We need to be upstarts about our start ups
$378 million sounds like a lot of money, right? It’s a catchy headline and looks great on a Sunday press release from Deputy Prime Minister Wayne Swan and his colleague Greg Combet. Don’t get me wrong, their new $378 million program to foster innovation was a good start albeit several years late.
You see the press and the tech communities have been arguing for several years that the local technology ecosystem needs help…and quite frankly Deputy Prime Minister; $378 million ain’t going to cut the mustard.
There are some fundamental challenges domestic startups are facing and many of them can’t be solved with government funds alone. While chucking taxpayer funds at a problem (that is quickly firming as an election issue) might be a tempting solution, what Australia desperately needs is long-term thinking and strong leadership.
This leadership can come from either side of the house; in fact our Prime Minister Julia Gillard went on a fact-finding mission a couple of years ago to Israel to learn how it transformed itself into a “Startup Nation”.
Unfortunately, it seems that her government hasn’t implemented many of the ideas she brought home with her. Investment in startups is only a very small part of how Israel transformed itself into a tech powerhouse, some of the other policies that we are yet to adopt in Australia tell the complete story.
The Israelis have a strong focus on maths and science in their schools, universities and in their military service, which in turn churns out world-class engineers. They have encouraged some of the world’s biggest tech firms (read: eBay, Google, eMC, Intel and PayPal) to setup local R&D research centers hiring and training up thousands of Israel software engineers with global best practice.
The country has investor friendly regulations to encourage domestic investment in technology startups as well as attracting some of the top global venture capital firms to setup shop in Tel Aviv. They also have a robust immigration policy, which sees talent from around the world move to the tiny strip of land in the Middle East… heaven forbid we’d discuss opening our borders to educated immigrants. As a result, many Israeli tech startups think globally from day one and have the largest share of companies listed on the NASDAQ outside of China and the US.
So if I could sit down for a cuppa with our Deputy Prime Minister what would I say to him? I’d start by encouraging him to go out and visit some of our great up and coming technology companies. He could wander through a tech co-working space like Fishburners in Ultimo where hundred of clever young entrepreneurs are burning the midnight oil creating really exciting technology businesses. While I’m sure most of the people he would chat to would welcome this week’s news of additional funding, I suspect Wayne would be exposed to a number of other issues, many that the government wouldn’t be able to solve on its own.
Here are some of the things he might hear from folks at the coalface:
Break the cycle of Risk Aversion
Shareholders often reward short-term profits over long-term strategy, and public boards and companies rarely invest in or partner with startups, as it would adversely impact their risk profile. Similarly Australia’s wealth is locked up in superannuation accounts, which don’t often (or in most cases aren’t able to) invest in technology startups. Let’s begin a public dialogue to try and surface this issue.
Update our taxation system to encourage technology investment
We need real changes to the way that angels and early stage investors are taxed. Other economies give tax concessions to investors who support startups, allowing them in some cases to write off more than 100% of the investment up front.
Develop a talent pipeline
The Government needs to devote more resources to universities and high schools to encourage our next generation to study maths, science and entrepreneurial courses. We also need to continue encouraging global technology companies to setup local operations. Google started with a lone employee in Sydney and now train and employ 350 odd engineers in their Pyrmont office.
Allow Austrade to help Australian firms enter foreign markets
I have had several conversations with Austrade officials who told me that their current policy direction is to focus on inwards investment rather that support local technology companies seeking new markets. If this government is serious about supporting Australian technology companies why is our main trade body focusing only on inbound investment rather than outwards expansion?
Shake it up
We need to consider more radical policy initiatives to kick-start our local ecosystem. For example, Canada’s new startup visa gives permanent residency to immigrants who intend to start new businesses in Canada. Singapore is similarly aggressive at pitching to technology companies and technology entrepreneurs, and is starting to see a strong tech community as a result of government initiatives.
While the Government can certainly help foster innovation in Australia (they should have acted that way before the election year), it’s incumbent on all of us to help create the next leg of growth for the Australian economy. When the mining boom invariably ends, we want to have other industries in which Australia excels. I’d argue that given our strong universities, educated population and geographic location adjacent to Asia (which is going through a digital boom), we should be laying our bets on a strong domestic tech sector.
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