Australia has a burgeoning ecosystem for new business. Sydney is the start-up hub, having as much as thirty-five percent of the nation’s start-ups. Second spot goes to Melbourne, with fourteen percent, and Brisbane placed third with nine percent. Spending time with start-up founders, influencers and accelerators will give you an insight into the ecosystem of Australian start-ups.
Earlier in 2016, a non-profit organization, StartupAus, compiled a list of successful start-ups from the last 13 years that are tech-driven. The list featured businesses whose value was in excess of $100 million. Less known businesses like Invoice2Go, Ingogo (a taxi booking app) and Halfbrick Studios (game developer) made the list. The head of strategy at StartupAus, Alex McCauley, has lauded the successes and said it was necessary to celebrate such success stories.
Characteristics of successful Australian start-ups
The successful start-ups in Australia have a common characteristic. Ninety percent of those on StartupAus’s 2016 list were male. The average age of start-up founders was 33 at the time they started the business. Another not-for-profit scaled Australian start-ups, and the average age of the participants was put at 36. Many of the founders have worked in the corporate world for over a decade before seeking a way out of redundancy. This may be old by international standards, as pointed out by McCauley, but the enormous number of recorded successes is laudable.
According to research, Australian start-up founders are more likely to be successful as they get older. Just below the $100 million threshold dominated by men, are strong female contenders. The strong ecosystem for start-ups created in Australia is linked to the success of companies like Atlassian, which is part of the $1 billion club. A few years ago, it was perceived as impossible to build a successful tech company, but the success of Atlassian has changed the mindset of many entrepreneurs.
Characteristics of Australia’s strong economy
It is undisputed that Australia has a strong economy - 13th largest in the world with per capita income that is ninth-highest. Australia also has a strong job market, characterized by high-paying jobs with a minimum wage of $18.22AUD (Approx. $14.48USD). Interestingly, the Australian economy has not seen an economic recession in 26 years.
A lot of Australians own homes even though the cost of doing so is high, especially in Melbourne and Sydney. The education sector has the strong backing of the state government. 40 of the 43 universities in Australia are public, and the government assists the students with subsidies and loans. The public health system is enviable, offering a high standard of care. Although the economy of Australia is burgeoning, the begging question is whether it can sustain a booming start-up ecosystem.
Perceived obstacles that may get in the way of start-ups
For the successful take-off of Australian start-ups, it appears that three hurdles have to be surmounted.
The sense of national humility is strong in Australia. Displays of success are met with hostility. This phenomenon is what has been tagged “tall poppy syndrome” - referring to the scenario when any flower that grows taller than those around it would have to be trimmed to size. The culture of shared success and collaboration currently championed by the Australian start-up community is an innovative way of fighting back this inane culture.
Generally, start-ups thrive faster when the founder has a burning desire to succeed. Australian founders are already older and financially comfortable. This robs them of the passion to strive to become more than they are. The current culture extols school, to university, to a corporate job path. To succeed, founders will need to inject hard work and energy into their chosen path.
2. Lack of investors
It takes investors for a start-up to grow. Australian venture capitalists (VCs) have a history of being averse to risk. This is a huge problem, because VCs are supposed to stand for high risks. Inasmuch as the economy is healthy, there is still a low investment in local start-ups. The tax incentive generously doled out by the government is driving a rise in property investment, even by young people.
The government of Australia mandates her citizens to save for retirement age. This savings, known as superannuation, has a lower tax rate and is not accessible to the individual until they retire. As of June 2017, Australia has a superannuation fund of $2.3 trillion, which makes it one of the world’s largest. Sadly, only about 0.011% of this fund is invested into local VCs. On the contrary, the United States pension funds commit as much as 2% of the funds under its management to VC. This is 180 times more, relative to that of Australia. A recent tour around Australia by Zack Weisfeld, head of Microsoft start-ups, has revealed there are positive changes on the way.
3. Feeder and Exit
Ease of access to exit routes and talent feeders are critical components of a successful start-up in a thriving ecosystem. Multinational Research and Development (R&D) are talent feeders of managerial talents who have invested years into the study of how to develop products at a given scale. Australia has few multinational R&D in comparison to Israel, which has over 300 such centres.
Start-ups are thriving irrespective of the challenges
Irrespective of the perceived challenges, Australian start-ups are growing in leaps and bounds. The intense immigration laws in the United States and the United Kingdom are making it more difficult for talented tech gurus to enter those countries, and Australia stands to benefit immensely. As one of the rare English-speaking countries in South East Asia, a pool of talent will find it attractive.
The bright side of immigrants is that they are risk takers, having left the comfort of their home country behind for a shot at a better future.
Hind Technology, a startup which builds electronics and software to control robots, is one of the Sydney-based tech start-ups that has found rare success on the world stage. The company, founded by Jatinder Grewal, is already struggling to keep up with demand just two years after it was founded. Success has a domino effect. The success of one start-up tends to spur another. Mathew Benjamin is the founder of AsiaRecon, a company that specializes in helping other companies expand into Asia, and has declared an interest in Hind Technology.
What more can the government do to support start-ups in Australia?
The government has rendered tremendous assistance to Australian start-ups through friendly policies, but a little more support can go a long way. The Federal Government of Australia is indirectly investing in start-ups through tax incentives and support programs like Australia’s R&D Tax Incentive. They encourage start-ups to venture into research and development by offering them incentives. Others like Incubator Support Initiative is an entrepreneur program that ensures founders get the support and advice they need.
A start-up ecosystem needs networking, start-up activities, and meet-ups to support the local community. The more start-up activities, the more beneficial effects it will have on the thriving ecosystem. Indirectly, the government of Australia is planting the seed that will ensure this happens faster than predictions.
The government of New South Wales created the organization, Jobs for New South Wales, in a bid to inject competition into the economy of NSW. This organization is committed to investing $35 million over the next five years in Sydney Startup Hub. This environment will undoubtedly hasten the growth of start-ups.
If you are planning to trail the path of Hind Technologies, you will find a community of designers on Freelancer that will help you come up with unique designs and robot prototypes. A good business starts with a good business plan, and you will find a large community of writers there that can help you make one perfect.
Do you think the Australian start-up could surpass that of America? In what other areas do you think the Australian start-up could accelerate growth? Let us know in the comment box.