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Crossroads 2015 Crossroads 2015 An action plan to develop a vibrant tech startup ecosystem in Australia April 2015 Contents Foreword ................................................................................................................................................. i What is StartupAUS? ............................................................................................................................... 1 Introduction ............................................................................................................................................ 2 State of the Australian startup ecosystem in 2015 ................................................................................. 4 What are “startups”? ............................................................................................................................ 10 Startups are not small businesses ........................................................................................................ 10 Why are startups important? ............................................................................................................... 11 Disrupt or be disrupted ......................................................................................................................... 13 Unicorns matter .................................................................................................................................... 14 Australian startups on a global stage .................................................................................................... 16 The case for an Australian Economy 2.0 ............................................................................................... 18 The case for government intervention ................................................................................................. 21 International entrepreneurship policy frameworKs ............................................................................. 23 Conditions for a vibrant startup ecosystem in Australia ...................................................................... 28 Action plan summary ............................................................................................................................ 29 Action #1 – Create a national innovation agency ................................................................................. 32 Action #2 – Increase the number of entrepreneurs ............................................................................. 33 Action #3 – Improve the quality and quantity of entrepreneurship education .................................... 41 Action #4 – Increase the number of people with ICT skills ................................................................... 46 Action #5 – Improve access to startup expertise .................................................................................. 52 Action #6 – Increase availability of early stage capital to startups ....................................................... 59 Action #7 – Address legal and regulatory impediments ....................................................................... 70 Action #8 – Increase collaboration and international connectedness .................................................. 75 Author and contributors ....................................................................................................................... 78 Foreword It is hard to over-emphasize how important this moment in time is for Australia. Accelerating technological disruption is coming hard, fast, and mercilessly to every industry with no regard for societal consequences. Industries that today account for almost a third of Australia’s GDP are in the line of fire. Challenges are coming from companies using technology for offense not defense, leveraging their global scale and access to new datasets to re-imagine industry boundaries and entire industries. Without action, these shifts have potential to stall Australian economic growth, render whole industries uncompetitive and lead to climbing long term unemployment across the nation. It sounds alarmist, but it’s not. It is reality. The choices we make right now will affect our generation and the ones to come. They will define our prosperity and place in the world. Public and private sector understanding of this has evolved positively over the last 12 months, reflected in public policy changes and anecdotal evidence of Australian industry allocating new funds for high risK technology based investments. Australian technology startups have also made huge strides, taKing the best learnings and methodologies from overseas and applying them domestically. All of this is good news, but the progress is relative. It’s not enough, and it’s not fast enough. I constantly meet talented Australian entrepreneurs here in Silicon Valley who made the gut wrenching decision to leave family and friends. They do it because the environment in Australia is still not conducive to building large new technology based companies. Of course there are exceptions with some world-class technology based businesses being spawned domestically, but as this report shows there are not enough of them and their success cannot be easily replicated. Compounding the challenge for Australia, their world-class progress was mostly recognized by offshore investors, and as a result there will be forces at work to have them shift their center of gravity to other parts of the world. These talented entrepreneurs, and their equally talented domestic counterparts represent the future of Australia as every industry and every business evolves to become a technology and data-driven business in our lifetime. The new economic structures underpinning data-driven businesses are unliKe anything we’ve seen before with the most progressive thinkers labeling them Platform Economics. Platform economics fuels growth for Apple, Google, Uber, GE, Monsanto and others. One primary implication is that value in every industry will migrate to the owner of platforms over time. These new business are global, scale driven and have winner-taKe-all dynamics. They recognize that value is a function of the structured data that the platform produces and the insights gained from these datasets. Often they have inherent monopolistic characteristics because of data feedbacK loops within the platforms. A recent report published in the US highlighted the fact that the leader in these new sectors typically captures more than 70% of that market’s value as measured by market capitalization.1 There aren’t any second chances. Developing countries throughout the world are responding with speed and conviction by implementing policies and programs to stimulate and support high-growth technology-based businesses, and to retool their worKforce by developing entrepreneurial sKills. China for example just announced an A$8 billion fund for new technology-based ventures. Obama has announced a decade long initiative to map activity in the brain to help with treating medical conditions, but also to accelerate development of Artificial Intelligence technologies, which will touch every industry in the US in coming years.2 Australia needs to do the same and prioritize the creation of conditions that will spawn new billion dollar technology based industries and businesses. 1 http://playbigger.com/files/PlayBiggerTTMCReport.pdf 2 http://www.whitehouse.gov/share/brain-initiative Page i Australia is unique in wonderful ways. As this paper suggests, rather than trying to replicate any other region in the world, it needs to taKe the best ideas and apply them domestically taKing into account this uniqueness and the country’s many strengths. The solution for Australia requires strong, coordinated leadership that cuts across industries and political ideologies. While the industry disruptions faced by Australia are global and not specific to us, what we choose to do about it is entirely in our hands. The consequences of action or inaction will be undisputable and because of the exponential nature of technology-driven change, Australia has the potential to pass a point of no return and be permanently relegated to a derivative economy if the right actions aren’t taKen now. There is no reason for this to happen. Australia is full of incredibly talented people with the conviction and tenacity to seize the moment and create the future we all want. We have world-class academic, applied research and enterprise institutions. As a nation we have a will to succeed, we just need to be clearly and objectively told the good and bad of the current situation so that we can take action and all pull in the same direction to resolve it. This paper is a credible, action-oriented plan that sets out structured programs that will help ensure we get to where we need to be. It’s a combination of original thought and adapting the best initiatives that have been proven to worK elsewhere in the world. For individuals this paper is also a call to arms to get involved and be part of the solution by engaging in constructive conversations, debates and by holding staKeholders across all sectors accountable for concrete action. I’m hopeful that the Australian private and public sectors realize the severity of the current situation we face despite the progress of the last 12 months and affect the necessary structural, societal and cultural changes. We are a country with incredible creativity, resilience and fight, but our economic future is in jeopardy. This is a very special moment in time. Let’s choose
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