In interviews with the Australian Ambassador to Israel and StartupAUS’ Acting CEO, we learned how Australia is making big changes to grow their ecosystem
Australia’s Minister for Industry, Innovation and Science Christopher Pyne announced back in December that his government would be funding the establishment of a number of key technology locations around the world, including in Israel, as a part of Australia’s big push to ramp up their startup ecosystem.
Calling them landing pads, the centers will be the home bases for Australian entrepreneurs, investors, and others traveling abroad. Visiting Australians can use the office spaces and services to establish connections on the ground, breaking through many of the initial barriers that can be an impediment to making good use of their time abroad.
The landing pads are one of the latest moves that signal change on the part of the government to better accommodate and nurture their still fledgling startup sector.
Playing catch up
While a bit of a late comer to the party, a combination of political will from the government is starting to align with an increasingly organized effort from the private sector, potentially leading to newfound opportunities for growth. Until recently, much of the economy was focused in the mining sector, due in part to the increase in demand from the regional economic powerhouse of China. Australian Ambassador to Israel Dave Sharma tells Geektime that the Australian economy basically hasn’t had any spare capacity to turn to things over the last ten to fifteen years. Most of the investment labor force, along with everything else, was basically going into the mining sector.
However he points to the slowdown in China and the fall of iron ore prices as factors leading the economy to start to look for other options that will allow their people to maintain a good standard of living, producing the high value products imperative to creating the middle income accessible for many.
“We have suddenly found we got a bit of excess capacity and slack and investors are looking elsewhere, workers are looking elsewhere and suddenly giving a bit of a boost to the sector,” he says, adding that, “Increasingly government policies focus now on what’s the next big agent of growth. We can’t rely on double digit growth from China anymore.”
Shifting policy for a more friendly startup environment
Speaking about the past few years, McCauley tells Geektime that the government had not been very supportive of the startup community but the election of the new government led by Prime Minister Malcolm Turnbull has marked a turning point in this policy.
“The new PM was very keen to get a move on with it. This government recognizes the vast opportunities for digital technology and startups,” explains McCauley, adding that the PM was involved in tech in the past, having made his money from internet providers and has a personal stake in seeing the industry succeed.
“He changed the language, adding terms like agile and innovate to the lexicon,” says McCauley, “On the ground, he began in December pushing programs like the landing pads, making it his number one priority.”
Sharma explains that the new government package is a recognition of the need for a policy to address the education, tax and immigration systems, taking a holistic approach to tackling the issues.
Opening up capital for investment in startups
One of the biggest challenges to laying the groundwork for a burgeoning startup scene has been the legal structures governing business and capital. Ambassador Sharma believes that the government needs to champion small business entrepreneurs, saying that they are starting to, but “it’s moving slowly.”
Some of the issues he addresses revolve around regulations put in place to address labor laws and other concerns for more traditional businesses in the hopes of protecting workers and collecting substantial taxes. Sharma says that the government is beginning to reexamine some of these polices to open up more maneuverability for the startup community. One option that he points to is to not tax the options that are given to startups, saying that these are one of the ways that cash strapped companies are able to reward and retain their early employees.
He notes that when it comes to funding, there are significant funds available. The ambassador explains that Australia has one of the top managed funds systems in the world but there needs to be a shift towards funding more startups, not just the blue chip companies and more traditional investments like bonds. He says that pension funds should be incentivized to invest part of their capital in startups, saying that even a small percentage like 0.05% could do a lot to vitalize the market.
Sharma and McCauley both point to the need for coherence in government policy. The ambassador says that they need more coordination between government and industry, and consistency in government policy. “There has been some small-scale work on this in individual cases or jurisdictions,” he says, but not enough on the big picture.
One of the important steps that the government has taken to improve this coordination is the creation of the innovation minister, a role that Sharma explains is similar to Israel’s Chief Scientist.
Addressing education and immigration
Traditionally, Australia has had a very strong academic capacity, with impressive research departments in areas like medical technology. Ambassador Sharma believes that there needs to be more encouragement to push the commercialization of some of this research. He adds that more must be done along with other efforts to educate a generation of engineers, a task that he believes they have the capability to do. However this comes with the caveat that the market will need to provide the jobs for these young workers in order for this to become an attractive option for students.
On the immigration front, McCauley points to the announcement this past December that the government will relax immigration rules for bringing in talent and are also launching a capitalization visa program to attract investors.
Currently, Ambassador Sharma says that Australia takes in 250,000 immigrants a year, including many from Asia and skilled migration to bring in people with needed specialties. While in the past this recruitment was used for the mining sector, he says that it provides a good base for recruiting for the startup sector.
Both men agree that Australia is an attractive place to live, with great weather, food, a rich multicultural society, and other advantages that could draw in outside tech talent in search of greener pastures.
Australia’s startup scene is very much still a work in progress, but it feels like they are moving in the right directions to set themselves up for success.
While the political will appears to be in place, they need to overcome some structural challenges to make their market more competitive and freer to investment. Striking the balance between disrupting industries while maintaining the protections for workers and public investments can be difficult but are necessary for taking the startup scene into the next stage of growth.
Looking to the future
Following the opening of the Israel and Silicon Valley landing pads, the government plans on establishing three more in the future, with Ambassador Sharma suggesting that there will likely be two in Asia and one in Europe.
The ambassador believes that while his country is a little late in working to advance their startup sector, he believes that they have strong potential for success, pointing out that Sydney normally ends up in the top 20 startup cities around the globe: Compass listed them as the #16 best startup city in the world in their most recent ranking.
“We have all of the elements to have a successful entrepreneurial sector but it’s just been missing a few sparks.”