How to boost the tech start-up ecosystem

Australia currently lacks a number of crucial requirements for a successful tech start-up ecosystem, according to a new report from StartupAUS, a not-for-profit that fosters local technology entrepreneurship.

According to the Crossroads report, there are currently 1,000 start-ups in Australia, 1500 founders, and 15 incubators and accelerators, as well as seven student incubator programs. But despite some success stories, the report notes: “Australia has not kept pace, and has under-invested in catalysing and supporting its high-tech industries, as evidenced by the fact that we now have one of the lowest rates of start-up formation in the world, and one of the lowest rates of venture capital investment.

“According to a recent World Economic Forum report, Australia’s start-up ecosystem is lagging behind those of many other developed nations due to a lack of emphasis on entrepreneurship education, limited engagement with universities and poor cultural support for entrepreneurs.”

The report also cites the ability to access capital and regulatory environments as factors hampering tech start-ups.

It suggests a range of actions to address these deficiencies. Most are not new and have been successfully implemented in other countries which experienced similar shortcomings.

Short-term steps include creating an entrepreneur visa, relaxing 457 visa restrictions for new businesses, changing the regulations around employee share programs and implementing a national visiting entrepreneurs program.

Medium-term steps include creating young entrepreneur scholarships, implementing a national learn-to-code promotion program, establishing a seed co-investment fund and creating a capital gains exemption or tax deduction for angel investments.

In the long-term, the report recommends a national program of entrepreneurial education, a digital technologies curriculum and a national program to raise awareness about tech start-ups.

These measures make good economic sense given that start-ups are recognised worldwide as important drivers of economic growth.

According to Enrico Moretti, Professor of Economics at the University of California in Berkeley, technology-based jobs have a larger multiplier effect than jobs in any other sector. Moretti found that for each new technology-based job, five additional jobs are created in other sectors.  He notes that this multiplier effect is three times larger in the technology sector than in extractive industries or traditional manufacturing.

The report suggests that developing Australia’s start-up ecosystem could also play a vital role in diversifying the Australian economy, which is dominated by service-based businesses and has exports heavily skewed towards the resources sector.

It notes that PWC’s recent Startup Economy study forecast that high-growth tech companies could make up four per cent of the Australia’s GDP by 2033, compared to just 0.2 per cent today and that this would add 540,000 jobs to the economy – but only if action is taken to address the sector’s current areas of market failure. 

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