The Australian government has set ambitious targets for increasing the number of startups. These objectives will only be achieved if funding patterns can be successfully altered.
Of the 1,500 startups currently in existence in Australia, an estimated 1,100 (73%) will potentially fail. PwC, the multinational professional services group headquartered in London, was commissioned by Google Australia to carry out a study entitled ‘The Startup Economy: How to support tech startups and accelerate Australian innovation’, which gives the Canberra government some direct advice on how to reverse the failing trend and achieve the business growth objectives that have been set. PwC goes through the various points that require special attention, among them the need to change public attitudes towards entrepreneurship and the role of the startup company in Australian society, plus the important question of how to ensure appropriate funding and investment.
Actions for growth
Among the issues that Australia needs to address, the report suggests that the country needs to attract more entrepreneurs with the right skills – with the aim of increasing the number of tech entrepreneurs to 43,000 by 2033. At the moment only an estimated 54% of the population regards entrepreneurship as an “interesting career path”. To increase the number of entrepreneurs, Australia is counting on young people putting their computer science skills to work, but at the moment only 29% of enrolled students find computer sciences an appealing subject and you can only start studying it in secondary school. Meanwhile, Australia needs to open up its markets to home-grown tech startups, says PwC, as both large companies and government departments carry out significant procurement of these kinds of products and services. The PwC-Google Australia study underlines that the government ought to be taking action to create a favourable regulatory/business environment for innovation, entrepreneurship and the development of startups, but that its role should end there and not stray into direct financing or picking winners. Indeed the third big question concerns how best to organise and encourage the necessary investment in this sector.
Early-stage financing needed
In short, invest intelligently is the PwC-Google Australia watchword. The study takes the examples of Canada, Israel and Malaysia, three countries which have seen poor returns on the substantial investments made in new businesses. The report points out that “more funding is not necessarily better funding”. And since the startup sector has been enjoying increasing success in attracting financing recently – with $21 million invested in 39 deals by Angels and micro-Venture Capitalist consortia last year, up from just $4 million in 2010 – it would appear that greater investment volumes are not needed but more early-stage financing is crucial. In summary, at the moment Australia boasts a mere 1,500 startups, managed by 2,000 entrepreneurs, and only 2% of domestic university graduates each year obtain a computer science qualification. However, with a rapidly expanding support ecosystem, “there is no better time to be an entrepreneur in Australia” and tech startups could well enable the country to achieve the objectives set by the government. By 2033, “the Australian tech startup sector has the potential to contribute (…) 4% of GDP to the Australian economy and 540,000 jobs,” says the report.