Australian news headlines are awash with announcements of new venture capital funds, investment from superannuation funds and a range of other initiatives to boost the innovation ecosystem.
In addition to this wealth of capital, and interest and support from governments and corporates, Australia also offers relatively low-cost labour, minimal competition, close proximity to Asia and a weak dollar.
While more could be done to ensure our ecosystem provides a greater comparative advantage in software-based technology, there’s perhaps never been a better time to be a tech entrepreneur in Australia.
1. Entrepreneurship is the mode du jour
Startups are fashionable in Australia. Forward-thinking politicians including the federal assistant minister for innovation, Wyatt Roy and the Victorian minister for innovation, Philip Dalidakis are relentlessly campaigning for the cause and sponsoring initiatives to provide core infrastructure for startups, such as LaunchVic.
There’s also a plethora of corporate support for the ecosystem including initiatives such as the Telstra-backed accelerator muru-D, KPMG and PwC sponsored co-working spaces, and startup competitions such as The Big Pitch.
2. Minimal competition
The number of startups seeking funding in Australia at any moment in time, in relative and absolute terms, is very low. This gives a probabilistic advantage to Australian entrepreneurs operating in Australia. A great team is more likely to be noticed and rise to the top in Australia than in California.
The number of local companies competing for a place in the ecology is also lower so it’s easier to secure a place in incubators, co-working spaces, accelerator programmes and the like.
3. Abundant venture capital
Great businesses in Australia can, and do, get funding. Australian family offices and high net-worth individuals have more capital available for quality ventures than they can currently deploy. Many venture capital funds such as Blackbird, Trimantium and Airtree are understood not to be fully deployed.
There’s also capital being mobilised by visionary superannuation funds Hostplus and First State Super. Prominent business people and semi-retired executives are open to meeting and angel investments. There is not a lack of capital in Australia and it’s easier being a big fish in a small pond.
4. Relatively low-cost labour
Software engineers are more cost effective to employ in Australia compared with most entrepreneurial hotspots. Similarly, rent is significantly cheaper in Melbourne than in places like San Francisco.
The total amount of capital needed to test assumptions, build product, launch and grow is lower than Silicon Valley and a smaller number of quality startups also means there’s a long line of great engineers ready to move for the right pitch.
5. A weak dollar
Price is not a sustainable way to compete or a recommended differentiator but favourable currencies can help to secure some foundation clients. Exports from Australia are ‘on sale’ given the recent and likely continued decline of the Australian dollar relative to the US dollar.
An Australian company is now 20-30% more competitive than it was 12 months ago. A naturally hedged startup incurring costs in Australian dollars but generating revenue in US dollars may be a sensitive move given most predictions.
6. Proximity to Asia
Australia is close in time zone and flight time to billions of early-adopting, internet-connected, smartphone enabled consumers across Asia. Large numbers of Asian investors are transitioning to tech, and the BAT tech giants of China – Baidu, Alibaba and Tencent – are acquiring far and wide.
Government incentives for startups in Asia, particularly Singapore and Hong Kong are significant, and should also be on the radar for Australian entrepreneurs.
Phillip Kingston is the founder of venture capital and investment firm Trimantium Capital, and a technology entrepreneur and investor. You can follow him on Twitter here.