This week’s economic statement from the federal government painted something of a bleak picture for the Australian economy, with unemployment predicted to reach 9%, wage growth flatlining and GDP expected to fall by 2.5%.
We were also finally let in on the government’s plan for the JobKeeper wage subsidy program, which will be extended until March next year, albeit at a lower rate that will be reduced again in the New Year, and with a new tiered structure.
For startups, the outlook creates yet more uncertainty.
Girl Geek Academy co-founder and chief Sarah Moran points to the ongoing rhetoric around how adversity breeds innovation. We know many of Silicon Valley’s biggest success stories were founded during the global financial crisis, she tells SmartCompany.
“We know that we’re sitting on that possibility and opportunity, but how does Australia actually tap into that?
“Part of that is tied to policy.”
Typically, when a founder is launching a startup, they’re either leaving a corporate job and relying on savings, or they have a partner to support them for a year or two.
In an extended economic downturn, the risk appetite starts to change. When there’s a lack of job security, people just want to get money in the door and food on the table.
Currently, there’s no government policy giving would-be founders the confidence to launch a startup, Moran suggests.
“Lots of the policy is significantly short term,” she says.
That’s particularly pertinent for businesses based in Metropolitan Melbourne — such as Girl Geek Academy — which is currently in the midst of its second COVID-19 lockdown.
“Changes in JobKeeper kick in only six weeks after we’re supposedly coming out of lockdown,” Moran points out.
“No one is confident in anything.”
Seizing the moment
That said, Moran also stresses that it’s not all doom and gloom. If you’re an entrepreneurial person and you do have the means to support yourself, “everything is up for grabs”, she says.
For example, for Girl Geek Academy, it became very obvious very quickly that face-to-face education programs would not be feasible for the foreseeable future.
“All that stuff that we’ve wanted to do and test and have a go at … we’ve got a captive market of everyone sitting at home. Great, let’s roll it out.”
The startup launched a series of online forums for girls, and while it’s still in the early stages, it’s going well, she says.
“I’ve got the time until JobKeeper runs out to make that work,” Moran says.
“And that could very well be our new business model.”
The same potentially applies to software startups. Suddenly, you have a dedicated audience of prospective consumers who are sitting at home all day.
If you’re a SaaS startup offering the kinds of tools people need right now, “the opportunities are becoming really obvious”, Moran says.
While the economic outlook isn’t exactly rosy, we now know the COVID-19 economic challenge will be a long-term one. Gone are any illusions of a bounceback before Christmas.
“There’s certainty in the uncertainty,” Moran says.
“If you’re looking forward until March, that’s not very long term, but it’s long enough that you can make some firm decisions.”
Embrace the positives
Through the economic downturn, Moran also predicts we could see some new entrepreneurs entering startupland.
There will likely be people who have never started a company before, but who find themselves out of work and turning an iso-project into something commercialisable. Just look at the sheer amount of people “entrepreneurially making masks at the moment,” Moran says.
“We’re going to find a lot of people who, by the sheer nature that the economy is changing, they’re all being thrust into new roles,” she adds.
“I would say that we might pick up some of those people as startup founders as well.”
At the same time, she points to existing initiatives such as the federal government’s Boosting Female Founder Fund, which was accepting applications pre-COVID-19 and which stands to invest $18 million into women-led Australian startups.
“Things like that will also help boost the ecosystem.”
There’s no doubt the economic environment will make things harder for many startups, and will change the way founders have to operate. But, it’s not all doom and gloom.
“I think we may see different types of founders coming forward in these times … those who see real opportunities and go and seize it,” Moran says.
“If we try to look for the positive, we can believe in it and move forward with that.”