Startup ecosystems and compound interest: the case for keeping your startup in Australia

Why are so many people working to help keep as many startups as possible in Australia?

 

Good question.

 

Firstly from me, the priority is to create successful entrepreneurs wherever they need to go. Startups are hard enough without putting aggressive limits on them. Start, work hard, do what you need to do (with integrity), keep doing it for a long time, and hopefully you will create something great.

 

But, if you can do it here in Australia – excellent!

 

Why? Because of compound interest.

 

In 2013 I went to Israel with a startup road trip with the Australia-Israel Chamber of Commerce and to Russia as a part of the Young Entrepreneurs Summit. I investigated what made startup ecosystems a success and I found a few interesting things.

 

Firstly, it took a small number of tenacious people committed to grow it.

 

Secondly, it took work at all levels of the industry to ensure that all of the parts required to support the companies could be provided locally.

 

Thirdly, it took 20 years of patience for compound interest to really kick in.

 

“Compound interest? What economics lingo jargon is this, Mick?”

 

I’m glad you asked. Here is a presentation I’ve put together to try and explain compound interest and why it makes a huge impact long term to keep companies in Australia.

 

 

To add to the excitement of compound interest, I’ve put together a spreadsheet. It’s not tracked to real numbers, it’s just showing the principle.

 

Laps Companies started Success rate Companies succeed Total angel investors created New jobs created Total jobs created
1 200 10% 20 40 1,000 1,000
2 400 11% 44 128 2,200 3,400
Australia 3 800 12% 96 320 4,800 8,880
4 1,600 13% 208 736 10,400 21,056
5 2,400 14% 336 1,408 16,800 42,067
Israel 6 2,880 15% 432 2,272 21,600 72,081
7 3,456 16% 553 3,378 27,648 114,145
8 4,147 17% 705 4,788 35,251 172,225
9 4,977 18% 896 6,580 44,790 251,460
Silicon Valley 10 5,972 19% 1,135 8,849 56,734 358,485

 

To reiterate what I said in the presentation about what you can do to help speed up the compound interest:

1. Invest in an Australian startup. Even $5000 and one day per month will make a massive difference.

2. Help connect Australian startups to Australian investors.

3. Lobby government to change ESVCLP to apply to all startup investing.

4. If you’re a co-founder, try extra hard to find the right investor in Australia. But, do what you need to do.

 

Mick is the entrepreneur in residence at muru-D, a technology accelerator that focuses on helping companies grow while staying in Australia. Applications are currently open and close on Sept 15.

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