- PwC’s Google commissioned report ‘The startup economy’, predicts that the Australian startup sector has the capacity to deliver $109 billion to the economy and create 540,000 new jobs by 2033
- Startups may be missing ‘bigger picture’ opportunities for growth in the Finance and Insurance, Manufacturing and Health Care and Social Assistance industries
- The growth of the startup ecosystem presents lucrative opportunities for enterprise organisations to support and embrace this sector
As technology becomes a central driver in our personal and professional lives, it is not surprising that our report ‘The startup economy’ (commissioned by Google Australia) uncovered that the tech startup industry is driving much of this innovation and could deliver an additional $109 billion to the economy by 2033.
The report defines a ‘tech startup’ as having the following characteristics*:
- Technology is central to the product/service being provided
- High leverage of the labour input to the product/service so that the business can scale rapidly
- The product/service is a ‘disruptive innovation’ in that it helps create a new market or new supply chain/network which disrupts an existing market
- Revenue under $5 million per year.
It highlights that ‘there is no better time to be an entrepreneur in Australia, but achieving the projected economic contribution will require a significant and persistent effort to encourage more people to create more tech startups’.
For enterprises, many of which are trying to compete with and keep pace with the agility and innovation of the startup ecosystem, these findings present a significant opportunity to support and embrace this sector.
As announced by Jeremy Thorpe, Economist and PwC partner, “The startup sector has the capacity to drive GDP growth by 4 percent and create 540,000 new jobs by 2033.”
However as highlighted in the report 75% of startups are targeting the Information Media and Telecommunications sector and may be missing the bigger picture opportunity for growth. Projections indicate that the Finance and Insurance, Manufacturing and Health Care and Social Assistance industries in particular hold either current or future value in contribution to total industry GDP. With Health Care and Social Assistance flagged as being the highest industry contributor to GDP by 2050.
These projections indicate lucrative opportunities for both tech startups and enterprise organisations already in these industries to work together leveraging talent, innovation and market access to harness these prospects.
Call to Action
In order to accelerate the growth of the Australian tech startup ecosystem, the report lists five key actions for growth:
- Enhance culture and community engagement – Research suggests that we have a considerably high ‘fear of failure’ rate, which is potentially constraining the growth of our startup ecosystem. Crucial to overcoming this is creating a culture that encourages participation, as well as provides support through mentorship and financial backing via angel funding.
- Attract more entrepreneurs with the right skills – The report outlines that this needs to be driven through both education, as well as engaging the existing workforce to be more entrepreneurial. The latter is something that has been done incredibly well by the likes of Google, where employees are actively encouraged to take time out to develop innovations and think entrepreneurially. If this approach is driven through more enterprise organisations it could not only facilitate the growth of the tech startup ecosystem, but benefit organisations on many different fronts.
- Open up markets to Australian tech startups – In 2012 procurement contracts from all levels of Australian government totaled $41 billion. The opportunity is there, however the challenge for startups is in accessing this important market. Simplifying procurement processes and open-innovation could have mutually beneficial outcomes. Transport for NSW is one Australian government department engaging in open innovation and connecting with the startup community to satisfy customer needs.
- Encourage more early stage funding – Funding for the Australian tech startup sector exists, but is in short supply. Australia invests approximately US$7.50 per capita in venture capital per annum, compared to the US ($75) and Israel ($150).
- Improve the regulatory environment – Australia is highlighted as having one of the best regulatory environments for entrepreneurship and the report indicates that there is potential for government to further support innovation and entrepreneurship.
An enterprise perspective
The overall conclusions of the report indicate that it is vital for the tech community to build greater openness and inclusion within the startup community to increase participation in the sector. This should be a shared responsibility for enterprise organisations, from not only a funding perspective, but in the ability to embrace entrepreneurship within the operation of a business.
Though the report illustrates purely from the startup ecosystem perspective, the growth of this sector is likely to have a positive impact on the broader business community. It opens up opportunities in terms of capturing digital talent (something that is widely reported as lacking in the local market), new business ventures and directions. Simply put, enterprises will be starved of the best talent unless we embrace tech startups and the growth of this sector opens up an opportunity to bring together the best of both worlds.
For further information, please download your copy of ‘The Startup Economy: How to support tech startups and accelerate Australian innovation’.
*This definition typically excludes companies which are heavily reliant on labour or hardware inputs such as web design, web marketing and ISPs, but includes companies whose final product/service is not technology itself, but is technology dependent, such as Shoes of Prey.