Starting a company in Australia, especially one that’s in the high tech industry, is much harder than it is in many other places in the world. This used to be due to a lack of supporting infrastructure, what with Australia’s remoteness precluding the required investment, however in more recent times that barrier has begun to melt away. The problem many startups face in Australia is that acquiring funding is extremely problematic as Australia’s risk averse investing style has meant that our large capital reserves aren’t used to invest in such ventures. Previous governments haven’t done much to change this, preferring to support already established businesses, however in his recent budget response Bill Shorten showed vision that few of his contemporaries have in the form of the Labor’s future technology policy.
At the core of this policy is the Smart Investment Fund, a $500 million allocation that will be used in partnership with venture capital firms and banks to facilitate more investment in early stage startups. I have spoken previously about how something of this nature would be required in order to kick start a Silicon Valley equivalent here in Australia and the policy that Bill Shorten has proposed lines up with that idea perfectly. Whilst startup investment can never be made risk free making them more attractive, through direct government investment and the partial loan guarantee with banks, will ensure that more of Australia’s capital makes its way into new businesses rather than the traditional investment vehicles.
Of course providing funding for such ideas is only one piece of the puzzle as we’ll need to encourage students to pursue careers in those industries. To this end Labor as put forward a policy to provide numerous scholarships to students who complete degrees in the fields of science, technology, engineering and mathematics (STEM) and then go on to become teachers in their fields. In addition to this Labor is proposing to forgive the HECS/HELP debts of almost 100,000 students studying in this field, something which could provide an incredible leg up for fresh graduates starting their career. Considering that 75% of the fastest growing new jobs are within these fields encouraging students to take up careers is an incredibly smart move and one that the current government should look at adopting.
You might be surprised to hear this but I’m on the fence about coding being added to the national curriculum, mostly because I’m not sure how it’d end up being implemented at the school level. Starting out in coding isn’t the most exciting of adventures and the rote learning approach which many schools use would, I feel, end up with them becoming bored and frustrated rather than energized and intrigued. Of course I’m not a teacher and I’m sure there are many who are more experienced in this field who could design programs that tackled this issue properly. In the end this is something that I’d have to see in action before I could form a solid opinion on it as whilst I’m all for kids being aware of how technology works I also know how quickly they can become bored with such things.
This is what the Australian public needs to see from a party in opposition: clear concise policies that show a valid course of action rather than mud slinging and point wining which have plagued Australian politics for the last 3 terms of government. Whilst these policies might not ever see the light of day it’s good to see that the Labor party is thinking along this direction and hopefully such policies will fuel their campaign come next election. I can only hope that the Liberals take note as whilst any incumbent would loathe to agree with their opposition it’s hard to deny just how solid some of these ideas are.
If you follow the start up scene, care of industry blogs like TechCrunch/GigaOM/VentureBeat/etc, the lack of Australian companies making waves is glaring obvious. It’s not like we haven’t had successes here, indeed you don’t have to look far to find quite a few notables, but there’s no question that we don’t have a technology Mecca where all aspiring entrepreneurs look towards when trying to realise their vision. You could argue that Sydney already fits this bill since that’s where most of the money is but it’s not the place where the innovation is most concentrated as Melbourne as arguably given risen to just as many success stories. This decentralized nature of Australia’s start-up industry presents a significant barrier to many potential businesses and whilst I don’t have a good solution to them the reasons behind it are quite simple.
Reserve bank governor Glenn Stevens gave a speech at the CEDA annual dinner a couple nights ago and hit the nail on the head as to why Australia doesn’t appear to have the same vibrant start-up ecosystem that can be found overseas:
Only 4.8 per cent of start-ups in Sydney and Melbourne successfully become “scaled” (large enough to be sustainable) which is another way of saying that 95.2 per cent fail. In Silicon Valley, the success rate is 8 per cent.
The difference is capital: start-ups in California raise 100 times as much money as Sydney ones in the scale stage, and they raise 4.8 times as much in the earlier stages of discovery, validation and efficiency.
Yet as everyone knows, Australia punches well above its weight in capital formation, thanks to compulsory superannuation and the $1.4 trillion super pool. Why doesn’t any of that money find its way to supporting
Current fiscal policies are quite conducive to long term, low risk, moderate return investments (such as property and bank stocks) and the investment practices of our superannuation funds reflects this. Indeed even at a personal level Australian investors are risk adverse with majority preferring things like property, extra super contributions or term deposits. Partly you could also put some of the blame on Australia’s culture which is more inclined towards property ownership as the ultimate achievement a regular Australian can aspire to, whereas the USA’s is far more entrenched in the entrepreneurial idea.
We then have to ask ourselves that if we’re aspiring to create a Silicon Beach here in Australia what we need to do in order to make that happen.
The report itself details a couple ideas that can be done from a policy perspective, namely making certain company structures and incentive schemes cheaper and easier, however that’s only part of the issue. Ideally you’d also want some policies that make investing in risky start-up companies more attractive than the current alternatives. I don’t think abolishing current legislation like Negative Gearing would help much in this regard but it could potentially be extended to cover off losses made on start-up investments. There are many other options of course (and I’m not saying mine is the perfect one) and I’d definitely be supportive of some investigation into policy frameworks that have been used overseas and their applicability here in Australia.
There’s also the possibility of the government intervening with additional funding in order to get start-ups past the validation phase in order to increase the hit rate for the venture capital industry. I’ve talked a bit about this previously, focusing on using the NBN as a launchpad for Australia’s Silicon Beach, and really the NBN should be the catalyst which drives Australia’s start up industry forward. There’s already specific industry funds being set up, like the one that just came through for Australian game developers, but the creation of a more general fund to help start up validate their ideas would be far more effective in boosting the high tech innovation industry. It would be much harder to design and manage for sure, but no one ever said trying to replicate Silicon Valley’s success would be easy.
For what its worth I believe the government is working hard towards realising this lofty goal (thanks to some conversations I’ve had with people in the know on these kinds of things) and as long as they draw heavily on the current start-up and innovation industry in Australia I believe we will be able to achieve it. It’s going to be very hard to break the risk adverse mindset of the Australian public but that’s something that time and gentle pushes in the right direction, something perfectly suited to legislative changes. How that should all be done is left as an exercise to the reader (who I hope is someone in parliament).
I’m a very firm believer in the adage of “either put up or shut up”. I often talk with people about their ideas for things and how much better they’d be than what’s currently available. My usual retort is that should then go ahead and try to do that (usually not facetiously) otherwise they should just stop talking about since an idea without action doesn’t do anyone any good. Of course I’m not one to let people say the same thing to me so the vast majority of ideas that I have for a product that I talk about have usually undergone at least some preliminary work to make sure the idea is viable, just so that I don’t feel like I’m talking out my ass.
The problem I’ve often found though is that it’s easy for me to get excited about an idea that I’ve had but it’s 100 times more difficult to get someone else excited about the same idea. I can hear you saying now “well if it was a good idea anyone would be excited about it” but the problem is that since pursuing such ideas is inherently risky people tend to err on the side of caution instead of wanting to get involved. The second you start mentioning dollar figures (whether costs or potential revenues) it gets even worse as people have seen enough seemingly rock solid business go down in recent years to be wary of anyone coming to them with some outrageous idea.
If I’m honest I’m really just generalizing my own personal experiences here and depending on who you are and where you grew up the experience could be quite different. Canberra, and the majority of Australia for that matter, are a risk adverse lot tending towards proven ideas rather than new risky new ventures. This is especially true with the majority of investment in Australia with many choosing the “safe bet” of property rather than investing in new ventures. Thus for any of us wanting to lash out on our own we’re more or less isolated in a community of risk adverse people, and that makes developing a new idea inexorably hard.
I found this a lot when working on many of my previous ideas. Sure there were many times when I’d discuss an idea and its potential with people and receive amazing feedback, but should I ask more than to try it when I finally released and I’d be met with non-committal responses. There’s also not much of a start up scene here in Canberra either since 90% of the people employed here are public servants or working directly for the government. Sure I could probably travel a bit to get involved in say Sydney or Melbourne however the only time I currently have to spare is spent on working on my product, and the potential to find (and convince) someone else to work with me on my ideas seems small enough as to be a waste of my time pursuing it.
Thus for my first couple ideas (and application to Y-Combinator) I decided to go it alone as a single founder. Now the odds are really stacked against you if you go this route, both for start up accelerators like Y-Combinator and the real business world. Many people liken it to raising a child, sure you can do it yourself but its a much greater burden to bear and you’ll need to put in so much more effort to achieve the same results. For someone like me who’s in an environment that’s not conducive to pursuing new ideas sometimes the only option you have is to go it alone, lest you never go at it at all. Of course the simple solution here would be to then put myself in a more conducive environment, which I am looking to do within the next year.
This all being for my 2 most recent projects I have been able to find people who are interested in the idea that I came up with and have been willing to work with me on them. I think I can attribute my success in this regard to finding an area of common interest that we could then expand upon, each of us being able to have meaningful input that will sculpt the end product. I’ll admit it’s a lot easier when you’ve got someone to lean on, even if they’re not technical as that back and forth helps solidify your idea, keeping your eye squarely fixed on the end goal. I’m hopeful that these ideas will turn out a lot better than my last couple ventures, not least of which I’ll hopefully be able to credit to sharing the load with someone.
There’s been many times when I’ve caught myself with some kind of random idea for a product, service or whatever that I’ve quickly thrown on an ever growing pile of ideas. It doesn’t seem to take long for that one idea that I’ve had to turn from something I thought that I only thought of to someone else’s business venture upon which time I curse myself for not following through on it. Granted many of these ideas have been kicking around in my head for years without them coming to fruition and my recent attempts to develop one of them has been quite the eye opener, showing me that ideas are great and all but implementations are still king.
This is one of the biggest challenges that anyone will come up against when trying to develop a product or service: someone has already done it before. In this world that thrives on innovation being the first to market with a new widget is a powerful force and almost guarantees you the lion’s share of the early adopter market. The problem here is though that being first to market with something means one of two things: either you’re creating a market that didn’t exist before (see Apple and Nintendo as good examples of this) or you’ve seen an established market and noticed something sorely lacking, which pits you against established players in this space. In both these cases if you’re just starting out at being an entrepreneur your friends, family and potential business partners will more than likely shoot a skeptical eye your way telling you that there’s no way it could work.
For the most part they’re right, in a traditional business world starting from scratch is a pretty risky business and whilst the jury is still out on how you can judge failure rates of new companies it’s no secret that you’re more likely to fail than succeed. To an investor a business plan that builds on proven methods will look a lot more attractive as there’s a much better chance that they’ll get a return on their money even if it would be smaller than something that could be perceived as a higher risk. Consequently this has the effect of stifling innovation for certain high risk ventures, although that trend is starting to change.
In the tech industry at least this can be attributed to investors gaining back the confidence they lost in the tech industry back in the dot com bust. After the crash many investors sought more stable investments (and look how that turned out!) and shied away from funding what looked like high risk ventures. As a consequence many hungry start up founders started to make do with a lot less and this drove a phenomenal amount of innovation. Primarily this was to attract their once bitten investors back into the fray and the last couple years has seen the resurgence of the high tech start up craze that we lived through only a decade ago.
For those looking to lash out into the world of tech start ups this means that for any idea that you might have you’re going to be compared to those who’ve come before you. That doesn’t necessarily mean that you’re destined to fail, it just means that you’ve got your work cut out for you if you’re looking to make an impression in the tech world. Innovation in this fast paced tech world is the name of the game and whilst any market you may care to get into (hats off to you if you manage to create one) may appear to be completely saturated that doesn’t mean you can’t succeed in that space. It all comes down to how you differentiate yourself from the pack.
Maybe this blog post is more for my benefit than anyone else’s as I’m currently staring right down the barrel of trying to attempt such a feat myself. The location space is heating up like crazy and all the large players in other spaces are already integrating location based services into their current offerings. Initially this was a boon for me but I’ve come to realize it first as a hindrance to me progressing my core functionality (Oh another information feed with co-ordinates in it, better integrate that one too!) and secondly as another blow against a product I’m looking to deliver. Realistically though I know what I want to do is different enough from every one else to warrant at least an attempt to make it successful and should it fail I’ll be that much wiser about the whole process, ready to try over again with yet another idea.
Realistically I’d need a team of 100 people to try all the ideas I have, so I could be in this cycle for quite some time 😉
Looking back over my short 6 year career I’ve noticed that I’ve never really worked for any smaller organisations. Probably the smallest team I ever worked for was a group of 20 people on the National Archive’s Digital Preservation Project but even there I was technically part of the larger group of 200 or so people responsible for archiving things of interest for the Australian public. Probably the largest team I was in so far was at Unisys with my team consisting of around 30 people and the section I was a part of had well over 400 staff catering to all aspects of IT for a large government department. Working in such large environments has its benefits, such as lower amounts of responsibility and the opportunity to heavily specialize, but these are easily overshadowed by the drawbacks of needing that many people: managing the lot of them.
For the most part though I’d agree that its required. The last thing you need in a large environment is some cowboy system administrator making wide reaching changes which end up affecting thousands of people or loose process definitions which end up confusing the heck out of anyone trying to get some work done. Once you reach a critical mass of users and staff formalizing your procedures and policies starts to bring tangible benefits and is the basis for the industry buzzterm Six Sigma. However it seems that organisations that are intent on strangling themselves to death with rigid frameworks seemingly looking upon the horror they’ve created with rose coloured glasses.
Take for instance change management. At its heart it’s all about making sure that you don’t go changing things that will inadvertently affect other things and ensuring that all required stakeholders are informed of these decisions. When I was trained in ITIL I instantly recognised the benefit of such processes and was quite thrilled to see it accepted at the first real workplace I had ever landed a job at. Once I had become familiar with its implementations though my view of the glorious world of ITIL compliant processes was tainted with the harsh reality that for the most part it’s completely unachievable.
My current workplace is a glorious example of this. In what supposed to be a relatively progressive workplace (they had 1.0 revisions of blade servers here, a risk very few took) the change process is still done manually. I.E. if I need to change something in the environment I need to fill out a change request (fine, that’s part of ITIL), print it out (hmmm ok sure), take it around to all the service owners and get them to sign it (ummmm what?), get the Global Service Delivery manager and CIO to sign it (argh, why are they never in their office? Oh right they have more important things to do) and then give it to the change manager (total time spent doing this, around 2 hours). The Change Advisory Board (which contains all the service delivery managers) then meets once a week to discuss the changes they’ve already signed and so spend 30 minutes confirming that they actually signed the changes. Oh and they might ask how the previous changes went, maybe.
The above example demonstrates quite aptly how a vision of a process becomes horribly bastardized in the hands of those who don’t really understand it. Worse, even though the process is known to be horribly flawed, nothing has been done to change it in the many years it has been implemented. It seems everyone is content to gripe about how bad it is yet when improvements are made they amount to nothing more than rearranging the deck chairs on the Titanic, giving the impression something is being done when really its not (*cough*management theater*cough*). Couple that with the apparently abhorrent idea of scrapping the entire process and rebuilding it anew and you’ve got a recipe for one bad idea to exist for eternity, right up until the whole organisation collapses upon itself in a flurry of industry buzz words and frameworks.
Many people who’ve come from smaller organisations and start ups often tell me this is a symptom of larger organisations, where bureaucracy reigns supreme. I can’t refut this position as I’ve never worked in such a situation although I’m doing my darnedest to get there. Logically it holds true as the fewer people you have to consult to do something the less time it will take to get it done, and the less likely that one of them will want modifications to your idea. After seeing so many organisations hang themselves on the ITIL/Six Sigma/Lean noose I’ve got to wonder if its the frameworks themselves are flawed and the smaller organisations are immune to their tragedies simply because they haven’t tried to implement them.
Maybe I’m just sour because I’ve never really been in a position to change these processes. Ever since I started working I’ve seen ways that things could be improved only to be told that they just wouldn’t work, no matter how I spun it. There’s the very true possibility that my view of the world is total crap and all my ideas would generally not work but evidence is mounting that non-traditional approaches to business work, especially in our information rich Internet world. The time is fast approaching for me to put up or shut up and hopefully my ideas will work out for the best.
Or I’ll fail miserably and come crawling back to the world of IT support, secretly crying in the corner of server room somewhere 😉