It is a challenging time to be an entrepreneur in Australia. The recently released IMD World Competitiveness Yearbook 2023 placed Australia 19th out of 64 nations for overall competitiveness. That wasn’t such a bad ranking, suggesting it’s not too bad to do business here. However, in terms of entrepreneurship, we were third to last.
According to an AFR report on the matter, the underlying reason for this was the lack of economic complexity — the number and complexity of products exported are simply not up to world standards.
This is not to say that Australia lacks entrepreneurs, or those with vision. Australia has been the home to several tech unicorn startups, including Canva ($40 billion valuation), Immutable ($25 billion), SafetyCulture ($1.6 billion), LinkTree ($1.3 billion) and Pet Circle ($1 billion). Australia is also the HQ of Atlassian, the iconic example of Australian tech ingenuity.
Research by major bank NAB found that four in 10 people would love to own their own business, but only one in 10 had been able to do so. There is clearly a disconnect between the Australian entrepreneurial spirit and the nation’s ability to facilitate and support those attempts.
Australia has the resources to back entrepreneurs
Though it might be difficult to get startups up and running, data shows that despite Australia’s poor ranking, people want to give it a go. The State of Australian Startup Funding report shows that while 2022 saw a decline in overall investment in pre-seed and seed funding stages at $7.4 billion (down from $10.6 billion in 2021), 2022 was still more than double the next biggest year (2020 at $3.1 billion).
The venture capital space also continues to be bullish. Late last year, Blackbird Ventures was able to successfully close a $1 billion venture capital fund — the largest on record — with the support of superannuation funds and high-wealth private investors.
“I really feel that super funds understand venture capital fully now, and they are really thorough in their due diligence, which is time-intensive for us but a great development for the sector,” the fund’s Partner, Rick Baker, said at the time.
But the problems lie elsewhere
However, Australia will likely continue to produce relatively few unicorns and remains a challenging space for entrepreneurship for reasons beyond the VC funds available.
“You cannot triple the amount of funding and triple the success,” Startup Genome CEO JF Gauthier noted in a 2021 report. “You have to triple the talent pool, you have to triple the number of entrepreneurs, and you have to triple the number of customers that care and want to buy the innovation.”
Australia has an expanding pool of funds available, but it faces massive IT skills shortages, making it both difficult and expensive for a startup to rapidly scale its business as it needs to.
SEE: Australia debates whether implementing regulations for AI will address the challenges caused by a lack of skilled AI talent.
Australian enterprises also face challenges when it comes to expanding into other markets, and entrepreneurs, therefore, tend to be focused on the domestic market, which is relatively small and difficult to spin a billion-dollar business out of.
This has led to an entrepreneurial brain drain, with many Australian innovators feeling the need to travel overseas to work on their vision.
Why this matters
Above and beyond the cost to Australia’s economy, when a billion-dollar business sets up overseas rather than in a local industry, the ongoing struggle to build an entrepreneurial class in Australia is contributing to several social and economic challenges.
Firstly, poor levels of entrepreneurism makes it hard for Australia to attract and retain the best talent. The sensation that there is a clear ceiling to personal and professional development is significant in this country, and the “brain drain,” which has been observed in Australian IT for well over a decade, will continue until talented technologists feel like their career potential extends to joining a unicorn project.
Secondly, that lack of entrepreneurism inhibits Australia’s ability to build a knowledge-based economy and transition away from its current reliance on resources, agriculture, tourism and property. Technology is also an export-friendly product that, with the right opportunities, could result in a lot of foreign money being brought into the local economy. Former Australian Prime Minister Malcolm Turnbull recognized the value of this and made innovation core to his Prime Ministership. Unfortunately, Turnbull failed to get through and subsequent prime ministers have allowed the agenda to quietly slip into the background.
Australians have created many world-changing technologies, from Wi-Fi to the black box flight recorder. However, the country has historically struggled to convert that ingenuity into sustainable tech and entrepreneur sectors. Unfortunately, it looks like, as the economy continues to weaken, that weakness in the nation and its economy is only becoming more prominent.