TBIXI3

and the Arts to address Australia's innovation in information
and communications technology. This programme funded
the management of incubators and provided seed capital for
incubated tenants. However, it ultimately failed to deliver on
the promise of generating and enhancing a successful ICT
sector in Australia. At the time, this made sense. Much of
Australia's economy in 2006 and 2007 was being driven, too
fast, by the booming resources sector. Rising interest rates,
falling productivity, a nationwide skills shortage and the
threat of inflation were all bigger problems than a need to
encourage people to start businesses. The Federal
Government had shifted its attention to working with more
established businesses, particularly in manufacturing, to try
to help them address some of these issues.
At the moment of the global financial crisis, then,
support for incubation in Australia had hit an all-time low.
And while the crisis prompted governments around the
OECD to implement policies targeting small business, pump
dollars into programmes that assist with developing capacity
and push to turn innovation into commercial reality, that
didn't happen in Australia. Why? Well part of the reason was
that the economic crisis didn't bite as hard in Australia as it
did elsewhere. In October 2008, just before the Lehman
Brothers crash, unemployment in Australia stood at just 4.3
per cent. It peaked at 5.8 in mid-2009 and today is back to
5.4 per cent.
When the Federal Government decided economic
stimulus was needed in 2009, then, rescuing people from
unemployment by encouraging them to start businesses was
just not a priority. Instead, governments focused on boosting
the economy by spending on infrastructure and encouraging
households to buy.
What happened in the wake of the financial crisis was
more surprising.
As Australia weathered the storm better than most other
economies, some of the intellectual capital we had sent
overseas for decades in the form of smart Australians who
wanted to work in Europe, Asia and America, came home.
Their jobs elsewhere had evaporated, and they came back to
look for new opportunities. Some of the world's money also
wanted a new home. Australia's dollar was and remains
strong, our banks are secure and the economy continues to
tick along - so it is little wonder that venture capital has
suddenly found a new place to invest. While other markets
are still emerging from the economic doldrums, there has
been an injection into Australia both of smart, savvy
46 February - May 2013
operators and investment funds looking for something to do
- and incubation offered some answers.
Since 2010, we have seen venture capital finance create
seed investment business accelerators, take equity stakes in
start-up tech businesses and incubate them with their own
management teams and mentors. There are examples of
incubators like Angelcube, Fish Burners, Pollenizer, Starmate
and BlueChilli - smart, modern and canny operators - with a
very different set of skills to those seen in the traditional
incubators Australia had prior to 2008. These incubators
have more sophisticated models to allow investment in startups
but also work in partnership with industry. Telecoms
firms, mining companies, and media groups want to connect
with, if not the next-big-thing, at least one of the companies
that might be in the running.
What you see in Australia today has been a rapid
evolution from an environment which the Federal
Government lamented in 2004 as “a market failure of the
venture capital market to adequately assess the prospects of
early stage ICT companies and to provide them with seed
capital.” The money is there now, and the incubator
operators that can tap into those pools of funds, are finding
entrepreneurs lining up out the door.
The biggest split between old and new incubators is more
philosophical than financial, however. Most existing general
incubators don't rely on government funding either, these
days; 80 percent of incubators report being financially
sustainable, and the operation of pre- and post-incubation
programmes and income generated from tenants remains a
model that continues to deliver benefits. For the new crop,
the thinking is different, though, and the risk going into the
future will be all about balancing the support for firms along
with the growing demands of private backers. Not an easy
task!
Everyone wants to commercialise technology, everyone
wants to find the next Facebook, and everyone wants to turn
a firm started on a shoestring into magic multi-millions. But
with the founder and financial investors wanting high
returns for the risk, it is going to be important that the
fundamental goal - supporting the entrepreneur - does not
get lost along the way.
Richard Laschon/Shutterstock.com
Australia's dollar was and
remains strong, our banks
are secure and the economy
continues to tick along