An entrepreneurial prime minister calls for a culture of innovation
Jan 9th 2016 | SYDNEY | From the print edition
WHEN people call Australia “The Lucky Country”, they often do not realise that Donald Horne, the writer who coined that phrase in a book of the same name in 1964, meant it as a criticism. “Australia is a lucky country run mainly by second-rate people who share its luck,” he wrote. “It lives on other people’s ideas…” Horne intended the phrase as a warning to Australians, and a plea for more curiosity from its leaders.
The country’s good fortune has long rested on wealth from its mineral resources and farmland. Now, however, with the prices of the commodities it exports hitting rock-bottom, Australians are beginning to realise that more must be done to encourage the formation of innovative businesses. Instead of living on other people’s ideas, in other words, it needs to generate its own.
Among Australia’s 2.6m registered businesses, the survival rate compares well with America’s and Canada’s, and is better than New Zealand’s. But a study published last month by the government’s Productivity Commission found that few young Australians start their own firms; that only about 0.5% of newly formed businesses are startups as commonly understood (innovative, ambitious and with high growth potential); and that only 1-2% of existing businesses can be described as innovating. This puts Australia on a par with Canada, say, but behind America and Britain. The commission concluded that one reason why Australia lags is that entrepreneurs need “other entrepreneurs nearby to connect and work with.”
Fortunately, Australia now has both a shining example of a tech startup becoming a global success, and a former tech entrepreneur as prime minister. Atlassian, a software firm whose products are used by developers and project managers, listed on the NASDAQ exchange in America last month, making its founders, Scott Farquhar and Mike Cannon-Brookes, Australia’s first tech billionaires. And in September Malcolm Turnbull, a lawyer and investor turned politician, unseated Tony Abbott as prime minister and leader of the Liberal Party. In the 1990s Mr Turnbull had made a fortune investing in OzEmail, an Australian internet-service provider.
Atlassian’s blunt slogan befits its Australian roots: “Open company, no bullshit”. Though it has offices in San Francisco, its headquarters remain in Sydney. Its founders, two university friends, started it in 2002 with a A$10,000 (then $5,400) credit-card loan. Fourteen years later, Atlassian’s customers include NASA, Netflix and Facebook and the company is valued at $5.6 billion. “When we began, there was no startup culture in Australia to follow,” says Mr Farquhar. “The attitude, fear of failure, was a problem.” Some say it still is.
Three days before Atlassian’s listing, Mr Turnbull gave a speech that Australian business leaders hailed as a welcome change in official attitudes to promoting innovation. Mr Abbott had cut a backward-looking figure, stopping public funding for wind energy and describing coal as “good for humanity”. Mr Turnbull called for an “ideas boom” to replace mining booms as the country’s new growth source, and told Australians they were falling behind most other rich countries in turning their ideas into commercial ventures. He promised about A$1 billion ($720m) in incentives, including tax breaks for investors in startups and venture-capital partnerships.
Mr Turnbull’s pitch to brand himself as the leader of the future, and to get his compatriots to rethink their “Lucky Country” attitudes, may take more than tax breaks. To begin to create the sort of community of entrepreneurs and innovators the Productivity Commission called for, Atlassian tried to buy a 19th-century former railway workshop near Sydney’s business district. In November, however, the New South Wales state government sold the site instead to a consortium led by Mirvac, a property company.
Mirvac plans to use much of the site for new offices for the Commonwealth Bank, though it will convert a former locomotive shed into spaces for tech firms and other startups. Even so, Mr Farquhar laments the sale as a lost opportunity to build a larger tech ecosystem that could help spawn more companies like his. Australia, he says, must decide if it wants to be a software producer for the world or a consumer, “missing this whole revolution and left wondering how we are going to pay for it”.
Mr Turnbull is putting his faith in a strengthening of links between science and business. He has restored a A$111m budget cut that Mr Abbott made to the Commonwealth Scientific and Industrial Research Organisation (CSIRO), Australia’s chief science agency, the outfit that invented the technology behind Wi-Fi.
Larry Marshall, the CSIRO’s head, was struck by Australia’s somewhat timid approach to business risk when he returned to his home country in 2015 after working as an entrepreneur for 26 years in Silicon Valley. He suggests would-be tech pioneers could find a model in Australia’s “incredibly risk-tolerant” frontier economy. Facing enormous distances and tough terrain, miners and farmers have survived only by innovating. The CSIRO has, for instance, collaborated with BHP Billiton, Newcrest Mining and others on better ways to drill ores, detect their grades and raise productivity. Cotton farmers now mainly use varieties the CSIRO has developed, which need less water and pesticides to deliver high yields. The challenge, Mr Marshall argues, is to channel the old economy’s risk-taking into new industries in which Australia has a good chance to excel: high-value food and biotechnology.
Some are already following in Atlassian’s wake. Alec Lynch and Adam Arbolino launched DesignCrowd in Sydney eight years ago after an earlier startup failed. Undeterred, Mr Lynch saw a chance to change the “slow, risky and expensive” way people procure projects from local graphic designers. DesignCrowd lets customers set budgets and receive ideas from designers around the world. After self-funding at first, capital came in from local angel investors and Starfish Ventures, a Melbourne venture-capital firm. DesignCrowd now has revenues of almost A$20m a year, four-fifths from outside Australia, and has opened offices in San Francisco and Manila.
Mr Lynch foresees a “mini startup boom” emerging in Australia. And he is optimistic that the interventions of the tech-friendly prime minister can only help Australia go from being the Lucky Country to one that makes its own luck.