Building scalable local businesses also requires scalable talent. The ACS report highlights the importance of real-time workforce visibility and development, where tools like ACS’s mySFIA help leaders assess, plan and grow tech capability as companies scale.
The commercialisation challenge
Encouraging innovative Australian businesses to remain onshore requires helping them navigate the funding abyss that lies between ideation and commercialisation, says ACS chief executive officer Josh Griggs.
Australian Computer Society CEO Josh Griggs.
Australia contributes around 3.5 per cent of global research output, ranking well globally in per capita terms. Local start-ups also have good access to early Series A and B stages of seed funding, but Griggs says they enter the “valley of death” once they have developed a minimum viable product but are yet to establish annuity revenue streams.
“Financial markets in Australia are relatively small, plus they are conservative and risk-averse because we don’t like to fail,” he says. “Meanwhile, investors in countries like the US are much more open to taking a risk on innovative businesses before they have established revenue streams.”
As a result, Australia invests a lot of time and effort into nurturing homegrown start-ups with great ideas, only to lose them at the scale-up stage when they’re lured offshore in search of funding to commercialise their ideas.
“Australians are renowned as quite scrappy; we’re very effective at achieving a lot with very little,” says Griggs.
“That’s a great testament to Australian ingenuity, but it works against us when our scrappy start-ups are ready to scale and need more – leaving them ripe for the picking by someone who is prepared to back them with capital as they grow.”
Australia’s commercialisation challenges are recognised at the highest levels. Harnessing the potential of start-ups and businesses adopting new technology is a priority of Australia’s newly returned federal government, with its Strategic Examination of Research and Development expected to be released later this year.
“When we make it too difficult for Australian start-ups and scale-ups to get out of the starting blocks, we end up losing that innovation, that intellectual property, those jobs and those economic benefits to other countries that are more prepared to nurture great Australian talent.”
The ACS report also identifies 10 key actions for building the pipeline of Australia’s digital skills development, as well as supporting a more innovative economy to ensure that more Australian businesses survive without having to move offshore.
Removing investment roadblocks
From a government perspective, this includes re-thinking investment and procurement policies. The report recommends establishing vehicles for co-investment into scale-up businesses in priority sectors and supporting diverse founders. Returns could then be invested in other scale-up businesses.
Griggs supports a “cohort” approach to diversify investments and reduce risk, instead of targeting government and private investment at individual start-ups.
“Rather than attempting to pick winners, spreading co-investment across a batch of start-ups in an effort to get them through to Series A funding increases the chances of success while addressing that fear of failure which can hold us back,” he says.
When it comes to government procurement contracts, while there are policies in place that encourage working with local SMBs, there are major hurdles that still remain.
“For example, requirements such as a ISO27001-compliant cyber posture can be difficult for SMBs to achieve – even if they are on the pathway – because it requires investment to get there,” says Griggs. “Likewise, references from existing customers creates a chicken-and-egg challenge for innovative Australian businesses looking for their big break.”
Workforce platforms such as mySFIA can assist organisations on the path to meeting technical and compliance requirements – helping bridge capability gaps in real time.
These issues have left Australia lagging behind other OECD countries when it comes to the share of gross domestic product spent on R&D. If the nation increased this expenditure from the current 1.7 per cent of GDP up to 2 per cent, it stands to gain a $6.3 billion dividend in 2035, according to analysis by the Technology Council of Australia (TCA).
“Australia is lagging in supporting our local businesses compared to the rest of the world,” says council CEO Damian Kassabgi.
“Without stronger investment in R&D and tech adoption, Australia risks falling further behind.
“We know Australia punches above its weight in innovation, and we have shown it’s possible to build and scale global tech businesses such as Atlassian and Canva. To truly compete on the world stage, we need stronger investment.”
For more information, visit acs.org.au/digitalpulse.
