The new Australian Government has been hit by a wall of economic issues, centred on surging cost of living, before all the ballots were counted. Although it is important that it navigates those, preferably without adding to the post-pandemic government debt burden, we should be helping them consider what needs to be in place to bridge to the economic recovery. After all, the small business sector accounts for a third of all Australian jobs.
The triple whammy of slowing economic activity, rising inflation, and monetary policy normalisation’s impact on markets, is going to make it harder for startups to get started, and harder for those that already have a few shoots above the ground to attract the right capital.
However, just as these economic headwinds were starting to build, the venture capital markets in some countries were really doing very well. Pitchbook has reported that Singapore has seen the highest rate of venture capital investment per capita of any country at US$695 per person, and Israel came in second with US$506 per person.
In comparison, a back of the envelope calculation would suggest that the Australian market did in the region of US$220 per head in the whole of 2021, and that was almost double the rate it saw in 2020. So what can we learn from these two countries that could make our market a more fertile ground for would be entrepreneurs to ‘startup’, and hence boost the economy, and perhaps help us meet the aspiration of a number of previous governments (of both colours) to become a financial centre.
It is well documented that Israel is a ‘technology startup nation’. It is considered part of the mindset of the people. Some of this is attributed to the compulsory national service, and that it has in common with Singapore. That experience does mean there is a strong education base, with a focus on technology. Perhaps also a sense of discipline and focus that ‘kids today’ might not get from the Australian ‘lucky country’ mentality.
It would also be true that English as a dominant language, and strong and stable institutions (including regulatory frameworks) would be seen as foundations in these countries. But we have all of those and more. And it unlikely to be argued that culturally Singapore is a more creative place.
It would be an interesting exercise to consider how the weighting of students across degree topics compares across the three nations. The comparative student debt outcomes might also give insight as to whether this changes career choices and risk appetites (potentially the period in national service might also support a young person’s financial stability, and give them a better grounding for risk taking at an earlier age?).
It seems that at least some of the ‘secret sauce’ is a conscious decision by successive governments to have a broad-based, joined up, policy framework that is supportive of startup culture. This includes all the tax incentives you might imagine for firms and individuals, the frameworks for spinning businesses out of the university research, and more.
Australia has many of the ingredients of the sauce. However, if we are going to supercharge our startup activity to support our economy, the new government needs to bring it all together holistically. We can be a ‘fast follower’ and leapfrog other nations by learning from their example. Perhaps that’s worth a Ministerial plane ticket to Israel via Singapore.