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Destination not home: why are Australia's tech start-ups flocking abroad?

By Dario Baudo - posted Tuesday, 17 July 2012

It's not a new story, in fact trawling through the Sydney Morning Herald or any other major Australian daily, you will find one story or another about an Australian start-up that's closing-up shop and heading overseas to kick-start the business. The destination of preference is usually California, but you will also find Australians splattered across the globe in more inconspicuous places like Santiago, Chile or even Cordoba, Argentina. With one mission in mind – to give oxygen to their niche product – all these entrepreneurs are abroad because they can't find the same incentives or investment support at home. As a member of a start-up associated with the tourism industry, and which is now located in Argentina, I can testify to the fact that it was the lack of support that led to this start-up relocating abroad.

So why is it so hard for start-ups to succeed at home? A few major hurdles exist, and from personal experience, one was the high cost of establishing the business. Based on basic industry standards (at least in Australian Capitol Territory), a small business will spend approximately $3,500 to $6,000 to be legally established. This fee may be considered miniscule, but in comparison to markets like the US, where a company can be established for as little as $500 - $800 AUD, the incentives to move overseas start to build up.

Anotheris the investment scene in Australia. Even though you will find endless grants sponsored by federal and local governments, few are actually tech start-up 'friendly'. With that said it's all downhill. Luckily you will find some interest from a tiny enclave of venture capitalists, like the Melbourne group AngelCube. However, unfortunately in comparison to other start-up hubs around the world, they provide too few incentives to allow the industry to take-off. This is especially true when you consider the benefits offered by a Chilean (of all places!) government grant, entitled Start-up Chile, which offers nascent start-ups $US 40,000 to kick start operations in the capital Santiago. Notwithstanding the excitement of moving to a new country and experiencing a new culture, again the financial incentives to look abroad are there. In light of such programs around the world it's plausible to ask; why isn't the our government doing the same here?


Lastly, the approach to risk in the start-up arena in Australia is conservative (considering the creative talent pool and promise for financial gain). Today's conservative trend may even seem financially sound, but conservative mindsets have led to promising Australian start-ups like Curicon searching for greener pastures in the United States. It's worth noting that Curicon is one of the many Australian enterprises who have established such a presence in the US tech circuit that the term the 'Aussie Mafia' has grown to reflect their influence.

In times like these, where economies around the world are shaken, initiative, ingenuity and some old fashioned 'guts' are part of what make economic rebounds occur in households. This is simple economics, as functioning small businesses have a positive impact on a nation's employment levels. This is also noted in an April 10, 2012 article released on Tech Crunch which stated that since 2007, 44 million jobs grew out of small businesses in the United States. Bjoern Hermann, one of the authors of an elaborate study focusing on start-ups called the "Startup Genome", correlated the positive economic influence of start-ups with their respective geographical concentration. Unfortunately, we aren't yet up to scratch, and Hermann's research says it all, with Sydney and Melbourne ranked as twenty-first and twenty-second in the world's top twenty-five start-up hubs.

Importantly, the start-up game isn't all about providing every crew with a hipster look and iPads with a million dollar investment. Silicon Valley, New York and London may have the image of funky start-up heavens, but they are environments which are strictly business. Competition weeds out idealist and baseless products with no market or realistic business model. Nevertheless in exchange, start-up hubs unlock the doors to entrepreneurial thinking, potential for financial reward, and also provide an economic stimulus to local economies. Considering the potential, Australian investors and even federal and local governments should consider incentivising this industry, otherwise the status quo will only lead to more entrepreneurially minded Australians flocking abroad to try their luck elsewhere.

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About the Author

Dario is a former policy and research officer who has a keen interest in criminal justice, national and international security with a focus on the Middle East.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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