Beyond Silicon Valley: Start-up hubs in Australia’s backyard



This article is by Donald McNeill, professor of urban and cultural geography at the University of Western Sydney. It originally appeared on The Conversation.

analysis There were some raised eyebrows when the smiling faces of Atlassian founders Scott Farquhar and Mike Cannon-Brookes appeared at the top of Business Review Weekly’s annual young rich list.

The business enterprise software entrepreneurs didn’t just symbolically edge mining magnate Nathan Tinkler from the top spot but they also pointed to the sudden appearance of a new Australian economic horizon that didn’t involve fracking. In the buzzing technology meet-ups and co-working spaces in Australia’s large cities, it was vindication for their commitment to what is sometimes referred to as the “ramen economy”: long nights, instant noodles, and little financial income to create a product that might never see the light of day.

For many Australian tech entrepreneurs, part of the glow from seeing Atlassian’s founders at the top of the tree came from admiration at the way the pair had “bootstrapped” their way to global competitiveness without relying significantly on venture capital – or, indeed, much outside investment at all.

It also helped ease the nagging sense of being a flight away from the action of Silicon Valley and San Francisco. For many Australians, the lure of the Valley is the feeling of being in a place that understands their risky business, very different to the one where bank managers, investors and even relatives would rather fund Gold Coast real estate than invest in the mysterious terrain of a digital technology start-up.

Start-up stamina
Unlike overnight Valley successes like Instagram, it took Atlassian’s founders 10 years to gradually build their company to its current prominence, which is common for enterprise software. Much of the admiration for the founders is due to this stamina. Yet questions remain over how best to create more Atlassians in Australia. For government, other than subsiding ramen, it is difficult to create policies that can be tailored to the wild diversity of products, sectors and markets that constitute the digital economy. Although agencies such as Commercialisation Australia are generally seen to be making the right moves for certain sectors, local investors find the distance from the Valley to be a major disadvantage in detecting what might take off as the next big app, website or online store.

However, there can be a tendency in Australia to fret over the inability to produce more firms that are on the scale of Google or Facebook. This ignores the vast swathe of small and medium-sized digital enterprises that will still – in aggregate – yield huge returns for the Australian economy in terms of employment and tax revenues. Indeed, Google Australia has such a strong interest in generating new tech SMEs that it commissioned a PWC report, The Startup Economy, which suggested that the sector could add 540,000 jobs and 4% of GDP by 2033. Given that many of Australia’s largest tech firms pay a minimal amount in corporate tax, this is not a small matter.

One of the myths of start-up culture is that success comes through clustering – where firms trade with each other, share knowledge too specialised to be written down effectively and hire from each other – and that Silicon Valley is therefore the number one choice for launching a tech firm. There is no doubt that the lure of Silicon Valley has been due to a virtuous cycle of knowledgeable venture capital, a world-leading research university (Stanford), and a number of other x-factors. Little surprise that the area’s accelerator programs such as Y Combinator or the Founder Institute are popular targets for Australian start-ups.

Asian hubs
But is there an alternative? In Singapore’s Block 71, out near the National University of Singapore, there lies a familiar warehouse-style building of start-ups, many of which are benefiting from the government’s desire to harness the creativity of app designers, e-commerce and finance software authors and lead the Southeast Asian market in these areas. The likes of Hanoi, Kuala Lumpur and Jakarta are similarly generating start-up cultures with the potential to tap into markets vastly larger than Australia. A successful Indonesian start-up is looking at a national population of 240 million, not far behind the US, which will increasingly sort itself into diverse digital markets for all sorts of things.

This is the future that could captivate Australian start-ups. Notwithstanding the inevitable digital downturn that will correct the massive supply of new firms and products, the long-term opportunities are huge for innovators who can meet a low- to medium-income Asian market. The current cross-party support for renewed government commitment to an Asian cultural and linguistic literacy could be crucial in training Australians who can understand and develop products that fit these markets.

The changing nature of tech capacity in Asia’s diversely enabled societies isn’t something that Valley firms can easily keep tabs on. The next Atlassian could be started by a pair of Chinese students studying right now in Melbourne, or an Australian-born Vietnamese or Indian entrepreneur who can leverage transnational family connections and build a fast-growing company. Encouraging these new digital economic geographies is a task that might occupy minds more than the California dreaming that so often occupies the start-up headlines. It might just be that this is one of the best ways that Australia can wire itself into the Asian Century.

Donald McNeill receives funding from the Australian Research Council Future Fellowship program.

This article was originally published at The Conversation. Read the original article.

The Conversation


  1. It has always puzzled me with the usual push for Australia to become a ‘knowledge economy’ that more isn’t done to stimulate the incubators. Not just ‘information technology’ based one either – all areas of technology.

    Definitely needs more focus from all levels of the community.

    • I’d call that something of an understatement – we lose dozens of research scientists to the US every year because there is no funding for research here. A friend was offered a $10k grant to continue his research here, or he could move to a lab in the US where he had access to a team of some of the most brilliant and published people in his field and a $500k annual budget. Needless to say he doesn’t have plans to return here unless he decides to move out of research.

      Another example is Enviromission, a solar energy generation startup that spent ten years trying to get a project up in Australia and eventually moved to the US, who offered them huge incentives and tax breaks to bring the project to their shores.


  2. Nice overview and good mention of the PWC report – but there are active and growing start-up communities in Australia. It would have been nice to see a mention of Incubators such as Inspire9 or York Butter Factory in Melbourne, or Fishburners in Sydney, or even a quote from an Australian VC.

    There is also a new generation of accelerators such as AngelCube or Blue Chilli who are copying the YCombinator model.

    One of the biggest aspects preventing Aussie companies taking off, which is inherent in Silicon Valley, is the risk appetite of investors and venture capital in Australia. This is starting to turn around however, with a few local venture funds recently starting like Blackbird and Square Peg Ventures, but these are still hugely over subcribed. AngelCube had over 150 applications for 12 paces on its class of 2013 programme, some from Chile and NZ.

    Others aspects include regulation around tax on share transfer, and an antiquated banking system that rarely grants merchant accounts to online businesses without track record. If you look at the class of 2012 from StartMate (as reported on Delimiter), every one of them registered in the US as a Delaware company and licensed IP back to Australia to get around these points.

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