Silicon Valley? Try Kangaroo Alley.


Australia is noted for its robust economy. There are Australians in their 40s who have never experienced a recession in their working lives.

The perception, of course, is that this impressive economic performance has been driven by Australia’s resources sector, and the country’s lucky proximity to insatiable Asian demand for commodities. Indeed, there’s even been talk of Australia suffering a “resources curse”, in which the commodities boom weakens the competitiveness of other sectors of the economy. Local manufacturing, brought low by high costs and a robust Australian dollar, is often brought forward as exhibit one in this argument. Some forecasts see a dire outlook for the Australian economy when commodities demand falls, as it now appears to be doing.

All the more reason, then, to rejoice in a recent Pricewaterhouse Coopers (PwC) report, commissioned by Google Australia in April, which offers up a very rosy outlook for Australia’s tech startup sector.

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“Australia’s what?” you ask. Yes, until very recently, the country was not noted as a hub of tech activity. That’s not really surprising, given that technology in Australia right now accounts for just 0.01 percent of the national economy and employs just 9,500 people.

But the sector is burgeoning, and PwC has predicted that by 2033, it could be a $109 billion industry, representing 4 percent of the Australian economy at that time, and employing more than half a million. At that point, it would be as big in Australia as the retail and education sectors.

The report is apparently extrapolating from recent trends. It notes, “Australian tech startups are supported by a rapidly expanding ecosystem with strong recent growth in incubators, accelerators and angel groups. Entrepreneurs today have access to a wide network of support.” This network has expanded particularly rapidly in the past two years.

But the growth is not guaranteed, and the report calls for a large range of initiatives that need to be taken, from enhancing the culture to improving the regulatory environment, if the technology sector is to fulfill its potential.

PwC noted that in 2012 there were about 1500 startups in Australia, 97 percent of them located on the country’s East Coast. Most have been launched since 2007, not an easy period for the global economy.

The PwC research is considerably more optimistic than a similar report released by Deloitte Private with several partners late last year. In this study, which dubs the local sector “Silicon Beach” and compares Australia with the rest of the world, it found that “only 4.8 percent of Australian technology startups grow into successful, global companies” compared with 8 percent in Silicon Valley and 6.7 percent in New York. It also found that U.S. startups raise 4.8 times more capital in their early stages, and a staggering 100 times more when they are ready to scale their operations. Australian entrepreneurs are significantly less ambitious than their American counterparts, the researchers found.

At first blush, the reports are a little hard to reconcile, but ultimately both appear to have the same purpose: prod Australian policymakers into action that would stimulate the local technology sector.

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