Australia has experienced three broad waves of entrepreneurial development in the past, but it is the third wave, which is only just starting off, which has the biggest potential for the development of rural and regional Australia.
The first wave of Australian entrepreneurialism, centred on agricultural and resources wave essentially created what we know as rural and regional Australia today. But it was not without its problems when considered from a macro perspective.
In both agriculture and resources, a long return-on-investment cycle combined with unpredictable and significant capital demands has tended to wipe-out small players (eg the entrepreneurs) in debt, drought and periodic collapses in commodity prices. This has lead to the development of agriculture and resource industries which strongly favour economies of scale, so most of the economic benefits go to large, offshore owned entities, not rural and regional economies.
Smaller and newer players — the agricultural and resources equivalent of startups — fail to make it past the incumbency advantages enjoyed by bigger, older players, who sit on the sidelines waiting to snap the newcomers up for cents on the dollar when the commodity sine wave inevitably plunges again.
The second wave of Australian entrepreneurialism was in professional services, in the development of professional services networks and franchise models post-WWII. It had some impact on rural and regional Australia but was limited in its benefits by the small population it can serve in Australia and the barriers to exporting professional services to larger markets.
Even after the significant population growth forecasts of the next decade, the entire Australian population is vastly smaller than even a typical urban area of Europe or the US, much less an Asian city. Differences in business practice and law, forex complications and trade protection makes it very challenging to export an Australian professional services model to other markets, as even our otherwise successful big five Australian banks will attest (even they keep losing money more often than not when they expand internationally).
The third wave (tech startup innovation) is only in its first decade and has already created several of Australia’s highest-valued companies (eg Cochlear, CSL, Atlassian). It has the most promise for rural and regional Australia because for the first time:
- It’s highly capital efficient compared to agriculture, resources, professional services, so the barrier to borrowing for development is low;
- Most business ideas can be developed and proven/disproven as viable in a matter of 3-5 years instead of 10-50 years;
- Zero cost of export because software can be easily localised, translated, marketed and exported in every market in the world at a fractional addition to the cost of developing the product for the Australian market. No significant trade barriers yet exist in software export and global marketplaces exist with well-understood market mechanisms in mobile app stores and Software as a Service (SASS) ;
- Startups requiring hardware have been able to efficiently fund their prototype and early customer sales through crowdfunding on eg Kickstarter and Indiegogo and then rapidly scale to global manufacturing and distribution with the help of specialists in China.
Perhaps most importantly for a healthy economy, the tech startup industry is not subject to a sine wave trend in the commodity price of software and hardware. In fact, whether it’s computer chips or a smartphone app, the cost of tech hardware and software has consistently, predictably, fallen every year since it was first measured in the 1970s.
Whereas the sale price of hardware and software has remained largely the same — most SAAS software sales are in the same price categories they were in at the beginning of the decade. Smartphone app sale prices are also relatively stable. And you pay about the same for a smartphone or a laptop today that you paid two decades ago for a flip phone or laptop — only the functionality has increased.
Four factors influence to what degree rural and regional Australia can participate in the new innovation economy, and how much of the economic benefit flows to regional communities:
- Availability of skilled workforce;
- Access to high speed internet, 5+G mobile data, hi-res GPS, low-cost, high-res satellite imagery and data
- Easy access to customers and capital; and
- Critical mass of startup community in the region
Availability of skilled workforce
You can’t create a tech startup without skilled tech workers and in no location in Australia do we have enough skilled software or hardware tech engineers. At BlueChilli our unique tech startup accelerator model makes use of our own skilled product development team to work with the non-technical startup entrepreneurs with great ideas for tech startups to build a prototype, then a minimal-viable product and then works with them to find product/customer fit, gain revenue traction and secure early-stage investment.
I’m so proud of the world-class engineering we do at BlueChilli, but honestly? I wish there wasn’t a market for it. I wish the availability and market price of those services was so low that we couldn’t afford to offer it. The fact that it needs to exist and that there is such demand for it in Australia is a sign that Australia is missing out on the economic benefit of the tech innovation boom by under-investing in the education of a skilled technology workforce.
Agricultural and service workers absolutely can retrain as software and hardware startup founders and employees but for this to happen they need credible role models, an accessible and affordable retraining path, and loans or subsidies to assist them in making the transition.
Show promise on the football field and you’ll attract sponsorship and scholarship to a selective school from an early age, but show promise as a software developer early in high school and the most likely reaction from teachers and parents will be to stop wasting all your time on computers and go outside to get some fresh air and exercise. Win the premiership and you and the team will get your photo on the front page of the local paper. Win the coding competition or start earning good money doing penetration testing and not only won’t you make the front page, if you do make the paper at all, you’ll be featured as an oddity or an eccentricity, not as a role model but as a special case.
If we want young people to aspire to a career in tech startups we have to help them believe that they can be as popular as a footy hero in your local town.
Even better is giving our youth the opportunity to learn these skills from the beginning, so that the Three Rs become STEM. It’s no accident Mark Zuckerberg created Facebook when he was 25 — he began studying software engineering in primary school, was encouraged by parents and teachers to do so, and when he dropped out to pursue Facebook fulltime, was studying software engineering (at a university which graduates more software engineers in one year than all of Australia’s universities graduated in 2016).
We know that exceptional students, intelligence and dedication to hard work exist in classrooms all through regional Australia, but if they don’t have the motivation, the role models or the expectation that they can be successful, that this is as meaningful a career path as running the family farm or rural business, it won’t happen.
Software engineering is one of the few qualifications which can be successfully taught and studied remotely. Melbourne University celebrated the graduation of its first 100% remote student in December 2016 and expects that greater than 40% of its total student population will complete the majority of its study online by 2020. The great engineering and business schools of Stanford and MIT are increasingly releasing their curriculum online for students all around the world to study. Rural students are no longer limited to studying face to face, or to travelling long distances and incurring big expenses to live on campus in our cities.
And I hope Australia’s regional university vice chancellors recognise that is both an opportunity and a massive competitive threat, and grabs that opportunity by the horns with both hands before the competition wins the rodeo.
Wherever our secondary and tertiary students have reliable and affordable access to high-speed internet services, they can now gain the best technology innovation qualification in the world and compete on a level playing field with the best in Silicon Valley. With the right role models, curriculum and support from their local community.