News, Insights and Stories from the Australian and New Zealand tech ecosystem.

Can Sydney become the startup city that ecosystem stakeholders want it to be?

Over the last few weeks, there has been a lot of talk about the Sydney startup ecosystem and why in the three years since the last Global Startup Ecosystem Ranking report was published, the city has dropped four places from 12 to 16.

Given the report is missing massive startup markets like China, it’s likely that Sydney sits even lower on the scale. I would hedge a bet that cities like Shanghai, Shenzhen and Beijing would appear in the top 10.

It’s also worth noting that Australian and New Zealand startups do not have a big presence on databases like Crunchbase, which is one of the key sources of data that was used to assess ecosystems across the globe. Despite the promotion by various stakeholders across the local startup landscape and various media outlets, if the response level of Bluechilli’s START RAIL callout serves as any indication, Australian founders are notoriously bad at engaging with surveys, which does in fact skew the data. This is a problem for our ecosystem.

Sydney as a global startup city

In the Crossroads 2015 Report produced by StartupAUS, there was a particular graph on Page 28 that gave an overview of the eight specific conditions that are required for a successful startup ecosystem to thrive.

A Thriving Startup Ecosystem

 

As a city, Sydney exhibits many of these conditions like a pro-entrepreneurship culture, experienced entrepreneurs that are willing to give back, and many examples of successes and role models to look up to in the ecosystem – as more startups reach maturity and exit this will increase. But there are also some very big gaps that Sydney as a city needs to address if we are serious about becoming the ideal environment for highly-scalable tech businesses.

A critical area that needs improvement is a more supportive regulatory environment to enable startups to ‘get on with the job’ and build businesses with a global reach that contribute to the city, state and federal economies in a positive way. Making things like equity crowdfunding and crowdlending accessible to Australians without so many conditions is an example of what I am talking about here; countries like the UK and New Zealand have seen a lot of positive traction by implementing supportive legislation around these two things.

The ESS legislation changes is something else which entrepreneurs like Matt Barrie have labelled as “horribly constructed”. While the changes implemented earlier this year might make it easier for startup companies to reward their employees and attract high quality talent, the changes bear no significant benefit for the obstacles that investors wanting to invest into the startup space face. In a lot of ways, the changes are counter intuitive because they only benefit particular segments of the startup ecosystem.

Regulatory frameworks is not city responsibility, but in order for the city to thrive, the fact is without the regulations being supportive, the ecosystem will never reach its potential.

The other two areas that Sydney needs to address is the availability of capital and the fact that we are not really as collaborative as we think we are. Although we have many collaborative spaces and programs like Fishburners, Tank Stream Labs, BlueChilli, WeCo, iCentral, Gravity, ATP Innovations, The Hub Sydney, The Emporium, muru-D, Jumpstart, Springboard, Startmate and INCUBATE – these are all examples of individual collaborative ecosystems – the collaboration factor between everybody is no where near as strong as it could or should be.

Nothing makes this point more clear than when you look at trends four years ago and compare that to trends today, particularly in relation to the types of startups launching. When group buying startups like Spreets and Cudo launched in Sydney, it created a snowball effect of startups trying to compete with them – at least two new group buying sites launched a week out of this city alone for a good year. It wasn’t healthy for the ecosystem at all – a bit of proper collaboration could have avoided a lot of lost capital and heartbreak for many people.

The same thing is happening right now in two spaces – grocery delivery applications and find-a-cleaner applications in Sydney. Probably two companies will ultimately win in this space and that will be awesome for them, but at my count right now there is about 11 attempting the grocery thing and about 7 operating in the cleaning space and I have no doubt someone else will enter the space next week. Collaboration helps to identify gaps in industries and it is from identifying those gaps that you breed original ideas.

Creating a concentrated area of startup activity

One of the standout points within the City of Sydney’s Draft Tech Startup Action Plan is the fact that when an industry “clusters” within a particular location, there is usually a higher level of success that stems out of that location, both from an economic and community standpoint.

For example, between 2007 and 2012 Harris Street in the city had the largest and fastest growing ICT workforce. In fact, during that time over 3,000 new people were employed by ICT companies in that section of the city. Companies like Google likely contributed to a decent amount of those employees, but the point that needs to be made here is that by encouraging startups to grow within close proximity to one another, it automatically encourages more collaboration, which as I stated before leads to a stronger startup ecosystem that begins to churn out more original ideas rather than ‘me too’ plays.

Sydney Councillor, Angela Vithoulkas, who is also the deputy-chair of the Business Development and Economic Sub-Committee for the City of Sydney, says that the Draft Tech Startup Action Plan is a positive step in the right direction to help shape and guide the further development of the tech startup environment in the city.

“We know that 64% of Australia’s tech start-ups are located in the LGA and this plan will help to build on that number and at the same time support entrepreneurs’ access to funding and access to markets,” said Councillor Vithoulkas.

“While the plan sets the general direction I also believe that input from those within the ecosystem will build on the draft plan. I’m looking forward to reviewing the submissions to the draft plan as well as input that is forthcoming during SydStart 2015 and Sydney Startup Week 2015 during October”.

Not only is Vithoulkas a Councillor, she is also a prominent small business owner in the city and the founder of a tech startup herself, small business digital radio platform Eagle Waves Radio. This kind of representation on the council is great for the startup community as it means that in addition to those that work for the city who are immersing themselves in the ecosystem to learn more about it, there is someone with a vote that understands startups and scalability struggles intimately.

Vithoulkas told Startup Daily that even when contesting the upcoming City elections that this will remain a core focus for her regardless of the outcome at the polls.

When contesting the next election the Sydney Matters Independent Team will focus on developing actions that provide start-ups with the best possible environment in which they can diversify and grow,” she said.

“My public support for the plan and the tech ecosystem will continue post-election as I believe there is a need for leadership and to strengthen ongoing collaboration with the sector, state and federal government as well as international governments and agencies for its continued growth”.

While the City of Sydney should play both a collaborative and leadership role in working with the tech startup community and other levels of government to champion startup success, as participants within the city, we all share the responsibility of publicly defining Sydney as a tech startup capital. If policy and collaboration can come together effectively, we may just make it happen.