News & Analysis

The Western Australia startup ecosystem report highlights opportunities for local startups to target Asia

- December 9, 2015 4 MIN READ

Earlier this week, Prime Minister Malcolm Turnbull told Australia it was time to forget the mining boom and look to technology and innovation as the fuel for the next big thing: the ideas boom. With excellent timing, StartupWA has today released a preliminary report examining the state’s startup ecosystem, looking at the benefits for the Western Australian economy of developing its tech and digital innovation sector, and how these can be achieved.

The report, produced through a collaboration between StartupWA, the Western Australian Department of Commerce, and the City of Perth, estimates that the economic impact of digital and internet technologies on Western Australia’s economy could be over $76 billion per year by 2025, or 25 percent of gross state product.

But of course, there is much to be done in order for the state to reach this figure. The report classed the state’s early stage technology industry as “still in its infancy, with a few breakout successes that have managed to overcome regional isolation and sparse support.”

StartupWA director Sam Birmingham said, “We must support the continued growth of startups as job creators and ensure that as much as possible of this multi­billion dollar opportunity is captured and the benefits of disruptive innovations are retained in Western Australia.”

The report identified 335 active startups in Perth, an increase of 235 percent from the inaugural report in 2013, which had identified a core of 100 startups. The state’s startups, supported by a dozen coworking spaces, 12 incubators and accelerators, and 111 meetup groups, hackathons, and other community-led initiatives, have created almost 3000 jobs since 2010.

The majority of the active startups are working in software or ecommerce, 55 and 53 respectively. Interestingly, despite the fact that Western Australia has been at the heart of the mining boom, the resources sector ranks as the sixth most popular for startups in the state, with just 26 startups working in the space.

But though Turnbull declared on Monday that the mining boom will inevitably come to an end, WA investment in research and development in mining reached $2.43 billion in 2015; as such, the report states that there is still a wide scope for startups to work in the sector. Accelerator programs and hubs focused on the space, such as Unearthed and KPMG’s Energise, are working to spur startup interest in the industry.

Justin Strharsky of StartupWA and Unearthed said the stat of 26 startups in the sector is “evidence of what it looks like to be poor at collaborating at innovation.”

He explained, “The Australian Government itself knows we are pretty poor at collaboration…we’re also pretty poor at commercialising academic research. It looks like startups are not engaging the major sectors of our economy, and the big players and supply chain partners in resources sector are also not engaging startups, or don’t necessarily view startups as a means to stay on top of technology and innovation.”

Strharsky said that, rather than being mutually exclusive, the mining boom can in fact be an important contributor in the ideas boom.

“Premier Colin Barnett was keen to point out that the resources sector can pick up a lot of that innovation. By no means is an industry that contributes so much to the GDP of Western Australia incapable of contributing to the creation of new jobs and absorbing, if you will, by virtue of being a market for, technology and innovation to come out of the startup sector.”

Another big issue in the report is location, affecting in particular the pool of funding available to WA startups with the bulk of Australian investors based on the east coast. However, the report highlighted the role proximity to Asia can play in the state’s startup success, particularly given the shared timezone and existing relationship: China is Western Australia’s largest export market, accounting for over 51 percent of the state’s total exports, while Western Australia also exports up to 80 percent of its agricultural production. In turn, the report highlighted opportunities for local startups in the hardware and Internet of Things sectors to take advantage of Asian manufacturing, while AgTech will also provide opportunities for WA startups to take on the Asian market.

As well as location and funding, the other top issues identified by participants in the local startup ecosystem included the lack of a culture of entrepreneurship, a lack of talent and skills due to low STEM course completion rates at WA universities, a fragmented, disconnected ecosystem, and the lack of government support – unlike a number of other states, Western Australia does not have a dedicated Minister for Innovation or clear innovation strategy.

On the flip side, the top opportunities identified for WA startups include the ability to play to local strengths – such as proximity to Asia – and the ability of WA’s culture and lifestyle to attract talent, as well as the availability of capital. Though this capital is usually invested in high risk early-stage mining ventures, the report states that these resources-focused capital markets and financial services could be re-oriented towards the tech sector.

The World Wide Web Conference 2017, a global technology conference that is set to be held in Perth in April 2017, was identified as a key opportunity to promote Western Australia’s startup ecosystem, with contributors to the report suggesting the state use the start to the conference as a deadline to grow the ecosystem and showcase its strength.

You can read the report here.

Image source: Startup_WA on Twitter.

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