Sep 092016

Over this week I’ve been posting a series of interviews with the candidates for this week’s Sydney Lord Mayoral election. All of the teams have interesting schemes and ideas on how they can improve the city’s profile as a global tech centre.

While each team’s plans are worthy, it’s worth asking exactly what governments can do to make their communities more attractive to businesses and whether short term subsidies and incentives can help.

There is some evidence they can, prior to San Francisco changing its tax rules the city took second place to Silicon Valley in the southern Bay Area. In the last ten years, the city has become the focal point for the tech industry.

However there is a counter argument that San Francisco benefited on a generational shift of lifestyle preferences away from the leafy suburban lifestyles of Palo Alto and San Jose to the grungy but walkable communities of the Mission and SOMA.

The Bay Area though is a special case, Silicon Valley’s success as a tech hub is based upon massive Cold War tech spending that drove the region’s industry and its that high level support that probably tells us more about government support.

In the case of London and Singapore, the successes have been due to the national governments putting in broader economic reforms and incentives. Also their proximity to Europe and East Asia respectively has made both cities attractive.

On balance it’s those broader economic factors that make regions attractive as industries clusters – local incentives count little compared to access to factors like markets, capital and skilled labour. Taxation is, at best, a secondary issue.

The biggest challenge for Sydney, and most Australian cities, is the the crippling cost of property. In 2013, released a survey showing Sydney to be second only to Zurich in the cost of establishing a startup.

In many respects, the cost of property doesn’t really matter to prosperous industry hubs – San Francisco, London, Singapore and New York are all eye wateringly expensive and yet they still thrive – however all of those cities have better access to capital and markets, if not labour, than Sydney.

Addressing Sydney’s chronic shortage of affordable accomodation is firmly in the state and Federal governments’ remit and beyond giving property developers a green light to build high rise apartments neither level of government has shown any interest in addressing it.

Similarly, the tax structures which penalise Australian employees of high growth businesses and dissuade investment in early stage ventures are totally the responsibility of the Federal government and it’s hard to see that changing in the term of the current dysfunctional administration.

The relative powerlessness of local governments leaves initiatives by the City of Sydney limited in scope and schemes to promote the city or offer incubator space are peripheral to the factors that encourage the development of a global industrial centre.

Ultimately though, the question has to be how much any government can do to create a Silicon Valley, factors such as labour availability and access to capital come down as much to the community’s attitudes and business’ risk tolerances.

So perhaps we focus on what governments can do for business. Maybe just providing a level playing field can be the best we can hope for.

Sep 082016

Leading the City of Sydney’s Lord Mayoral race is incumbent Clover Moore. Long a thorn in side of the state’s political and media establishments, the independent Moore has safely held the city’s Lord Mayorship since beating the seemingly unbeatable Labor candidate in 2004.

Since being elected, Moore has been focused on Sydney being a ‘living and sustainable city’ with the Sydney 2030 plan being the focus of her administration. This election’s platform builds on that scheme.

While acknowledged in the 2030 strategy paper, the tech sector really didn’t feature in that document – something that reflects how late all levels of Australian government have been in recognising the industry’s role in economic development.

However in recent years the council has been developing its programs, including the Startup Action Plan and on the Clover Moore team for this year’s election Jess Scully, director of  the annual Vivid Ideas festival and organiser of TEDxSydney, is the spokesperson for the campaign’s tech and cultural platforms.

“The crucial things are access to talent and space,” Scully told me when I interviewed her a few weeks ago. “There are reasons why people are attracted and drawn into the gravity of precincts in the heart of the city.”

Scully cites the city’s working with property developers to allocate space for startup hubs in new developments, the council’s support for various events and the support for infrastructure projects, not least the contentious bikepaths, to improve the city’s liveability.

Like the rest of the candidates’ teams, Jess provided the following answers to our questions.

What are your policies relating to encouraging tech startups?

“Clover has been very proactive in supporting the start-up sector and encouraging co-location, which we know amplifies the benefits of having a lot of bright minds working together. After consulting with the sector, the City adopted a Tech Start-Up Action Plan in March, which has the aim of building a robust start-up ecosystem by offering access to affordable space, promoting dense agglomeration and increasing access to funding and markets.

“Of course, it’s easy to say these things – but under Clover’s direction, the City of Sydney is already taking action – one major step has already been taken. We know Sydney can be an expensive place for start-ups to access affordable space, but in the future we want the knowledge economy well represented in the heart of our CBD. The City has negotiated a Voluntary Planning Agreement with Lend Lease to secure 3900 square metres on three floors in a prime spot on George Street at Circular Quay for tech start-ups.

“This new development will put tomorrow’s tech and start-up leaders right in the centre of the action, closer to potential clients and partners in the corporate world. This new CBD tech hub will provide affordable space for businesses at different stages of development, co-working spaces and community space.”

What do you see as Sydney’s strengths in this sector?

“Sydney benefits from its own gravity – we’re home to over two thirds of Australia’s start-up community – we’re the natural home for businesses that want to scale up and go global from the outset. We’re a global city that’s attractive for talent, and we’re the base for the creative industries, finance and services sectors, so being located here allows you connect with potential collaborators, clients and investors. Other regions have to offer more incentives to overcome the natural advantages that Sydney offers start-ups.”

What are we not doing well at the moment?

“We’re still young: Sydney has a relatively new tech start-up ecosystem and we’re struggling with two challenges: skill shortages in ICT, and in attracting capital to scale-up.”

What are we doing well?

“I think our start-up ecosystem in Sydney is one of the most supportive and collaborative in the world: I’m so impressed by the generosity and knowledge sharing that goes on in places like Fishburners, Stone & Chalk, Blue Chilli.

“It’s also fantastic to see how engaged our start-up success stories – the founders behind Atlassian, Spreets, Freelancer, and the incredible team at Blackbird – and how committed they are to leading the next generation, being present and offering support, to raising the tide and growing the sector here. I have been fortunate to work with Blackbird Ventures for the last two years on The Sunrise, a conference they fund and drive to get students, aspiring entrepreneurs and emerging founders to connect with new thinking and with each other. Their work and their investment fund are going to be transformative.

“From my observations around the world, this generosity and level of support is just remarkable – they’re leading the way in helping Sydney deliver on our potential to be a global start-up and tech hub.”

How do you see the City’s relations with state and Federal government affecting current efforts?

“The City has differences with other levels of government on some issues but tech start-ups is not one of them – we have a good relationship with other levels of government on tech start-ups.  In particular, we are working closely with the NSW Government on innovation and new initiatives.”

Currently Victoria and Queensland are doing better at attracting businesses. Should we do anything to counter that and, if so, what?

“The City of Sydney is the nation’s tech start-up hub with two thirds of Australian start-ups. The City of Sydney’s economy also grew at 4.5 per cent per annum in the last term – outstripping the national growth rate. Other states use incentives to try and attract businesses to counteract the fundamental strengths of Sydney as the nation’s global city. Our ecosystem is 6 times larger than Brisbane and 55% bigger than Melbourne.

“Working on the fundamentals that underpin the strength of a tech start-up ecosystem is the key for a successful ecosystem in Sydney – not picking winners.”

How can Sydney compete globally against cities like Singapore, Shanghai and even Wellington?

“Sydney is consistently ranked as one of the leading global cities – we are one of the Asia-Pacific’s finance hubs and host high-quality ICT, professional and business services, educational institutions and creative sectors. Sydney also has high liveability which is important for attracting and retaining talent.

“In addition to improving the capacity of our tech start-ups ecosystem to support local, innovative companies become global companies, we need to address some of the other issues affecting the functioning of our economy and society such as the affordable housing crisis.”

The Clover Moore team comes with the advantage of incumbency despite the hostility of Macquarie Street and the performance of the City of Sydney and the growth of the tech community under Moore’s administration has been remarkable.

How much of this is attributable to Moore’s leadership is another question, however her policies are similar to those of other successful tech cities like San Francisco, London, New York, Wellington and Singapore.

Singapore and Wellington probably illustrate the weakness of Moore’s leadership in that both the island state and New Zealand don’t have a level of provincial government whose parties are hostile to independent administrations as is the case where successive Labor and Liberal governments have interfered in the City of Sydney’s operations.

That however hasn’t stopped Moore from investing in the city’s infrastructure and making it a place attractive to startups and tech businesses. Making the city a better place to live and work may be Moore’s biggest attraction for the startup sector.

Sep 072016

Of all the contenders in the City of Sydney elections, the Liberal Party’s Christine Forster seems the candidate with the best chance of beating incumbent Clover Moore. For the city’s tech industry and startup communities, the Liberals have made a strong pitch.

At the last council election in 2012, the Liberal Party’s Edward Mandla – who has since defected to the Sydney Matters group – was the second placed candidate with 16% of the popular vote after incumbent Clover Moore’s 51%. With the voting rules changed this year to allow business owners to vote alongside residents, Forster is expected to pick up a substantially bigger proportion of the poll

Like Sydney Matters’ Angela Vithoulkas, Christine Forster sees Brisbane as being the example Sydney should be following in encouraging startups. In her detailed tech policy Forster laid out what is probably the most ambitious agenda of the major candidates.

The Liberal policy paper points out Sydney is home to nearly two thirds of the Australian startup community but doesn’t rate well internationally. She proposes addressing that through establishing a Sydney Emerging Entrerpeneurs Program to provide support and small grants.

Forster promises an incubator offering affordable office space based on ‘The Capital’ in Brisbane setting up a working hub to address the crippling commercial rental costs and establishing global ‘launching pads’ for local entrepreneurs in key overseas centres.

“To help promote Sydney to US companies wanting to establish an outpost to expand into Asia, we will establish an office in San Francisco, and investigate further offices in Guangzhou and Singapore,” Councillor Forster is quoted in the policy’s media release as saying.

Of the standard questions we asked the four major candidates, Cr Forster’s team answered them in bullet points;

What are your policies relating to encouraging tech startups?

  • I will commit to Council providing affordable office space for start-ups
  • I plan to establish an Incubator, similar to The Capital’ in Brisbane
  • I will establish a ‘Sydney Emerging Entrepreneurs Program’ providing practical support and small grants to the city’s best emerging start-ups. (One of these already exists in Brisbane.)
  • Appoint a Digital Director for the City of Sydney
  • Set up a ‘City of Sydney Digi-Challenge’ to help solve local council issues though digital leadership
  • Have clear goals for digital policy achievement benchmarked against globally accepted measures.

What do you see as Sydney’s strengths in this sector?

  • Sydney is Australia’s most visible global city. People and businesses want to come here to live and work.
  • Sydney is home to an educated, technically literate population and three world class universities.
  • Sydney already has a strongly entrepreneurial culture and outstanding local success stories – think of Atlassian and

What are we not doing well at the moment?

  • Lord Mayor Clover Moore doesn’t intuitively see business as part of the community – she treats business as the enemy
  • Council has not embraced new technologies, it is not business-friendly and dealing with it is notoriously bureaucratic, expensive and time-consuming
  • Clover has mishandled opportunities for the community because she doesn’t understand what businesses need. One notable example is Council’s failure to secure an anchor tenant for its Oxford St properties
  • Business contributes around 80% of rates to the City of Sydney but the Council has not been living up to its own KPIs.

What are we doing well?

  • Not a lot. We’re trading on our name and on the fact that Sydney is physically beautiful and well located.

How do you see the City’s relations with state and Federal government affecting current efforts?

  • Any relationship needs to be more collegial than it has been. There are situations where I disagree with tech and innovation policies at the State and Federal levels but where these arise, I prefer to negotiate to achieve a solution. Clover has made much of “taking the fight up” to other levels of government – I don’t believe it’s a fight, it has to be a negotiation.

Currently Victoria and Queensland are doing better at attracting businesses. Should we do anything to counter that and, if so, what?

  • I don’t believe we should think in adversarial terms – I want Australia to attract more business.
  • But that doesn’t mean Sydney has nothing to learn from Brisbane or Melbourne.
  • I want to set up a ‘Revive Oxford St’ taskforce bringing together residents, business, local and state government representatives to build a strategy – at the moment I’m thinking a QVB-style development in which we offer organisations with experience reviving retail precincts an opportunity to tender on how they could sensitively revive this important cultural precinct
  • I want to establish a dedicated office in our sister-city of San Francisco to promote Sydney’s potential as a stepping-stone for tech companies interested in expanding into Asia. The office will provide advice on establishing an office in Sydney.
  • I will also improve Council’s online services. I’ve got costings to show that with 10% of services moving to digital we could cut costs by $5-$10m p.a. That money could then be reallocated to community projects in each of the eight villages.

How can Sydney compete globally against cities like Singapore, Shanghai and even Wellington?

  • By making it easier to do business for a start, but also improving the city’s amenity. One of my policies is a simple but important one – increase the number of bins and make recycling easier in public areas to get rubbish off the streets.
  • Facilitate the establishment of a ‘SydneyOne’ ticket that covers all local arts, culture and tourism destinations. If Singapore and London can do this – and make it available online – so can Sydney.
  • We are also investigating ways of delivering free Wi-Fi in public areas.

How does your tech industry policy fit in with other key Sydney employment sectors like the creative industries, financial services and education?

  • I want it to cease to be a ‘poor relation’. Sydney has a global reputation in finance, the arts and education. Walk through Martin Place and look up; walk through Sydney University or UTS and look around you; go to the Opera House. These activities are so obvious as to be stereotypical. I want people to think of our tech sector in the same way. I want there to be 10 Freelancer.coms, not one.

Christine Forster and the Liberal Party have an ambitious program to place Sydney as global centre and, given the Liberals also hold government at state and Federal level, their platform does hold the promise of improved relations between the city council and other layers of government.

However the state government has been very slow in identifying the tech sector as being important to the regional economy and its focus on property development makes one wonder what the priorities would be if every level of government was dominated by the Liberals – the decision to sell the Australian Technology Park over the protests of the tech community speaks volumes on Macquarie Street’s attitude towards the sector.

At the Federal level, the innovation agenda seems stalled and confused with little likelihood of any reforms to address the causes of Sydney’s high property prices being addressed or further changes to the tax system to encourage investment in new technologies and businesses.

If anything, the declining fortunes of the Liberal Party at a state and Federal level may well damage Forster’s local campaign and detract from her message. The message though does flag an understanding at the local government level of the importance of the tech community to the city.

Sep 062016

In the second of our series on the tech policies of the Lord Mayoral candidates for the upcoming City of Sydney elections, we look at the policies of the Sydney Matters team, the independent business focused group.

Sydney Matters is led by Angela Vithoulkas, who’s operated a central Sydney coffee shop with her brother for 25 years. Angela, who is a friend of this writer, ran as a Lord Mayoral candidate in 2012 and won election as a councillor.

Angela’s team includes the founder and editor of Startup Daily, Mat Beeche, as well as Edward Mandla who was elected to council as a Liberal candidate but defected from the party earlier this year.

The Sydney Matters platform is the only one that has a specific tech policy which reflects both Angela’s and Mat’s backgrounds and interests in technology and how it affects the business sector.

What are your policies relating to encouraging tech startups?

As Lord Mayor I will work with Tech Sydney, Startup Aus, FinTech Australia and other key players. I would like to explore concepts like having a Chief Entrepreneur in Residence program at Town Hall – similar to what Advance Queensland recently announced.

What do you see as Sydney’s strengths in this sector?

“The People, in 2011 the startup scene we have in Sydney didn’t exist in the same way it does today – and it exists today because passionate people said I am going to change things.”

What are we not doing well at the moment?

“We are fragmented, we need closer connections – physical hubs where tech startups can collaborate, meet serendipitously, make it easier for them to do business with each other – proximity can be helped by the city looking at smarter real estate opportunities for the tech sector.”

What is Sydney doing well? 

The City of Sydney’s Tech StartUps action plan is a step in the right direction but we need to build on this and work in collaboration with other levels of Government to drive our tech startup industry forward.”

How do you see the City’s relations with state and Federal government affecting current efforts? 

“To make inroads we all need to be on the same page and collaborating for the interest of the sector.”

Currently Victoria and Queensland are doing better at attracting businesses. Should we do anything to counter that and, if so, what?

“When I sat down with Mat Beeche who is on my ticket and asked that very same question, I was surprised by his answer – The stats show that NSW is actually performing a lot better than the media would have you believe.

“Sydney has attracted some huge tech companies to Sydney including data and analytics startup Qualtrics, valued at $1 billion that chose Sydney for its APAC operations.

“Fintech startup Acorns is in Sydney, HealthTech startup ClassPass is in Sydney, Dropbox chose Sydney, Market Research startup SurveyMonkey chose Sydney and most recently Social Media Snapchat chose Sydney to set up their sales operations office for the region.

“Our problem is that we perhaps are not being as vocal about the achievements of the NSW government who put in a lot of hard work behind the scenes to have these organisations choose our city as their destination of choice for expansion.

“What the City of Sydney needs to do is work closer with Macquarie street from a PR and Media perspective to change this perception.”

How can Sydney compete globally against cities like Singapore, Shanghai and even Wellington?

“By being more proactive and being an exemplar – Wellington does a great job of that.”

How does your tech industry policy fit in with other key Sydney employment sectors like the creative industries, financial services and education?

“Tech Startups sit across all industries including creative industries, financial services and education – so our policy is about them as well.”

Of the four candidates we interviewed, the Sydney Matters team probably has the most comprehensive tech strategy. It’s notable how they’ve paid attention to what other Australian cities – particularly Brisbane – have been cultivating their startup and tech communities.

Councillor Vithoulkas’ point about Sydney not marketing itself well is a fair point and that probably reflects more on the cultural differences between the harbour city and its interstate counterparts where Sydneysiders are far less likely to be cheerleaders for their cities than their Melbourne or Brisbane counterparts.

In many ways their strategy is not greatly different from existing council policy which in some ways is probably good for continuity for the business community.

Aug 292016

One of the most stunning examples of Australia’s uncompetitive, post-mining boom economy is its National Broadband Network.

Announced in 2009 to provide high speed data access to the nation to address the effects of thirty years of poor decisions and poorly thought out policies by successive governments, the project was intended to upgrade the telecommunications network and break the near monopoly of the incumbent telco, Telstra.

Sadly the project quickly foundered as the managers of the company set up to build the network made a series of poor decisions that stemmed from their underestimating of the project’s scope and their arrogant hubris in rejecting the advice of those who did.

To compound the problem, the project was politicised by the intellectually lazy and opportunistic Liberal opposition who promised they could build it for less by utilising existing telephone and Pay-TV infrastructure. On becoming government, the then communications minister and now Prime Minister changed the scope to do that and promised a quicker and cheaper rollout.

Last Friday, the folly of the Liberal Party’s plans were shown when the National Broadband Network company, nbn™, issued their updated business plan that detailed a further retreat from both the original project scope and the government’s promises.

The Melbourne Age’s Lucy Battersby illustrated how completely Malcolm Turnbull and the Liberal Party bungled their costings, showing just how mediocre and dishonest the government and Prime Minister have been in estimating the cost of the project.

However, NBN Co underestimated the cost of using existing hybrid-fibre coaxial [HFC] cables laid by Telstra and Optus in the 1990s. Last year it calculated an average cost of $1800 per house. But detailed field work discovered the cost was actually $2300.

In 2013 the Coalition estimated FTTN connections would cost about $900 per premise and this was raised to $1997 in a 2014 strategic review, and raised again in 2015 to about $2300.

In the real world, being out by nearly 300% would cost an estimator or executive their job and for a small business could well see them being put out of business, but in the carnival of mediocrity that marks modern Australian politics, those responsible for such mistakes only thrive, as do the managers of nbn™ who recently awarded themselves fat bonuses.

Adding insult to injury for the long suffering Australian taxpayers and broadband users is that the nbn™’s management have revised the scope again to overcome increased costs and now only 21% of consumers will get a fibre connection as opposed to the 40% claimed when the new government changed the scope.

Those scope changes beg the question why anyone bothered in the first place. Had the network been left with Telstra there’s a reasonable chance 20% of customers would have ended up on fibre by early next decade as the economics of maintaining and installing the technology overtook the older copper system.

Probably the biggest insult though to Australian customers though are the desperate attempts to make the new network profitable with plans to gouge the nation’s telco users as Fairfax’s Elizabeth Knight reported.

Data use per user is anticipated to grow at a compound rate of 30 per cent per cent to 2020.

At first blush these increases in usage might look exaggerated – but wait. Only last year NBN was working off the expectation that this year its existing customers would consume 90 gigabytes per month. But the current rate of consumption is actually 131 gigabytes per month – and rising.

Thus as the years progress towards 2020, NBN not only gets an increase in customers, it get an increase in revenue per customer .Monthly average revenue per user is forecast to increase from $43 this year to $52 in 2020..


So Australians will be expected pay more for their substandard connections to help an organisation that has consistently failed to meet its promises and targets. It should also be noted that rising Average Revenue Per User (ARPU) is the opposite of what’s been happening in the real world over the last twenty years as revenues, and profits have fallen.

To be fair, it’s not just Australia that has struggled with rolling out fibre networks. In the US, Google Fiber is going through blood letting and scope changes as the company struggles to meet targets and keep costs under control. That same experience has been repeated around the world.

However when it comes to missed targets, broken promises and the sheer scale of money wasted, Australia’s National Broadband Network dwarfs them all.

Australian taxpayers, voters and telecommunications users should be asking hard questions of their political leaders


Aug 222016
building sydney as a smart city

There’s a mayoral election pending in Sydney and the talk of the city becoming a startup hub is becoming one of the issues.

Over the next few days I’m hoping to interview each of the four major candidates on their policies regarding how they see Sydney competing against the likes of Singapore and Shanghai, let alone San Francisco or London.

In 2009, I was working with the New South Wales state government on their Digital Sydney project which looked at how the state capital could become a global centre, one of the things we found was that the city had many of the attributes successful creative centres had – diversity, tolerance and access to talent.

That project died in the face of bureaucratic ineptitude but the idea still kicks around with last week’s launch of the NSW Government’s Jobs For The Future report which, despite its opening thirty pages of buzzwords and waffle, contains some serious analysis of the state’s reliance on inward facing service industry jobs.

Refreshingly, the NSW Government strategy looks beyond the current mania around tech startups based on the Silicon Valley venture capital model – something the Federal government’s Innovation Statement failed to do – and discusses how to encourage growth and investment in other emergent sectors both inside and outside the inner city startup communities.

While Sydney can be an attractive place to live for the digital elite, it falls down in a number of areas with property being among the most expensive in the world, telecommunications being costly and unreliable coupled with a complacent corporate sector and a stingy investment community.

Making the city more attractive is going to take a number of initiatives that including easing the cost of doing business, improving links between academia and industry along with tapping into Sydney’s diverse immigrant populations.

Some of these factors are within the City of Sydney’s purview but most of them are state or Federal matters. By definition this limits what local politicians can do.

Which doesn’t mean they shouldn’t try to do them and it’s good to see these topics have become issues in the local elections. For Sydney though, one suspects it’s going to business as usual until The Lucky Country’s luck runs out.

Aug 152016

It started so well but has ended in a whimper. I’ve just filed a story for Diginomica on how Australian’s Innovation Agenda died, strangled by the nation’s complacency.

While writing it, I found the moment Prime Minister Malcolm Turnbull’s credibility evaporated. At a media stunt in suburban Sydney, Turnbull and his treasurer Scott Morrison visited the Mignacca family who own two speculative properties and had just bought another for their one year old daughter.

That stunt illustrated everything that is wrong about modern Australia’s investment and taxation policies. The Mignacca’s could be improving their skills and education, they could be setting up a business to provide the jobs and growth that was the cornerstone of Turnbull’s re-election campaign or they could be developing innovative new products for their industries.

Instead they are speculating on property – and borrowing heavily to do it.

The Mignacca’s are doing nothing wrong and are responding rationally to the incentives in Australia’s tax system as well as doing exactly what their peer and parents did, speculating on property to secure their retirement.

Not that this strategy is without risk, like 85% of the Australian workforce both of the Mignacca’s jobs are in domestically facing service industries and in the face of an economic downturn the young couple could find their properties falling in price at the very time they can’t afford to keep them.

In ditching the Innovation Statement and adopting the comfortable rhetoric of his predecessors, Turnbull betrayed the Mignaccas, Australia’s economy and his own stated view about the nation’s property addiction.

Moreover, he killed any credibility he had in being able to recast Australia’s economic future.

One suspects history won’t be kind on Malcolm Turnbull and the day he travelled to the Mignacca’s home will go down as the moment he lost the future.