Tag: government

Does venture capital really matter?

Venture capital investments are concentrated in a handful of cities, but does it matter?

Around the world governments are trying to replicate the Silicon Valley startup model. But does that model really matter?

On the Citylab website, Richard Florida looks at which cities are the leading centres for startup investment.

Unsurprisingly eight of the top ten cities are in the United States with San Francisco and San Jose leading the pack. While London and Beijing make up the other two, the gap between the regions are striking with the Bay Area being home to over quarter of the world Venture Capital investment while the Chinese and London capitals com in at around two percent.

global-startup-cities

While these proportions are impressive, the numbers are not. The total VC investment identified by Florida in 2012 is $45 billion, according to the Boston Consulting Group there was $74 Trillion of funds under management in 2014.

That makes the tech venture capital sector .06% of the global funds management industry.

In the US alone over 2013 small businesses raised $518 billion in bank loans, more than ten times the global VC industry.

What this scale shows is how small the tech startup sector really is compared to the broader economy and, more importantly, how the Venture Capital model perfected in the suburbs of Silicon Valley is only one of many ways to fund new businesses.

Even in the current centre of the startup world, it’s estimated less than eight percent of San Francisco’s workforce are employed by the tech industry although that goes up to nearly a quarter in San Jose.

None of this is to say the startups are not a good investment – Thomas Edison’s first company raised $300,000 in 1878, $12 million in today’s dollars, from New York investors including JP Morgan. The Edison Electric Light Company, while relatively modest went on to being one of the best investments of the 19th Century.

That twelve million dollar investment looks like a bargain today and it’s highly likely we’ll see some of today’s startups having a similar impact on society to what Edison did 140 years ago.

Edison’s success created jobs and wealth for New Jersey and New York which helped make the region one of the richest parts of the planet during the Twentieth Century and that opportunity today is what focuses governments when looking at encouraging today’s startups.

So it’s understandable governments would want to encourage today’s Thomas Edisons (and Nikola Teslas) to set up in their cities. The trick is to find the funding models that work for tomorrow’s businesses, not what works for one select group today.

While the Silicon Valley venture capital model receives the publicity today, it isn’t the model for funding most businesses. Founders, investors and governments have plenty of other options to explore.

Reinvigorating Australia’s research sector

How an outward focus might reinvigorate Australia’s besieged research sector

Could Australia’s poor track record in commercialising research be turned into an advantage? Data 61’s CEO Adrian Turner believes so.

Australian research agency Data61 was formed last year following the science hostile Abbott government’s slashing of research budgets coupled with a merger of the National ICT Australia organisation (NICTA) with the long established CSIRO.

The intention behind Data61 was to create a world leading data research agency. At the time of the announcement then communications minister and now Prime Minister, Malcolm Turnbull said, “Having a single national organisation will enable Data61 to produce focussed research that will deliver strong economic returns and ensure that Australia remains at the forefront of digital innovation.”

Having been in the role for six month and now, in his words, having his feet finally under the desk, Data61’s CEO Adrian Turner met with the media last week to discuss the directions he intends to take the organisation.

Business in a data rich world

Coming from a corporate Research & Development background and having spent over a decade in Silicon Valley tech businesses, Turner is conscious how industries are being changed in a data rich world.

For corporate R&D model shifting as industries are changing he says, “their challenge is they can’t hire the digital and data talent that they really need.” Turner sees one of the opportunities for Data61 in providing access to the high level expertise large companies are struggling to find.

Giving Data61 is global focus is Turner’s main objective with an aim of capturing a tenth of one percent of the world’s private sector R&D budget, describing how he will sell the organisation’s scientific expertise to global corporations, “we can plug them into the Boeing and GMs of the world and introduce them to the people to short circuit the sales process.”

“We’re going to go around the world where corporate R&D dollars get allocated and convince these companies that Australia is a place where primary R&D can take place,” Turner continued, “we’ve got the talent and we’ve got the capabilities to do the research.”

Good at the basics

Turner highligthts an ongoing problem in Australian science and industry. The nation historically has been good at basic research but poor at getting those developments to the marketplace, something the World Intellectual Property Organisation’s Global Innovation Report has regularly flagged.

While Australia ranks at 17 overall in the 2015 WIPO report, the nation’s business community flounders at 38th in the world for its collaboration with researchers and 39th for knowledge and technology output. Put bluntly, Australian businesspeople are not very sophisticated or research orientated.

Adrian Turner puts that down partly to the nation’s being weak at product management, “I think it’s a function of global companies seeing Australia as a sales and marketing outpost so we don’t have the product development expertise.”

Inward looking locals

The nation’s inward looking local corporations are also part of the problem, “for us to succeed as a country we have to have a global mindset. We can’t have the zero-sum mindset that I win if you lose in the domestic market,” Turner continued. “In that sense what we’re doing is creating a product marketing function.”

So to meet Data61’s objectives of meeting its own financial performance targets, developing an R&D ecosystem and having an impact on the nation economy, Turner sees the organisation having to go overseas for most of its partnering with private sector researchers.

Sparking the startups

All is not lost though for Australia with Turner believing Data61 has a role in helping the local startup community develop. “We don’t have the infrastructure in place to support the entrepreneurs to go out and build new business,” he says.

“In Silicon Valley over decades you have this infrastructure, you have this workforce, you’ve got the legal infrastructure, you’ve got capital, all of these things that have built up organically over decades and they stack the odds in favour of the entrepreneurs.”

Data61 was born out of an unfortunate period of Australian politics where for the first time the nation was lead by a government that was genuinely hostile to science. Now the political winds have changed and the organisation has a global focus, it may be possible to reverse the long-term neglect of Australian research and build a new business culture.

An entrepreneurial paradox

Having a nation of entrepreneurs may not indicate a vibrant economy

Being an entrepreneur has become fashionable in western countries, but according to the Global Entrepreneurship Monitor it’s not the developed nations which are the most enterprising.

UK purchasing platform Approved Index took the GEM’s 2014 report and looked at which countries have the most entrepreneurs, defined as being “the percentage of an adult population who own (or co-own) a new business and has paid salaries or wages for at least 3 months.”

Surprisingly Uganda came out on top with 28.1% of the population meeting the GEM’s criteria for being entrepreneurs with Thailand and Brazil in second and third place. Of the developed nations, Australians were the most entrepreneurial at position number 26.

This raises the questions of what is the definition of an entrepreneurs and what drives people to become one?

What drives entrepreneurs?

Part of the answer to the second question is necessity. In Nigeria, a part time business is known as the “5 to 9 job” and, as the BBC reports, those evening enterprises are the way most Nigerians see as being a pathway to the middle classes which wouldn’t be possible for most wage earners.

That becoming an entrepreneur is often a result of necessity is borne out by Uganda’s profile in the GEM report where the authors note are scathing about the government’s support of business.

The biggest enabler of entrepreneurship in Uganda is its internal market dynamics. The most significant constraints are the unsupportive government policies, in terms of bureaucracy and taxes, and a lack of financing.

Indeed, the GEM itself noted in its 2014 report on global entrepreneurship that “there tends to be more entrepreneurial activity in less competitive economies” and Uganda ranked 122nd of 144 economies in the World Economic Forum’s 2014/15 Global Competitiveness Index.

Comparing the indexes

Looking at the Countries listed in the GEM’s top ten and listing the countries by the World Economic Forums competitiveness index ranking and the World Bank’s ease of doing business index starkly illustrates the correlation between business strangling bureaucracy and people setting up their enterprises outside the regulatory strictures.

GEM rank

Country

WEF rank

World Bank rank 

1

Uganda

122

122

2

Thailand

31

49

3

Brazil

57

116

4

Cameroon

116

172

5

Vietnam

68

90

6

Angola

140

181

7

Jamaica

86

64

8

Botswana

74

72

9

Chile

33

48

10

Philippines

52

103

 

Of the top ten countries by their entrepreneur ranking, only Chile and Thailand make the top 50 of either the World Bank’s Ease of Business index or the World Economic Forum’s Global Competitiveness Index. To summarise, the urge to be entrepreneurial is a reaction to a poor business climate.

Defining entrepreneurs

What we could be seeing is a poor definition of an entrepreneur although it’s hard to draw the line between a Ugandan housewife who sets up a market food store and an Australian family that buys a fast food franchise. Is one more entrepreneurial because they have more access to capital?

Perhaps the Silicon Valley definition of an entrepreneur – the founder of a technology startup – is a more appropriate however that excludes vast tracts of western economies and almost all the developing world.

On many levels the Global Entrepreneurship Monitor’s definition is probably the fairest as it indicates how many people are starting their own ventures regardless of their capital position or the nature of their business.

If the GEM’s definition is fair then the leader board indicates that maybe having a nation of entrepreneurs is actually the symptom of a constrained business community rather than that of a vibrant economy.

Maybe political and business leaders need to be careful what they wish for when they call for a more entrepreneurial nation.

Rethinking education in a time of a declining middle class

Reskilling the workforce is essential to address middle class decline

The role of higher education is changing in the face of technological and economic change as this World Economic Forum article describes.

Education is one of the keys to staying competitive in an increasingly technology driven society on both a personal and societal level. Individuals and nations that neglect their education investment risk are left behind.

One of the starkest examples of this are America’s lower middle class and the rise of Donald Trump.

In an article for The Atlantic, former George W. Bush adviser David Frum, describes how economic uncertainty for America’s relatively unskilled workforce are pushing back against their falling living standards.

The angriest and most pessimistic people in America are the people we used to call Middle Americans. Middle-class and middle-aged; not rich and not poor; people who are irked when asked to press 1 for English, and who wonder how white male became an accusation rather than a description.

You can measure their pessimism in polls that ask about their expectations for their lives—and for those of their children. On both counts, whites without a college degree express the bleakest view. You can see the effects of their despair in the new statistics describing horrifying rates of suicide and substance-abuse fatality among this same group, in middle age.

That these people are supporting Donald Trump – and their counterparts in almost every Western democracy – is not surprising as they losing in the new economic order and the technological changes which are eliminating or devaluing their jobs.

For governments and communities, the question is how to restore these folks’ fortunes or at least maintain their living standards. With protectionism almost certainly guaranteed to fail, the obvious answer is to give these workers the skills to compete and contribute in the 21st century economy.

Sadly, most Western governments still locked in a 1980s Reagan/Thatcherite mindset see education as a cost to be reduced rather than an investment in both their communities’ collective wealth and society’s cohesion.

Education, like the rest of society, is changing. A rethinking of both how it is delivered and its role is essential for nations to be successful in today’s economy.

When autonomous vehicles and humans collide

The interaction between humans and autonomous vehicles is not turning out well so far

With the rapid advances in driverless cars, it was only a matter of time before the question of what happens when people encounter them would be answered.

It turns out not too well for the autonomous vehicles reports Bloomberg citing a study by the University of Michigan’s Transportation Research Institute that found driverless cars have accident rates double those of normal vehicles.

As it turns out, those accidents are usually minor and are caused by humans colliding with the autonomous vehicles as the law abiding computers catch drivers unawares.

That people aren’t very good at driving cars isn’t a surprise but now we’re seeing what happens when distracted, mistake prone humans encounter cautious and usually correct computers.

We now have to start thinking about what happens when artificial intelligence encounters human frailty.

Building a European Silicon Valley

Europe’s development of an equivalent to Silicon Valley faces many hurdles

The World Economic Forum asks can Europe build its own Silicon Valley?

It seems the answer lies in money, investors’ money to be precise, with a lack of VC funds to finance emerging businesses and a lack of acquisition hungry corporates providing high profile experts argues the WEF piece’s author, Keith Breene.

That appears to be a strong argument although there’s still some strong contenders for European tech hubs with the WEF identifying Munich, Paris and London as being major centres.

London’s claims are reinforced by the city’s strength in financial technology with KPMG nominating 18 of the world’s top 50 fintech startups being based in the British capital.

Interestingly, the Belgium town of Leuven which has styled itself as a centre for 3D printing and beer features on the WEF list of European startup hubs as well.

While it’s unlikely Europe can create a ‘Silicon Valley’ – even the post Cold War US would struggle to do so today – the presence of major centres like London and specialist hubs like Leuven indicates another important aspect of creating a global centre, that of having an existing base of businesses and skills.

That skillbase isn’t built up overnight, it’s a decades long process of commitment from industry, investors and governments and often as much the result of a series of happy accidents rather than deliberate planning.

It may well be the question of Europe creating a Silicon Valley isn’t really relevant with the bigger issue being how the continent’s cities and nations put in the conditions to develop long term industrial hubs. Trying to ape today’s successes for a project that will take decades to come to fruition could be a big mistake.

How banks will survive the fintech onslaught

Fintech startups threaten to disrupt the banking system but the banks are well placed to survive and prosper

Earlier this week the Financial Times reported how the eleven biggest North American and European banks had shed 100,000 jobs this year, so it when I was asked to do a segment on the future of banking for radio station ABC666 in Canberra I was more than delighted.

The ABC producer’s interest had been piqued by an Ovum research paper detailing the IT spending of banks and their increasing focus on security.

Rethinking payments

In Ovum’s view much of the banking industry’s security  comes from the diverse range of payment options coming onto the marketplace. Another factor in the increased spend are the US credit cards moving to contactless payments.

Certainly the increased focus on payments security is being driven by the range of new devices with smartphones, wearable technologies and the Internet of Things opening up a whole new range of commercial channels. This is something driving the development of services like Apple’s and Google’s payment system and part of a wider battle over who controls those channels.

Underpinning much of the security focus is the interest in blockchain technologies which move the authentication records off central ledgers – historically one of the core functions of banking – onto a distributed network of databases.

Core challenges

That shift in record keeping is just one of changes affected the banking industry’s core functions, crowd funding and peer to peer lending threaten to displace banks from being the main providers of business capital, one of the fundamental reasons for the banking sectors existence.

It should be noted though the banks have largely stepped away from being the providers of small business capital over recent decades as the ill conceived ‘reforms’ of the 1980s and 90s saw the finance sector being more focused on housing lending and doing mega M&A deals with the big end of town.

The Financial Times report notes a decline in M&A deals is one of the drivers for the staff lay offs at the major banks, it’s notable that technology is changing that business function as much of the due diligence can be better done by artificial intelligence and algorithms rather than highly paid corporate lawyers and bankers.

Where have the bankers gone?

As the banks lay off senior staff, it’s notable many are finding their way to fintech companies. The Wall Street Journal however describes the relationship between incumbent banks and their would be disrupters as far more complex than it seems.

Increasingly banks are buying or taking stakes in promising startups along with establishing their own investment arms and running hackathons to identify potential disruptors. Many in the banking industry are quite aware of the changes happening.

That the banks are adopting the new technologies and identifying the threats shouldn’t be surprising, over the past fifty years the sector has been adept at applying technology from batch processing on mainframe computers through to deploying Automatic Teller Machines and rolling out credit cards to improve their business operations. Banking is one sector that’s proved itself fast to identify and adopt technological changes.

Are the banks going away?

So with fintech startups snapping at their heels, is it likely today’s banks are heading for extinction? Probably not suggests the CEO of fintech startup Currency Cloud, Mike Laven who describes such talk as being part of the “Level 39 bubble”, referring to the financial services startup hub based in London’s Canary Wharf.

Laven’s view is some banks will evolve while others won’t do so well and historically that’s what we’ve seen with other technological shifts – some of the incumbents adapt and reinvent themselves while others are not so adept and wither away.

Some of the bigger threats to banking may be social and economic change. Today’s rising of interest rates by the US Federal Reserve may mark the end of the last decade’s ‘free money’ mentality that’s been so profitable for them in recent times. The end of the consumerist era also challenges those financial institutions basing their business models on a never ending growth of consumer spending and household debt.

Almost certainly the banking industry is not going to vanish, however it is going to be a very different – most definitely a much leaner – beast in a few years time. What is certain though is the days of banks as we’ve known them in the second half of the Twentieth Century are undergoing dramatic change in the face of technological and social change.

Walling off the Internet

Governments and politicians have an urge to restrict the internet

China held an internet conference today where, as Forbes reports, President Xi Jinping laid out the nation’s vision of an Internet that ‘complies with Chinese laws.’

That Internet is a walled garden where access to sites like Facebook are blocked and an army of censors make sure that subjects which aren’t to the Chinese Communists Party’s approval are promptly removed.

Meanwhile in the US, Republican presidential candidate Donald Trump stated the Internet should closed down for America’s enemies.

That both the Chinese government and Donald Trump agree on something shouldn’t be surprising, however the urge to monitor and shut down the Internet is shared by many governments. It’s an urge that needs to be resisted.

Opening the chequebook. Can you buy a Silicon Valley?

In subsidising tech businesses, the Victorian government is doomed to fail. However at least they are trying unlike their Sydney counterparts.

How do you build an industrial hub like Silicon Valley? Many cities and regions have tried various tactics, from demolishing entire suburbs to attract corporate headquarters through to spending millions on enticing film productions and countless examples of setting up Digital Hubs.

An interesting experiment is happening at the moment in the Australian city of Melbourne where the Victorian state government is spending millions on subsidies to businesses, government enterprises and academic research centres to set up in the town.

One of the Victorian government’s most surprising moves was to poach Sydney’s Sydstart startup conference for a million dollars. Naturally the event will have to be renamed and there’s no word on who will pay for the branding consultant’s time.

Opening the chequebook

Having an open chequebook is fine, but in the absence of a broader strategy that ties in educational, financial and other vital factors for building an industrial hub it’s hard to see how spending taxpayers’ funds on adhoc projects is going to create a sustainable local tech sector.

The National Broadband Network security office subsidy is particularly galling given it’s a payment to a Federal government owned corporation and it’s highly likely the facility would have been based in Melbourne anyway given the organisation’s Network Operating Centre is already in the city.

Added to the embarrassment of the NBN announcement are the overwrought claims of job creation. While it’s possible a total of 300 building staff might be involved in the construction, the idea the centre will employ 400 IT and telco security staff is surely stretching credibility.

The failed games industry

Sadly for Victorian taxpayers this isn’t the first time their government has tried to use their chequebook to attract high tech business. In the late 1990s a similar effort was launched to attract video game developers.

For a while this worked but ultimately the Victorian games sector declined in the face of a high Australian dollar, a shift in the economics of studio produced games and successful competition from Queensland who built their own subsidised centre on the Gold Coast by offering better incentives that those on offer in Melbourne.

Both the Queensland and Victorian efforts ultimately failed and today both states have little to show for those subsidies.

At least though the Victorian government is trying, unlike its property development and coal mining obsessed neighbours in Sydney who are in the process of selling off their Australian Technology Park hub and replacing it with a poorly articulated thought bubble of a technology precinct based out of a disused power station in a transport blackspot.

Sydney’s failure

In the process of coming up with these ideas, the New South Wales government managed to alienate the most successful of Sydney’s tech startups, Atlassian who last week floated on the NASDAQ stock market for over four billion US dollars.

One of the notable things of Atlassian’s story, and that of most other successful Australian tech startups, is how little direct government support features in their development.

That direct government support like subsidies feature so little in these company’s successes really tells us what really works for governments wanting to develop an ecosystem – providing the environment for skills, capital and distribution networks to develop.

Without a long term plan it’s hard to see how Victoria’s ‘splashing the cash’ will end up any better than previous efforts with other industries. As Silicon Valley, Israel and the UK have shown, it’s consistent long term investment in the industries and the infrastructure that allows businesses to developed that creates successful industry hubs.

Putting the smart vision into smart cities

Smart cities need vision and a rethinking of design and contracts says Autodesk’s Terry Bennett

“Smart cities need smart visions,” states Terry Bennett, Autodesk’s lead strategist for the infrastructure industry.

Bennett was speaking to Decoding The New Economy about how cities will evolve with smart technologies however he believes that data is not the answer.

“Smart doesn’t mean putting sensors on everything and collecting terabytes of data,” he says. “Just putting sensors in the road doesn’t make it a smart city. To have a smart city you need smart people with a smart vision.”

S.M.A.R.T

“We see smart as more as an acronym. The ‘S’ is for setting science based targets for the data being collected,” he explains. Those targets could be financial, environmental or quality of life, “you have to set targets to see that your plan is being carried out.

The M is for measuring against those targets while the A is for absorbing or analysing that information and using it effectively.

R is for retrofitting, with Bennett seeing that valuable existing assets that still have long lives ahead of them being best refitted with smart technologies to get better information out of them.

Shifting demographics and tastes

One of the challenges ahead for planners and designers are the changing demographics and usage patterns of cities as the next generation of workers promise to be far more mobile and not as fixed to central business districts.

An advantage for smarter cities is they have much more data available to make informed decisions and as patterns change, those municipalities can see the differences occurring sooner.

Coupled with newer construction methods that allow infrastructure to be built faster, cities are going to be able to quickly respond to changing usage and demands on services.

Contracting out innovation

Those fast construction methods create another need for change in contracting methods. “We have to start thinking more as manufacturing rather than construction,” he says. “We get bogged down a lot in the ‘contract’ part of contracting. We have contracts written in the 1950s that are today’s standard contracts.”

“You can’t build fast enough given the changes in demographics and technology using those older contracts. You basically contracting out innovation.”

For government this can be an opportunity, Bennett believes. If clients allow builders freedom in techniques and methods then costs can be reduced with more resilient results.

Ultimately it’s that resilience that matters with infrastructure being designed for decades, “if you’re designing for traffic patterns for today then you’re wrong.”

Paul travelled to Autodesk University in Los Vegas as a guest of Autodesk

Changing the Australian investment mindset

Can the Turnbull government’s Innovation Statement reset Australia’s investment mindset?

“Of course I’m minimising my tax. If anybody in this country doesn’t minimise their tax they want their head read,” media tycoon Kerry Packer growled when asked about his financial affairs at an Australian Parliamentary committee in 1991.

Kerry Packer’s attitude towards tax minimisation runs deep in the Australian psyche so the announcement of a range of concessions to encourage investment in startups as part of the Federal government’s Innovation Package, branded as The Ideas Boom, may well succeed in unexpected ways.

The National Innovation and Science Agenda should be welcomed by any Australian concerned about the nation’s role in the 21st Century. After 25 years of neglect – if not wilful ignorance – by successive Liberal and Labor governments there is now at least a recognition that developing new industries and businesses is essential to maintain first world living standards.

Many of the proposals in the package are long overdue such as a commitment to open government data, initiatives to support STEM education, programs to encourage women in the IT industry and recommitment of funding for the government scientific agency, the CSIRO.

Australia’s quiet tragedy

The defunding of education and CSIRO research by successive Liberal and Labor governments has been one of the quiet tragedies of Australia’s turning its back on the 21st Century. The reversal of the focus on property speculation and mining is hopefully the start of renewed government efforts to restore the long term competitiveness of the country.

While many of us hope this is part of a broader, bipartisan vision of where Australia should be in the connected century, at this stage no-one can have confidence that these long term measures won’t be the victim of short term political expediency.

Short term gains

In the short term however the focus will be on the immigration and investment incentives. In some respects they are disappointing – the $200,000 annual limit for tax benefits should be contrasted with there being no such restrictions on property speculation – and both the investment and immigration proposals are still overly complex and will be a boon for well connected advisors and consultants.

However the changes are a start in shifting the attitudes of the nation’s risk averse investment and business culture and may well be well timed as the real estate price bubble starts to deflate forcing investors and speculators to look elsewhere for returns and tax breaks.

That chase for tax breaks could well mark the change for Australia’s investment starved small business and startup community, at the time Kerry Packer made his comments to the Parliamentary committee one of the most popular tax minimisation strategies was investing in locally made movies under the 10BA scheme that allowed generous deductions for investors.

Following film

Most of the films made under the 10BA regime were at best forgettable and the scheme was wound up in the mid 2000s but the wave of money that flowed into the Australian film industry helped launch the careers of many of today’s globally actors, producers and industry professionals.

If these changes can have similar success in the technology industries then they may be well worthwhile.

Another aspect to the Innovation Statement may well be the shift in Australian government industrial policy from a failed ‘think big’ mindset that assumed local businesses had to dominate their domestic markets to compete globally into a view where smaller, nimble operations can succeed internationally.

Welcoming change

Overall the Turnbull government’s Innovation Statement is a welcome change from the last twenty years of complacent policy around Australia’s economic development. One big challenge remains though in changing the nation’s complacent business culture.

Ultimately, the biggest challenge is move Australian households and investors on from the tax minimisation mindset. While Kerry Packer may no longer be with us, his mindset remains the driving force of Australian business.

Innovation and the Australian investment paradox

The Australian government’s Innovation Statement hits an obstacle in the nation’s risk averse culture of regulation

Even before its breathlessly awaited release it appears the Turnbull government’s innovation statement seems to have hit rough water as industry figures and the opposition criticise the proposed requirement for companies to be public before they can raise money through crowdfunding.

In itself this requirement isn’t a major barrier as prominent industry figures have pointed out although it will have the effect of making crowdfunding an option for more established ventures rather than early stage startups, which probably won’t be a bad thing for investors, employees and founders.

The requirement though does show a deeper seated problem in Australian government and regulation – a desire to legislate risk out of the system.

An Australian paradox

For tech startups, along with other businesses in new industries this creates a paradox as most of them will fail and their investors lose their money. Trying to protect backers of these ventures guarantees they won’t raise money.

So in trying to create a risk free environment, regulators end up killing the ecosystem.

From an Australian perspective, the risk free environment makes sense to a mindset that believes property is guaranteed to double every decade. Why invest in something that will probably fail when borrowing to speculate on an apartment is certain winner?

Protecting property

Strangely that attitude towards property has created another Australian paradox where the real estate industry is exempt from most consumer and investor protection law. The sad truth is the average Aussie has more protection in buying a smartphone case from a two dollar shop than they do when purchasing a two million dollar home.

Because property speculation is seen as risk free, there are few regulations or barriers to Australians gearing up into houses and apartments but for productive businesses and startups the obstacles for raising capital are substantial.

Ultimately, if Malcolm Turnbull and Wyatt Roy want to change the focus of Australian business and investors they are going to have to change the mindset of regulators and voters.

To change that mindset will take some brave steps, for the moment it’s far more likely the budding Australian innovation renaissance is likely to be suffocated by risk hating regulators.