Put your money where your mouth is: Five things local councils should do to fuel startup growth

In regional Australia, there’s no one thing that will encourage a startup ecosystem to grow and flourish, but there are a few things local councils can do to give it a fighting chance.

Speaking at LaunchVic’s Thrive conference last week, JF Gauthier, founder and chief executive of global startup ecosystem analysis body Startup Genome, suggested boosting any local startup scene is more than just a flight of fancy.

There’s a sense of urgency here, he said. In many regional areas in Australia and globally, traditional jobs are in decline, leading to an exodus of talent to cities, or even different countries, where young people see more opportunity.

If there is no support structure for startups, entrepreneurial people will flock to the cities. This means regional towns lose not only their startups and their entrepreneurs, but all the jobs that come with them.

According to LaunchVic’s latest Mapping Victoria’s Startup Ecosystem report, only 7% of Victorian startups are located outside of Greater Melbourne, although this is up from 3% in 2017’s report.

Many regional areas will have to transform themselves if they’re to thrive, but “it takes a long time to create an ecosystem”, Gauthier said.

“If we’re going to start losing jobs at a rapid rate, and it takes 20 years to create an engine of growth and job creation, we need to start now,” he added.

“It’s going to take time, but you need to start,” he said.

1. Put your money where your mouth is

Addressing the audience of primarily local council representatives, LaunchVic chief executive Kate Cornick suggested there’s a need to reconsider the role of local government in supporting any startup ecosystem.

“It’s really important that we talk about procurement,” Cornick said.

Federal and state governments, as well as local councils, effectively take on the role of corporates here, she added, providing opportunities for partnerships and sales. Millions of dollars are spent on procurement contracts every year, Cornick said.

“Very few of these go to startups,” she added.

In September, the Victorian government announced it is investing $2.5 million into a new accelerator aimed at helping startups secure government procurements.

If a local government is looking for a way to support and strengthen its local startup ecosystem, it should send contracts their way, Cornick said.

“The best thing a startup needs is their first customer. If they have a great first customer, they will get a great second customer,” she added.

LaunchVic chief executive Kate Cornick speaking at the Thrive Conference 2018. Source: Supplied.

2. Focus on community

According to Tristonne Forbes, founder of Pathwize, startup founders are people who believe “if you have a good idea, and you’re willing to work hard and see it through, you can succeed”.

Speaking at the conference, Forbes said the job of a startup ecosystem “is to find all the people who think this way and to bring them together, because that’s where the magic happens”.

At the centre of this is a strong startup community.

“We have to have entrepreneurs at the epicentre of every ecosystem,” Forbes said.

“Startups need to work with people who have been there and done that. People who can empathise with their struggle and their determination …  and that will believe in them.”

According to Startup Genome data, a startup founded in Silicon Valley is twice as likely to succeed than the same startup — with the same founders and the same idea — founded in Johannesburg, Gauthier said.

“It’s not about the entrepreneur, it’s not about the idea, it’s about the people around it,” he said.

Local councils trying to boost their startup ecosystem should focus on building a community for founders.

“Surround the entrepreneur with knowledge, with resources, with support,” he said.

Startup Genome has mapped the benefit of community for startups, asking founders to quantify how many hours of help they have received from mentors, experts and investors, and how many people they meet in an average week.

Taking into account factors, such as size, revenues, employee numbers and startup age, “we saw a dramatic difference”, Gauthier said.

“We could really show a clear relationship between this local connectedness and revenue growth,” he added.

The more connected a startup is, the more feedback it receives, the more tips and tricks it will discover. Founders will also gain access to employees, mentors, investors and resources.

However, there’s no quick way to create a good startup community. It requires good policies, funding, co-working spaces and accelerators.

Each of these aspects are important, “but one will never be enough”, Gauthier said.

“The community grows together, therefore you need to act broadly,” he advised.

3. Build on your strengths

When you’re a small regional town, there’s no point in trying to compete with global superstars, Gauthier told Thrive delegates. So, regional areas should play to their strengths and build their startup ecosystem around the traditional industries that have thrived there before.

“If you have scarce resources, which we all have, and you want to have a big impact, you’d better focus them on where you’re going to have the most impact,” Gauthier said.

If you invest in a broad sector, such as artificial intelligence, it’s going to be difficult to compete with the likes of Google and Facebook, he added.

“But, you can do AI for mining, you can do AI for advanced manufacturing and robotics. Why not?”

Local areas should identify their “legacy strength”, Gauthier said, whether that’s in agriculture and food production or manufacturing.

“Speciality is acceleration,” he said.

“You cannot be a generalist small ecosystem. That’s not going to work.”

Gauthier also suggested focusing on local challenges, speaking to residents and understanding where the pain points are.

“This is the source for your entrepreneurs,” he said.

“If you have a problem you can see and touch in your community, I guarantee if you can solve it you can export it, because other people in Australia and in the rest of the world have that same problem.”

Startup Genome founder and chief JF Gauthier. Source: Supplied.

4. Put policies in place

Gauthier also stressed the importance of having long-term policies in place to support the growth of a startup ecosystem.

Chicago, for example, produced Groupon, one of the early US unicorns, but had no real ongoing supportive policies in place.

“Have you heard of Chicago creating any unicorns lately?” Gauthier asked.

“If you’re a great economy with a good ecosystem but you have no policy, and you’re competing against others that have great policy, the latter will win,” he said.

5. Embrace startup culture

When it comes to culture, Forbes said local councils have to first embrace the startup ethos that it’s acceptable to fail, and “the honour is in the attempt”.

If anyone comes to the ecosystem with an idea of how to add to it, “you have to let them go for it”, she added.

Initiatives will either work or they won’t, she said, and the ecosystem with “self-select” what belongs there.

There’s also a cultural element of local councils approaching their startup ecosystem challenges together.

“We need collaboration over competition,” Forbes said.

“When you look at how many regions across Victoria want to be involved in building startup ecosystems in their regions, and how focused everyone is on retaining talent, you can start to feel quite competitive. But a rising tide lifts all boats,” she said.

She advised local councils to do as entrepreneurs do — share resources, reach out to as many entrepreneurs and advisors as possible, and talk to people who have been where they are.

If councils focus on keeping entrepreneurs front-and-centre, and on building a good culture, “then your startup ecosystem will survive, and it will strengthen”, Forbes said.

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