Canva and Atlassian are outliers. The truth is Australia has a tech innovation deficit

While a few notable tech startups have come out of Australia — think Canva, Atlassian and Linktree — the truth is, Australia’s digital prowess is severely lacking compared to its overseas counterparts.

A 2022 report from IMD points to a worrying trend within Australia’s digital competitiveness, dropping five places to 20th in the Institute for Management Development (IMD)’s World Digital Competitiveness Ranking (WDCR). It’s the third year in a row Australia has fallen in the rankings, with only Poland and Bulgaria recording bigger falls across the global ranking of 64 countries.

In some respects, comparing Australia to tech powerhouses like the US and the UK is like comparing apples to oranges. For one thing, the opportunity in Australia is tiny versus America or the UK. Despite its huge geographical size, Australia’s 26 million population is never going to compare to the US’s 329 million or even the UK’s 67 million. Within the confines of such a relatively small population, there are simply fewer chances for innovation to bloom.

Of those Australian innovators, the ones who have made it into the big time are the ones who have been able to prove their customer base on a global scale. Canva, Atlassian, and Linktree are all global brands with a global footprint, and have been so since the start.

Australia’s risk-averse incubator programs

The true problem lies hidden within Australia’s incubator programs, which are filled with ‘wanna-preneurs’ who fail to recognise ideas that can make it. These programs’ leadership teams don’t have enough runs on the board to really know what makes a true MVP, and the overall process lacks risk muscle and solid business experience.

The result is that the true Aussie success stories are all hot-footing it over to the US, and fast.

In general, Australia takes a more conservative approach to risk. Australian investors and incubator programs are generally looking for businesses that already have a proven track record, and funding is usually reserved for businesses that are already several years down the track. Independent investors and government schemes alike are looking for post-revenue businesses with a good cash flow, who have already proven their ability to stick around.

While this might be a less risky move, it virtually eliminates the Atlassians, Go1s and Gilmour Spaces of the world, all of which took many years and much investment before they became financially self-sustaining. For example, my own business Virtual MGR is currently in its ninth year of operation, and we’ve now got access to all the investment we could ever need. The problem is… we no longer need it. And at the same time, there are hundreds of young, hungry startups that genuinely do need a cash injection, but can’t access it.

In comparison, in places like America, if you’ve got a great idea (or even just a good idea), somebody will take a punt. In fact, you can have a pretty average idea in America and have 10 times more chance of getting funding — simply because somebody believes in the individual or the idea.

Designing for innovation

It’s not all doom and gloom. Australia has the potential to be a strong breeding ground for innovation, but in order to get there, our incubator programs need a serious rethink.

It’s critical that we remove as many barriers to entry as possible. Grants, funding, and investment shouldn’t take years of painstaking applications, reviews, and endless rounds of approvals. Checks and balances are clearly important, but they shouldn’t be so strenuous that they kill all potential innovation in their tracks.

We also need better communication between council, state, and federal governments in order to pool our national resources on the hunt for the very best talent. As things stand, the disparate nature of our country’s incubators means opportunities for connection and communication are missed.

The reality is, many of the world’s most innovative companies have come about because the right people were in the right place at the right time, surrounded by inspiration from their peers. By designing Australia’s incubators to make that happen, it’s possible to transform our country from an innovation afterthought to a serious global player.

Finally, let’s not underestimate the potential of creating one central hub for innovation. The US has Silicon Valley, the UK has East London Tech City. It’s high time Australia found its own silicone suburb.

Anil Patel is the founder and chairman of Queensland software company Virtual Mgr.