Many start-ups are created from a dissatisfaction of a specific service/product or a gap in the market that hasn’t yet been taken advantage of. But what else is needed to create an organisation and a brand that has the potential to disrupt the norm and rapidly expand?
An environment where start-ups are supported is absolutely essential, and this environment has no magic design or perfect circumstance. But it does generally involve a government that provides support and understands that this start-up innovation period is an ongoing global movement. A movement that will only grow as technology advances and the instruments available to revolutionise it develop further.
A recent example of a city that has taken advantage of the global boom in start-ups is Fukuoka, Japan. Fukuoka is the capital of Fukuoka Prefecture and sits on the northern shore of Japan’s Kyushu Island. Although the city is an ancient port packed with dated ruins and surrounded by mountains, it is currently drawing entrepreneurs globally through its lower cost of living, easier lifestyle and Japan’s first ‘Start-up Visa’.
Siochiro Takashima, the youngest mayor in the city’s history is taking full advantage of the growing start-up trend and ensuring there is less red tape and more incentives for arriving entrepreneurs. The ‘Start-Up Visa’, is giving entrepreneurs a six-month exemption from the investment and hiring requirements of a business visa, business consultations with government experts, city certification and promotion, along with many other possible incentives. Mr Takashima has also effectively lobbied the Japanese government to lessen the corporate income tax of start-ups based in Fukuoka.
The city, with a population of only 1.5 million, now has the highest ratio of new businesses in Japan with foreign residents rising 22 per cent last year, which is huge for Japan.
Israel is another example of a nation-state that has fostered exemplary start-up growth over the last two decades, with the country having the highest density of start-up organisations in the world – around one start-up for every 2,000 people.
‘Start-up Nation’, a book written by Dan Senor and Saul Singer, about the economy of Israel posed the question: “How is it that Israel – a country of 7.1 million people, only sixty years old, surrounded by enemies, in a constant state of war since its founding, with no natural resources – produces more start-up companies than large, peaceful, and stable nations like Japan, China, India, Korea, Canada, and the United Kingdom?”
Although there are varying factors, an underlying success of Israel’s start-up economy is smart government policy. The Yozma program (Hebrew for ‘initiative’), offers tax benefits for foreign venture capital investment as well as a promise to double any investment with government funds. A Technological Business Incubator Program, led by Israel’s Office of the Chief Scientist, started six incubators in the 1990’s that were designed to foster and accelerate entrepreneurial development. This program now has 24 incubators, raises hundreds of millions of private funds annually and has the Israeli government pumping over one billion a year into the program.
The Israeli government recognised the risk, the geographic isolation and the previous market failures and decided to raise the bet by heavily funding and focussing on the start-up industry after the Yom Kippur War. And now, thanks to that decision, Israel has the largest gross expenditure on R&D, the highest amount of companies listed on NASDAQ outside of North America and the highest level of venture capital comparison to GDP.
What can Australia do?
Innovation and Science Australia (ISA) was recently tasked by the Australian government to discover how to make Australia the leading “innovation nation” by 2030. With Sydney only last month slipping to 17th in the global start-up genome survey (from 16th in 2015 and 12th in 2012) it became apparent that ISA had no small task ahead.
The 2030 Strategic Issues Paper published by ISA has suggested that there are six challenges for Australia that will be fundamental to overcome in order to push Australia’s innovation status. These are:
- Moving more firms, in more sectors, closer to the innovation frontier
- Moving and keeping, government closer to the innovation frontier
- Delivering high-quality and relevant education and skills development for Australians throughout their lives
- Maximising the engagement of our world class research system with end users
- Maximising advantage from international knowledge, talent and capital
- Bold, high-impact initiatives
The two major points to draw from this nation-wide strategy is the need for the government to be more involved in the start-up sector and the development of skills and relevant education of Australians.
Currently the start-up environment is being fostered by investors, VC firms, co-working spaces and innovative brands such as Amazon, NAB, CommBank and Telstra. These organisations and investors understand the value of the start-up community, not only to the Australian economy and their personal back pockets, but also to customers and future developments.
Due to the skilled visa reform in April, the Australian government has received widespread backlash from the start-up community, arguing that the government is decreasing support and forcing start-ups to move internationally while other national governments ramp up start-up support.
Recent news articles have also drawn attention to the technological skill-gap within Australia. Digital technologies is one of the fastest growing industries in the Australian economy with a contribution of 79 billion dollars in 2013-14. Yet as the demand for digitally-literate professionals begins to grow, the number of ICT graduates has continued to decline since the 2000s. Change must come soon.