Lack of access to human talent and raising capital remain the biggest handbrakes for business growth in Australia’s technology sector.
When these are lifted more unicorns will emerge in rising tech subindustries, such as medtech, mining tech, edtech and cleantech, according to a new report by professional services firm RSM Australia.
RSM Australia National Leader Technology Mathavan Parameswaran said the report – What Australian tech businesses can expect in the next two years – concluded that ''despite the tech revaluations and market corrections of the past year, the local industry is not experiencing anything equivalent to the ‘tech wreck’ that reshaped the American tech industry in 2000’’.
``There is a bullish long-term outlook for Australia’s tech industry, and particularly for the potentially significant role Australian entrepreneurs could play in delivering new local and global cleantech solutions to help businesses move towards the Australian Government’s net zero emissions target,’’ Mr Parameswaran said.
``Australia also has the potential to replicate its success in traditional industry sectors such as mining, agriculture, health and education in their equivalent tech subindustries with the right growth levers in place,’’ he said.
Technology Council of Australia CEO Kate Pounder – who shared her outlook on Australia’s tech sector in the RSM report – said achieving talent, tax and regulatory improvements and addressing any market or government failures in high-potential industries would reduce the chances of Australian tech companies taking their ideas offshore.
“We know we can create world-beating tech companies because we’ve done it. It’s now just a matter of creating the ideal environment for more local tech companies to grow into unicorns,’’ Ms Pounder said.
Angel investor and Healthengine CEO and co-founder Dr Marcus Tan – who shared his industry insights in the report - is upbeat about the maturation of Australia’s relatively young tech industry.
Dr Tan said Australia had reached the stage where first-generation successful startup founders were now providing capital and mentorship to up-and-coming generations of startup founders.
“In the US, successful tech entrepreneurs have long reinvested in the industry they know and love,” he said
“We are now seeing that happening on a significant scale in Australia.”
However, RSM Australia Director and National Head of Corporate Finance Glyn Yates warned tech businesses without strong fundamentals, namely a cashflow positive balance sheet, would struggle in the current market, no matter the potential broad appeal of their innovation.
“Those supplying capital have become significantly more selective and somewhat more impatient,” Mr Yates said.
“Tech businesses that are profitable, or clearly on the road to profitability, will still be able to sell equity and borrow money. But many marginal businesses, especially copycat ones unable to differentiate their offering, will collapse. Or need to merge with, or be acquired by, a competitor,’’ he said.
RSM Australia International Tax and Transfer Pricing Principal Danielle Sherwin also sounded the warning bell for tech companies that had launched into new global markets or secured talent offshore without full consideration of the tax complexities and rules.
“If economic activity is occurring in a country, that country will typically want to derive some tax revenue from it,” Ms Sherwin said. ``However, the complexity of operating in the digital age means it’s sometimes not clear where the economic activity is occurring.”
Australian Computer Society CEO Chris Vein – who also shared his views on the tech sector’s short-term challenges in the RSM report – said access to talent was “the biggest challenge right now and will likely remain so for the foreseeable future’’.
“In 2020, fewer than 6,000 IT bachelor’s degrees were awarded to domestic students. That is less than 10 per cent of the annual projected growth of the Australian IT workforce,’’ Mr Vein said.
The RSM report canvased the views of a range of technology sector leaders and companies including: Pentanet (Perth); Virescent Ventures (Melbourne) CT4 (Brisbane/Melbourne); Healthengine (Perth); Greener (Melbourne); MedAdvisor (US-based).
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