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Nassim covers the accounting and tax rounds for BRW, as well as general business news. She previously worked for The Age newspaper covering general news, state politics and economics.

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Why Australia is unlikely to have a thriving ‘Silicon Beach’

Published 29 May 2013 11:54, Updated 30 May 2013 07:59

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Why Australia is unlikely to have a thriving ‘Silicon Beach’

There have been suggestions that Sydney could develop its own ‘Silicon Beach’, but Jeremy Howard thinks it would require a ‘total rethink’. Photo: Kate Geraghty

Australia is far off from creating its own version of Silicon Valley because its political leaders and business community lack the same entrepreneurial spirit, says the president of prominent San Francisco-based start-up Kaggle.

“We are a lot further away than I first realised before I came to Silicon Valley,” says the company’s president and chief scientist, Jeremy Howard.

The Silicon Valley start-up runs competitions where 100,000 data scientists solve problems for organisations including NASA, Ford and Deloitte.

The company was launched in early 2010 by former Reserve Bank of Australia economist Anthony Goldbloom and recently raised more than $US11.25 million in funding from leading US venture capitalists and investors.

Howard is also an Australian but now lives in San Francisco. He says California pumps “100 times more money” into start-ups than Australia as an entire country does. “It makes you realise that the appetite for supporting risky but high potential investments in Australia is just not there yet,” he says.

Howard first became involved with Kaggle as competitor, winning a series of forecasting competitions. Before moving to America, he worked as a management consultant at McKinsey & Company and later set up his own online businesses, which he later sold off.

He says when Australians choose to invest in new companies, it is generally resource exploration companies. But Australian start-ups are not supported in the same way.

“Now that I have come to the [San Francisco] bay area, I understand why it’s so successful,” he says. “There’s a culture of innovation. There’s an acceptance to fail. To fail means that you’ve tried. And people try and try until they eventually get it right.”

He says political leaders and the business community in California are “extremely supportive of entrepreneurs”, but that those in Australia are not.

“As soon as we came here we had so many people offering to help us, expecting nothing in return. I had two start-ups in Australia … but I did not get help from anybody ... In terms of supporting start-ups, [Australia] has a long way to go.”

Government must be proactive

Asked how far off Australia is from having its own version of Silicon Valley – some label this as a Sydney-based “Silicon Beach” – Howard says: “There’s nothing to say that it will ever happen. I’m not saying it can’t. But no one has ever managed to replicate Silicon Valley. And lots of people are trying.

“For it to happen, it will require a total rethink of the way we do things. It would require the [Australian] government to be very proactive about being start-up friendly. It would require help from venture capitalists that are interested in supporting these kind of companies.”

He says in San Francisco, Mayor Edwin Lee regularly attends start-up events and offers its founders assistance. “He walks around asking things like, ‘how did you go in finding office space’, ‘how did you deal with building regulations’, ‘is there anything else that we can do to help you start up?’.

“At all levels of government and administration, people are asking questions around how they can support start-ups. They see it as important to their economy.”

A report released last year comparing Australian tech start-up companies with overseas companies found the start-up ecosystem in Silicon Valley is 6.7 times the size of Sydney’s.

Based on size, the closest overseas start-up hubs to Sydney were in Paris, Tel Aviv and Singapore, according to the report Silicon Beach: A Study of the Australian Startup Ecosystem, co-authored by Deloitte Private, Pollenizer, Australian start-up publication From Little Things and the Startup Genome Project.

The report says Sydney entrepreneurs are 86 per cent less likely to want to get rich, and 45 per cent less likely to want to change the world than their counterparts in Silicon Valley.

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