Now that what we had assumed was a safe economic future – digging stuff out of the ground and selling it to China for the next few decades – no longer looks so secure, it’s time we got back to the basic tenets that drive economic growth. With terms of trade and mining exports at record highs, the large amounts of money that have flowed into the country over the past decade have drawn attention away from how to boost the keys to prosperity – productivity and innovation.
In last week’s issue, we revealed the 100 wealthiest self-made entrepreneurs aged under 41 in 2012. Behind the headlines of the new dominance of technology firms over mining magnates was a disturbing figure – that nearly one-quarter (23) of these most successful entrepreneurs now live and have their headquarters abroad. Much of this is attributable to the strength of technology firms in the list and the pull that Silicon Valley has on them in terms of talent, funding and ideas. However, it’s also a sign that many of the best people who create value and employment don’t find Australia a supportive environment. It’s a reminder that while we all know capital is mobile, so too are ideas and people. Every country wants self-starting migrants to make a home on their shores – the competition for people like this is fierce and while having a world-class lifestyle is attractive, it’s not enough.
Three areas should be the focus and two of them call for better policies on funding and regulation. As Jessica Gardner discusses in her story this week, “A hole in the road”, venture capital funding (between $1 million and $10 million) for would-be innovators is thin on the ground and its scarcity is stifling growth. There’s no easy solution for this and venture capitalists’ pleas for more backing from superannuation funds are unlikely to gain traction – and nor should it as super funds are mandated to provide for retirement needs, not to fund a particular asset class.
What is needed are ways to make venture capital a more attractive investment option or finding other ways to fund companies at that stage. Better regulation is also key, where government policy should focus on cutting red tape and essentially getting out of the way of entrepreneurs. The third area isn’t necessarily one of policy but one of attitude. We need to embrace successful people rather than cut them down because of an inbred tall poppy syndrome. In the United States, failure is seen as a necessary part of success. When someone such as Nathan Tinkler falls down, it is in all our interests to want him to stand up again.
Finally it’s too easy to ringfence entrepreneurship to the realm of start-ups and young technology companies. Those that are on the BRW Young Rich are by default start-up companies, even though they are well established, but the focus on encouraging innovation can’t just be with this group. If there’s one place that entrepreneurship is needed most it’s in established mature companies that struggle to reconcile their basic goal of making profits with that of innovation.
Larger companies have become more risk-averse since the financial crisis, particularly those in industries facing structural change such as retail. But these are the ones most in need of embracing new business models. At BRW, we don’t think entrepreneurship is just for start-ups, it must be for everyone.