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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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Google MD Nick Leeder says Melbourne trumps Sydney for linking start-ups with Silicon Valley

Published 20 February 2013 11:48, Updated 27 February 2013 21:03

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Google MD Nick Leeder says Melbourne trumps Sydney for linking start-ups with Silicon Valley

Google has some surprisingly old-fashioned ideas, says Australian MD Nick Leeder. Photo: Rob Homer

Sydney may be home to the greatest number of local tech start-ups, but Melbourne is better at creating start-up communities locally and connecting with big players in Silicon Valley, according to Google Australia’s managing director Nick Leeder.

Leeder said Australia needs to create a “critical mass” of tech-savvy companies and it can do this by helping create better links between universities and business to encourage more start-ups.

Speaking in Melbourne this morning in a speech for the RMIT business lecture series, he threw his support behind the Gillard government’s innovation precincts. The government wants to spend more than $500 million on establishing up to ten precincts, which it says will “bring together” businesses – research institutions such as the CSIRO, universities and government agencies – in particular areas.

If it won’t be used by 1 billion people it’s probably not right for us.

Google is working on a plan to help create Australia’s version of Silicon Valley, which Leeder likes to describe as “Silicon Beach”. He said greater digital innovation will help lift productivity and global competitiveness.

“We look to Silicon Valley as an incredible creator of wealth in the United States,” he said.

“Not only do we see Google and Facebook and Apple and Microsoft come out of places like [Silicon Valley], but what it does is create a pool of capability for the whole economy to draw from. It creates the engineers and the technicians who can help normal businesses navigate these changes really well.”

Leeder said that while in Australia the quality of engineers is “incredibly strong”, the start-up community lacks a “critical mass”.

“We need to figure out how we better connect in universities with that community and with companies like Google,” he said. “We have to be flexible about how we connect. There’s actually a great venture capital community in Melbourne. That’s one of things that Melbourne’s done better [than Sydney] over the last 15 years, is bring together that community. It’s slightly more disparate in Sydney.”

Apart from connecting with each other locally, he said it was also important for Australian start-ups to build bridges with Silicon Valley-based companies. “If we construct those well we may be able to overcome our lack of size [in Australia],” Leeder said.

A recent report 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.

It found Sydney is home to the greatest number of tech start-ups in Australia – 1.5 times more than in Melbourne, six times Brisbane’s and eight times Perth’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.

But Leeder doesn’t see the massive number of Australians with bright ideas flocking to Silicon Valley as a threat. “I don’t think it’s a failure if an Australian packs up their bags and heads to the Valley and has wonderful success,” he said. “That can be great for the company and probably good for Australia in the long-run as well.”

Leeder said the government’s industry innovation precincts were a good idea and would assist in helping our digital sector thrive. As part of its ten precincts, the government wants to create an “online industry innovation network” that will help improve technology knowledge and digital business partnerships.

Unlike other business players, he isn’t worried about the government’s planned funding cuts for big companies undertaking research and development, saying that, when it comes to a thriving technology and innovation sector, the issue isn’t money, but rather size.

“There is VC (venture capital) money in this country,” Leeder he said. “But the amount of it that ends up going offshore and back through the Valley shows there’s an issue. It’s not a money issue. It’s actually a critical mass issue.”

That’s why linkages between the public and private sector and helping universities deliver the best and brightest in science, engineering and related fields is crucial. Great ideas come from bringing people together. “Precincts are good,” he said. “We are big believers in physical proximity.”

“We’re so old-fashioned that we do breakfast, lunch and dinner for free in [Google’s Pyrmont-based] office. “And it’s literally to get everyone around the table – so that the engineers are bumping into the business people; bumping into each other. What we do see is that helps ideas flow.”

Google is already reaching out with internship programs with a number of universities. He said this is “building an appetite” for students to innovate and create their own start-ups.

Asked whether Google is doing corporate venturing to support local start-ups, he said: “Google’s approach to investing in start-ups is a global approach.”

While Australia and New Zealand are on the radar – the acquisition of Google maps was a local one – “the reality is that it’s a very, very competitive space” and often companies that have great ideas locally simply don’t have the scale to attract investment from big companies such as Google.

“Start-up ideas have to be incredibly good and incredibly scalable,” he said. “If it won’t be used by 1 billion people it’s probably not right for us.”

Leeder called on both sides of politics to think about the infrastructure needed to support digital innovation. He said the objective of fast-speed broadband is a good one but that “both sides of politics are in fierce debate about how to get there”. “In that battle, let’s not lose the objective,” he says. “That would be my one ask.”

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