James Riley
February 22, 2017

Sydney mega-hub is only the start

StartupLand

Sydney mega-hub is only the start

Sydney Startup Hub: A huge step forward for the ecosystem and good news for growth.

The Jobs for NSW proposal to lease up to 15,000 square metres of CBD office space to create a Sydney Startup Hub is the most interesting thing to happen in StartupLand in while.

It’s pretty ballsy, frankly. Whatever recent reluctance the Commonwealth has about shouting the importance of startups to job creation is clearly not shared by the states (led by the very active Philip Dalidakis in Victoria, but with the NSW ministerial cohort and Queensland not far behind.)

That the NSW Government support is coming through Jobs for NSW is instructive, because it was commissioned as a kind of public-private collaboration.

The point about the Sydney Startup Hub, which will become easily the largest cohabitation of startup companies in the southern hemisphere - should it proceed - is that it seems very much an interim initiative.

This is not where the startup sector wants to be in the long-term (ten or more floors in a single, fairly non-descript CBD building doesn’t sound like anyone’s idea of a spiritual home). And you get the sense that it’s not really where the government wants to be either (subsidising private sector rentals off into the faraway future.)

There is no-one connected to the sector who doesn’t think government for a Sydney Startup Hub is a good idea and that they have a good plan. But again, it’s an interim measure.

There is a backstory to the call for expressions of interest for the Sydney Startup Hub that is fascinating for what NEARLY happened, and illuminating for what a genuine startup precinct in Sydney might look like in the medium term.

It is understood that Atlassian was close to signing on the dotted line for 18,000 square metres of space in the Wynyard Green building on York Street. It is like-wise understood that Atlassian did not need 18,000 square metres of space immediately, but had been seeking a single location to grow into.

And so it had approached incubators about sub-letting space – most notably Fishburners, which has been bursting at the seams. It is understood Atlassian had proposed a structure in which Fishburners and other incubators and startups would lease an effectively subsidised commercial rate and Atlassian could grow into the space, while giving the sub-let startup incubator tenants 12 months’ notice to move out when Atlassian needed the space.

This looked like happening right up until about October last year. But alas for Atlassian (and for Fishburners), some immovable timing issues got in the way, terms were not reached with the landlord, and the deal fell over.

Atlassian moved to Plan B, which is at 363 George Street. What. A. Bummer.

To my inexpert eye, that Atlassian-inspired arrangement looked like about as elegant a structure as you might find for the support of the early sector. Surely the smart people looking to find a medium-term home for startup and scaleup businesses are looking at this model.

You would have to assume these discussions are already happening, even if not in the open.

Ideally, the industry must surely want to run its own race. Jobs for NSW looks to have stepped in to fill a void – which could not have come soon enough for Fishburners, nor for Stone & Chalk, which has to be out of its current location by the end of the year.

And that’s roughly where the Sydney Startup Hub has landed. Assuming it goes ahead, Fishburners is in., Stone & Chalk is in, iCentral is in. So that’s the big three covered.

The Jobs for NSW call for expressions of interest will flesh out a bunch of other incubators and accelerators and sundry ecosystem players. It is understood that Jobs for NSW will co-locate in the facility, along with other industry-relevant government programs.

Jobs for NSW holds the lease and underwrites the risk, and ultimately will be providing a subsidised rental for startups in a single location. If you call around the industry – which I did – there is universal agreement that this is a good thing.

Density and collisions are the words you hear a lot in relation to this, and the power of peer learning, and the broader boost to the ecosystem that these things bring.

The difference, of course, is that it’s now the taxpayer that’s now driving this, rather than might have been the case when a large hugely successful scale-up was both the catalyst and the momentum.

The devil’s in the detail of course. But I would not be the only person in Australia who would argue that having the government as the primary driver of this key infrastructure for entrepreneurs and startups is sub-optimal.

The industry needs to own this stuff. It will work better if it does. You would have to hope that the discussions about a longer term and larger ‘home’ for the startups and scale-ups – say in three to five years from now – is already advanced. Because 15,000 square metres in a single CBD building is not going to cover it.

And you would have to imagine there is more than a few ideas that have been put to the Premier’s unsolicited proposals unit that looks at this notion of a precinct, or a spiritual home for the sector.

There are not a lot of options that make much sense for such a precinct either in the CBD or on its edge. White Bay has mass transit issues, and too far off (in the geographic and temporal sense). The Powerhouse and the Harris Street corridor through Ultimo and Pyrmont must surely still be attractive.

Wherever such an innovation and startup precinct might lie is going to take significant – very significant – government support. But it has to be the industry that owns such a precinct project in the medium term.

But before we get too far ahead of ourselves, it is worth noting that by stepping in to fill a void, the NSW Government – via Jobs for NSW – has set off in a positive direction, and that is to be celebrated.

The limited time horizon of the Sydney Startup Hub proposal surely mean that there is a more substantial medium term solution down the path.

I have spoken to a lot of people in the past week [you know who you are] and will be writing about the Sydney Startup Hub in much more detail in the next several weeks.

The announcement raises huge numbers of questions.

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