Denham Sadler
June 5, 2017

Global accelerators waste of money

Global accelerators waste of money

Hugh Stephens: Money spent bringing global accelerators to Australia should go to local startups

Spending taxpayer money to attract huge global accelerator programs to Australia does a disservice to Australian startups and delivers few benefits to the local ecosystem, according to Schedugram founder Hugh Stephens.

Debate is raging in startup and tech circles over the merit in spending large amounts of public money on luring accelerator programs from overseas, rather than investing in local programs and companies.

It was reignited last week when US-based accelerator Techstars released the statistics on applications for its first program in Adelaide. The company set up in Australia earlier this year thanks to an investment from the South Australian Government worth “several million dollars”.

TechStars first Australian intake received applications from 49 countries, with less than 20 per cent from Australia. The majority of applications came from the US, with 34 per cent coming from the Asia-Pacific region.

Hugh Stephens, the founder of Victorian-based startup Schedugram, said this shows that the global accelerators will do little to actually grow the local ecosystem.

“If the reason we brought Techstars here was to encourage startup tourism, we may as well have done a program like HotDesQ in Queensland, which does that unapologetically,” Mr Stephens told InnovationAus.com.

“Importing knowledge and expertise by bringing international programs here sends the message that we don’t have enough knowledge or expertise locally, which is wrong.”

“I think that Techstars Adelaide not getting many Australian applications is a symptom of them not adequately promoting it locally and not having people in the program who were previously embedded in our local ecosystem.”

But Techstars Adelaide managing director Terry Gold heralded the first round applications, insisting the aim was always to attract the best companies globally.

“We are excited that Techstars Adelaide has sparked global interest, as our first Asia-Pacific accelerator and the first to be located in Australia. Our accelerator programs always aim to attract the best teams with the most interesting ideas, and these can come from anywhere in the world,” Mr Gold said.

Techstars’ arrival in Adelaide was met with much fanfare and media coverage, including press release commentary from federal defence industry minister Christopher Pyne.

In his own press release, South Australian innovation minister Kyam Maher said Techstars would play a role in growing the local ecosystem.

“It shows we are succeeding in our mission to position South Australia as the default place for smart new businesses to start and grow. By attracting the best talent to South Australia, supporting entrepreneurship and building local businesses, we are growing the economy and creating jobs,” Mr Maher said.

Other state governments have also made plays to attract globally-renowned accelerators to their cities, the most prominent being Victoria. The state’s $60 million innovation fund LaunchVic has handed out large amounts of money to bring two accelerators to Melbourne.

It spent nearly $3 million to lure 500 Startups to Melbourne, and $600,000 to bring Startupbootcamp. In contrast to Techstars, both of these programs will only be accepting startups from the Asia-Pacific region.

But Mr Stephens said that while making for good announcements, these plays do little to actually help the state’s local companies.

“I think governments are bringing them here because they want the media announcement and they think the brand will make the ecosystem somehow more legitimised,” he said.

But Victorian innovation minister Philip Dalidakis is firmly sticking behind the strategy, saying that even if the programs attract mainly overseas companies, it’s still a positive.

“I don’t see it as an issue. I can certainly see how people would regard it as that but my view is that when you’re trying to build an ecosystem, you need to get some size and scale about it,” Mr Dalidakis told InnovationAus.com. “We all work with what we’ve got, but we have to start from somewhere.”

“We want to be a destination of great people. We can’t and shouldn’t limit ourselves to a very parochial feel of the best and brightest just in Victoria or South Australia, because we want to expand our capabilities, we want to expand our networks and relationships and expand what we can offer to people.”

A major argument, and one used regularly by politicians, for bringing the accelerators to Australia is that they will in turn attract global investors to our shores.

But Mr Stephens said Australian startups already have a good reputation overseas and don’t need any more help with networking.

“International VCs are already attracted to Australian startups and have been for some time,” he said.

“So it’s not that we need their connections at an early stage anyway, as when businesses are at a later stage and looking for these connections to scale they’re able to access them as Australian startups do have a good reputation internationally,” he said.

“In reality, overseas VCs and investors already have some respect for Australian startups as we have had some great successes and many expats who now are heavily in those overseas ecosystems.

“Many of the brands being brought here often have minimal local brand awareness, which means that we aren’t growing the pie – they aren’t attracting startups, who wouldn’t otherwise be actively participating in the ecosystem.”

For Victoria, bringing the likes of 500 Startups to Melbourne is a continuation of its policy of using taxpayer money to bring large global firms to the city, in the hopes this will create more jobs and opportunities for the local community.

“This comes back to what we’ve done with Zendesk, Etsy, GoPro and the others. We’ve attracted some of the best and brightest internationals for the startup scene on the basis it adds to our local scene,” Mr Dalidakis said.

“It’s about wanting to do both: support our local talent with the best and brightest internationals and hopefully expanding the knowledge and talent pool in the local scene.”

Ultimately, the debate hinges on whether the young companies from around the world that will come to Australia to participate in these accelerators decide to stay on afterwards and create local jobs, mentor local companies and build the local ecosystem.

“If people come into our ecosystem and get mentoring and build relationships, then if we’re good enough there’s a good likelihood and opportunity to attract them in the longer-term into the ecosystem,” Mr Dalidakis said.

Even if they do, the money would have been better spent on the local companies in the first place, Mr Stephens said.

“I think it’s great that governments are investing in the space, but I would rather them be helping local accelerators improve how they work and operate than import an overseas model that often doesn’t suit our environment and doesn’t add that much additional value to what we already have,” he said.

“I think it’s hard to say what it will mean for the local ecosystem, as it depends on whether those businesses stay, and whether they become super big.

“Neither of those things are certain, but I do think that it shows a lack of confidence by the government in local knowledge that, irrespective of overseas companies’ success, sends a bad message.”

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