As extraordinary as it seems to actually write this down, the ultra-premium office space at the harbourside finance and professional services mecca of Barangaroo is being considered as the taxpayer-subsidised home for the proposed 15,000 square metre Sydney Startup Hub.
You know you’re watching a bonfire of the vanities when startup hustlers manage to convince parliamentarians that subsidising startup rents in one of the most expensive buildings in one of the most expensive cities in the world is a good idea.
I’m not using ‘startup hustlers’ as a pejorative. But honestly. Can you imagine?
Surely there is little chance of this actually happening, given Barangaroo rents are two to three times the per square metre price of competitive CBD locations and three times that of the CBD-fringe?
Actually, there is a very good chance.
Wherever the Sydney Startup Hub lands – and it looks like it will proceed, if the response rate to its call for expressions of interest is an indicator – it remains only the front-end of a longer-term startup housing problem for the city.
Maybe it’s a nice problem to have. The rather incredible momentum that has been building in the Sydney startup landscape is real and genuinely exciting.
But you have to wonder whether the best way to build a resourceful community of lean disruptive insurgents is to subsidise their rent inside the flashiest and most expensive premises you can find.
In the scheme of things, the cost to do this is probably not such a big deal. Over five years it would be expected to cost the state, rather than the tens of millions or hundreds of millions.
The Start Society founder Pete Cooper makes the point well that this level of support will be seen in future as modest, as measured against the return as Australia enters a golden age for startups.
And it sends a powerful – if expensive – message to the world at a time when global competition for skills and capital increases.
But the message cuts both ways. Sure, it tells internationals about how serious this state government is about bringing the best and brightest to this city, but for much of the broader electorate this kind of thing just gives them the shits.
It has simply not been made clear how tipping millions of dollars into paying the rent for elites in harbourside Barangaroo is going to materially benefit Western Sydney. Or the Central Coast. Or the Central West.
But here we are. The Jobs for NSW call for expressions of interest has now closed. It is understood the information session run by the agency attracted about 120 people, and that it received about 90 proposals.
Jobs for NSW, which is chaired by Australian tech industry icon and former Telstra CEO David Thodey, has two priority locales in mind for the Sydney Startup Hub. The top priority is for a location in the central CBD, and the tier two priority is a location on the CBD fringe.
A CBD location makes sense. The CBD is home to a swathe of industries that are ripe for disruption, finance and professional services chief among them. You want your startups rubbing shoulders in this world, because whatever successful products born out of teeny-tiny but sophisticated Sydney can sell into global markets.
In addition to Barangaroo, early discussions have been held with the landlords at Wynyard Green and 80 Pitt Street, as well as sites across Ultimo, Haymarket and Surry Hills.
You have to feel somewhat for the Jobs for NSW people. The landlords, via the public calls for expressions of interest, can literally see them coming.
David Thodey says the notion of a Sydney Startup Hub is not a long term solution. The creation of a 15,000 square metre space with the assistance of government money is an interim measure only.
“We’ve got to look at where the natural energy going to be in the startup community, and what’s going to happen with The Powerhouse, what’s going to happen to White Bay [development],” Mr Thodey told InnovationAus.com.
“But all of those solutions are about, five to seven years away. So we thought we must get going now and to support as many of the great startup groups we’ve got right now,” he said.
Mr Thodey says in an ideal world, industry would be driving this kind of program entirely. Governments need to be wary about where they choose to step in and help specific sectors.
But there is an opportunity here, he said.
“At the moment there does seem to be a real shortage of space in the Sydney CBD, and that’s why we think there’s an opportunity to help address that problem. But look, governments should only get involved when there is a failure in the market, and we just think there is an opportunity at the moment,” Mr Thodey said.
“So coming back to that longer term strategy, we need to have the dialogue and talk to people and the community about what’s the best thing for the longer term and see if we can come to an agreement of where we should go.”
And this is where subsidising rents for high growth startups in the short to medium term in the CBD starts to look like a low-cost, value option.
White Bay is years off. But regardless, the only way it becomes attractive for this kind of CBD-attached tech and startup precinct is if it is connected to a genuine mass transit system. That doesn’t mean a light rail, or buses or a fleet of Segways.
White Bay needs to become part of the interconnected, metropolitan-wide mass transport network or it is not interesting. And that’s where government will be looking at enormous investment – hundreds of millions, even billions.
Same with the Powerhouse site and what would be a general refresh of the Ultimo-Pyrmont corridor. Big dollars.
Those are investments that will take somewhat more explaining than simply subsidising startup rents for a few years.
These ae exciting times for the industry. But it’s an exciting time for Sydney also, if the state can get this right. If you look at the successful investments made by the City of London on manufacturing a startup ecosystem through subsidised space, it’s an effective strategy.
The London initiatives took some time to build momentum, but it is hard to argue that it isn’t paying off in a big way right now.
And by the way, it is not clear how the Sydney Startup Hub would fit in with the somewhat mysterious Lighthouse project, which was to have aimed to become a home for hundreds of startups over several floors of Barangaroo Tower Three.
The thinking behind Lighthouse, which is being run by former Muru-D CEO Annie Parker, was unveiled in considerable detail last December, but has gone quiet through the Jobs for NSW EoI process.
We will have to wait to see if they are connected.