Australia risks falling behind the rest of the world on deep tech at a time when it is most important, while renewed investment in the sector would present “unprecedented opportunity” for the country, a new report has found.
The AlphaBeta report was commissioned by Cicada Innovations to mark its 20th birthday, and found that if the government were to make targeted investments into three new Cicada-like operations, up to $1.1 billion in economic value could be created for the country and spark a further $1.35 billion in investments for deep tech companies.
The report also found that for every $1 generated by a deep tech company, more than $3 of value is created for other parties, such as other startups or the general public.
AlphaBeta conducted modelling on six companies that have gone through the Cicada Innovations incubator with a combined $378 million in economic value. It found that the highest beneficiary of this value was the wider society, which received $109 million, business customers with $104 million, startups with $99 million and consumers with $66 million.
While the deep tech sector can deliver benefits for the wider society, businesses, startups and consumers, it is an industry that requires direct investment over a significant length of time and specialised support.
Many successful deep tech companies, such as Cochlear and ResMed, are “30-year overnight successes”, Cicada Innovations chief executive Sally-Ann Williams said.
“While the modelling demonstrates that deep tech companies hold significant potential for value-creation in sovereign economies, it also shows that they require decades-long investment and specialised networks and support if they are to reach that point of explosive growth and value creation,” Ms Williams said.
“While deep tech’s long timeframes can be daunting, they yield the technologies that can help us hear, cure cancer, connect us across oceans and feed us,” she said.
“We must ask how government, industry, community, research and education institutions and entrepreneurs can best work together to make the most of our deep tech strengths, and how we can align policy and practice to strengthen the pipeline of deep tech companies we need to fuel our future.”
Compared to its international peer Australia is lagging behind and “not yet fully embracing this opportunity”, the report found.
Cicada’s equivalent in Singapore, SG Innovate, has received $50 million in government funding in the last four years, and incubated 70 startups that have collectively raised $558 million.
“Deep tech is key to economic performance, but Australia is at risk of falling behind. Technology is the only driver of sustained economic growth and innovating countries perform better. But while Australia is a world leader in deep technology research, relatively few Australian corporates are global R&D leaders,” the report said.
“Because deep tech is expensive and development takes a long time, developing the right commercialisation pathway is crucial. Incubators are increasingly demonstrating their efficacy at successfully commercialising deep tech startups.”
The report outlines four priority areas for Australia’s policymakers, business leaders and investors: building a bridge through the pandemic crisis to ensure current businesses survive, developing a shared vision for the country’s deep tech capacity, nurturing an innovative culture within organisations and committing to invest in deep tech in the long-term.
The report also raised concerns that the current JobKeeper scheme offers “little respite to universities and pre-revenue startups”, while recent proposed changes to the Foreign Investment Review Board regime could also make it more difficult for startups to attract funding.
While Australia faces a “long road” to achieve its deep tech potential, there are “extraordinary benefits” on offer in the long-term, the report found. Incubators like Cicada are crucial in providing capital, networks of advisors, secure technical facilities and a route to market.
A significant focus for the federal government must be put on helping in the commercialisation process, it found.
“Australia’s deep tech future is not assured. Australia’s innovation efforts are unbalanced: we invest heavily in research, but not enough in commercialising deep tech. Australian universities and businesses do not work together as much as they should,” the report said.
“Many Australian businesses invest less in R&D than their peers in other advanced economies. Australia counts relatively few R&D powerhouses among our largest companies. Many Australians are sceptical about innovation. The COVID-19 pandemic also threatens to undermine progress.”
This should be done through developing scale and maturity in existing deep tech incubation, rather than “spreading one-off grants thinly across many small incubators”, the AlphaBeta report found, while the government needs to provide funding to ensure continuity for the public research sector and to maintain momentum in private sector investment.