Australia has a proud history of invention. But we have repeatedly failed to capitalise on our breakthroughs.
Despite Australia’s strong research impact, with 3.5 per cent of global publications cited 42.2 per cent above the world average, its economic complexity, based on the diversity of goods exports, has been declining since 1995.
To ensure that our best and brightest innovators and innovations scale and succeed within our borders, we must prioritise deep tech at a national level.
Deep tech is defining the industries of the future – the only question is whether Australia will own its critical technologies, or watch them scale elsewhere.
We must move beyond rhetoric and implement concrete actions to secure Australia’s deep tech future.
Despite Australia’s history of innovation, exemplified by the invention of Wi-Fi, polymer banknotes and ultrasound technology, we are at risk of other nations profiting from our deep tech innovations.
The discussion paper released last month regarding the Australian government’s ongoing strategic examination of Australia’s research and development (R&D) system highlights a concerning trend: business R&D investment in Australia has remained stagnant for 25 years, at 1.66 per cent of GDP, notably below the OECD average of 2.7 per cent.
To address this, a shift from simply increasing R&D spending to a more strategic approach is essential.
The answer lies not only in direct R&D investment, but in fostering collaboration with deep tech SMEs.
We are witnessing a surge of deep tech startups and SME’s in Australia, with 72 per cent of Tech23 applicants founded within the last five years and 110 out of 141 startups reported to have successfully raised capital, according to our Cicada x Tech23 Insights Report 2024: Deep Tech: Australia’s Critical Technologies.
This burgeoning sector now comprises 20 percent of all Australian startups, as highlighted by the Startup Muster 2024 Report.
However, our capacity to scale and commercialise these innovations remains worryingly inadequate.
Without addressing critical gaps in funding, corporate engagement, and procurement, we risk forfeiting our most promising technologies to overseas competitors.
Gap 1: Funding the deep tech pipeline
Deep tech innovation in Australia is being stifled by a critical funding gap.
While government grants (38 per cent) provide crucial early-stage support, Cicada Innovations data reveals that only 17 per cent of deep tech startups applying to Tech23 secured venture capital, compared to 20 to 30 per cent in more mature ecosystems.
This forces startups to rely heavily on non-scalable funding sources like friends and family, and accelerators and incubators, hindering their ability to scale and compete globally.
The government must urgently address this by implementing measures to bridge the funding gap between R&D grants and venture capital investment, ensuring that promising homegrown innovations don’t falter on the path to commercial success.
Gap 2: Australian corporations overlooking deep tech
Australian corporates are missing out on opportunities to drive innovation and growth by neglecting deep tech startups.
Tech23 data reveals that Australian startups are just as likely to partner with international corporations as with domestic ones, highlighting a concerning lack of local support.
This is further evidenced by the fact that many global corporates in Australia operate primarily as sales and service hubs, with crucial R&D and decision-making powers located offshore.
Unlike countries where strong industry-startup collaborations are commonplace, like South Korea (Samsung), Germany (Siemens), or Japan (Hitachi and Fujitsu), Australian corporates lack structured pathways to invest in and partner with deep tech ventures.
Our research shows that this results in less than 10 per cent of deep tech startups securing a corporate partner during their scaling phase.
We have to ask ourselves why are international companies seeing the value in Australian deep tech before our own corporates do?
To reverse this trend, Australia must actively incentivise corporate R&D partnerships, create targeted industry collaboration programs, and establish a ‘first customer’ initiative to ensure local deep tech solutions gain traction before global competitors take the lead.
Gap 3: Government as an early adopter
Successive government failure to bridge the gap between early grant funding and procurement raises a critical question: Has Australia inadvertently been subsidising global deep tech innovation?
While the Australian government supports local early-stage R&D, it does not procure the resulting technology, forcing it to seek validation overseas.
Subsequently, Australia ends up losing the IP advantage and often repurchasing this technology.
This trend underscores a significant gap in Australia’s deep tech ecosystem: the absence of a robust government-led procurement strategy.
To address this, Australia should establish a sovereign procurement commitment targeting critical sectors such as defence, energy, and healthcare.
By acting as a ‘first customer’ for strategic deep tech solutions, the government can de-risk ventures and drive their growth, ensuring Australian innovations benefit Australians first.
This approach mirrors the US Small Business Innovation Research (SBIR) program, which has propelled companies like Qualcomm and Symantec to success through early government contracts, and Germany’s government SME procurement support, which provides crucial market validation and early revenue, significantly boosting their growth trajectories.
A commitment to domestic deep tech procurement would unlock follow-on investment and accelerate commercialisation of homegrown critical technologies.
These challenges are not new but have occurred over the past 25 years of inaction as highlighted by the R&D Review.
To reverse this trend and safeguard our future prosperity, a bipartisan, sustained commitment must be established. We must prioritise critical technologies with the same unwavering resolve we apply to critical minerals
The ongoing R&D review highlights that the lack of action over the past 25 years has exacerbated these existing challenges.
A bipartisan, sustained commitment is therefore required to prioritise critical technologies with the same unwavering resolve we apply to critical minerals.
Only in this way can we reverse this trend, and safeguard our future prosperity.
Sally-Ann Williams is chief executive at Australia’s pioneering deep tech incubator Cicada Innovations
Do you know more? Contact James Riley via Email.