A culture of innovation sits at the heart of what makes a thriving and globally competitive economy.
A culture of innovation sits at the heart of what makes a thriving and globally competitive economy.
Complex, innovative economies are more sustainable, harder to compete against, and more protected against global economic headwinds.
These protections have never been more relevant, with advanced economies in constant competition with one another to deliver innovative new technologies and products to the global marketplace.
The state government’s innovation strategy lays out a 10-year plan for the state to position itself as a thriving and innovative place in which to live, work, visit and do business.
Building the state’s innovation ecosystem through early-stage business investment to support local startups is essential to Western Australia’s economic growth and the creation of high-quality jobs.
Innovation drives diversification, and diversification adds to the state’s economic and employment growth, its economic complexity and stability, within and across industry sectors and regions.
And yet the state’s performance in attracting venture capital remains way behind most other state jurisdictions, and not just the two most populous states of NSW and Victoria.
WA accounts for only 1 per cent of Australia’s early-stage venture capital investment partnerships, compared with more than 60 per cent for NSW, 25 per cent for Victoria and 8 per cent for Queensland.
But WA’s domestic economic activity makes up 11 per cent of the national total, as expressed through state final demand.
This underperformance seems anomalous, especially given the strength of the state’s knowledge economy and the research and development horsepower of mining and resources companies, hi-tech manufacturing, and the higher education and research sectors.
So why is WA punching so far below its weight when it comes to venture capital investment?
One conjecture is that the state’s heavy reliance on resources is less attractive to venture capital investment and sucks the oxygen from investing in other sectors, such as downstream renewable energy technologies and biotech.
Another is that WA’s startup ecosystem is less advanced than our state competitors, with fewer well-developed incubators and accelerators, fewer networking opportunities, and a more conservative appetite for innovation and risk taking.
Whatever the reason, the WA government has clearly identified the lack of venture capital investment as an Achilles heel of the state’s startup ecosystem.
New or enhanced programs offering support to startups have been progressively introduced over the past few years.
These include funds to develop cybersecurity and the digital economy, and to improve local infrastructure.
The government added $9.1 million to the New Industries Fund in last year’s budget, bringing its total investment on the NIF initiative to $25.8 million over four years from 2021-22.
The fund is intended to support the state’s innovation ecosystem through grants for startups, scale-ups, and venture capital investments.
But when are these initiatives likely to take effect? And what can Treasurer Roger Cook do in the upcoming state budget to grow WA’s slice of the venture capital pie?
Building confidence among the investor community is key, as is the consistency of policy settings.
The more the government can boost investment through targeted incentives to potential investors, direct support for startup businesses and improved regulatory frameworks, the better the value proposition for venture capitalists considering investing in WA.
- Professor Alan Duncan is Director of the Bankwest Curtin Economics Centre
