Silicon Paddock a multi-billion-dollar opportunity
Entrepreneurship and innovation have always been integral in fuelling our economy, and have been synonymous with big-city dreams and the pace and excitement of a busy metropolis. But times are changing and many of today’s entrepreneurs are just as likely to be found in regional Australia, in the growing “Silicon Paddock”.
Tremendous value has already been created from our regional communities: the innovative practices of local businesses annually inject more than $19 billion into the Australian economy, with scope to reach $44bn. This figure will be boosted by the recently announced stronger regional focus of the Incubator Support Initiative, designed to assist in the growth of regional start-ups and businesses, with 50 per cent of the total value of issued grants to be directed towards incubators. Supported by such positive government schemes, technology start-ups are projected to create more than half a million jobs across the nation in the near future, with more than 20 per cent of start-up founders based outside our nation’s capital cities.
It’s a win-win scenario, with start-ups priced out of metropolitan areas enjoying the lower rent, wage and living costs of regional Australia, while the development of such firms in turn creates more jobs outside of traditional industries.
With clear socio-economic benefits, it’s no surprise that the growth of the silicon paddock is a global phenomenon. In the US, “rust-belt” areas, previously littered with manufacturing hubs of the past, are now experiencing a revival movement, with entrepreneurs moving in and starting businesses. For example, Cleveland Polymer Technologies — a firm in Watervliet, New York — now occupies space in an old US-army arsenal. And in Manchester, New Hampshire, an old riverside mill district is being revamped with an influx of knowledge businesses.
Returning to Australia, a prime example can be found in Byron Bay, a coastal region famed for fostering a successful entrepreneurial ecosystem, as well as several entrepreneurial businesses which have since accelerated and gone global. Byron Bay’s ecosystem has developed organically, and favours the “lean start-up” model, one which involves validating an idea and getting it up and running as a business through short product development cycles, while investing as few resources as possible.
Building on these strengths, the small township’s successful start-ups come in many forms. Spell Designs — today considered one of Australia’s most successful women’s clothing brands — is a good example, having begun at Byron Bay’s local markets. Founder Isabella Pennefather started the business in 2009, with her sister Elizabeth Abegg joining shortly after relocating from Sydney. The two sisters steadily expanded the business, selling and marketing their clothes via online platforms. Establishing online sales channels gave them the best of both worlds — able to expand beyond the limitations of local markets and gain access to a global audience, while still enjoying the lower overheads of a small-town business, with a 200sq m design studio costing just $250 a week. Instagram in particular has proved to be a stunning sales channel, with Spell Designs boasting nearly 800,000 followers, many of which are based overseas.
Byron Bay is also home to beekeeping technology company Flow Hive. From his home in Byron Bay, founder Ceder Anderson, together with his father Stuart, developed a beekeeping technology that streamlines the process of extracting honey from the hive into a jar. His innovation has been named the most successful beekeeping invention since 1852, making it easier for beekeepers to collect honey, and saving bees from being crushed during the honey harvest. Funding of more than $5m was initially secured through the crowdfunding platform Indiegogo, one of the most successful crowdfunding campaigns in history. Flow Hive has since created more than 30 local jobs, and supports Australian manufacturing by getting the hives made in Brisbane. The company has also received the “Fast Company World Changing Ideas Award” in the consumer products category, alongside the likes of giants Microsoft and GE, a huge achievement and source of pride for a small coastal town.
For both these firms, and many others like them, savvy use of technology has been key.
These founders have used their expertise to step above the competition and secure many customers in Australia and beyond, taking advantage of technology to communicate and engage in commerce. And with more and more regional communities being connected to the National Broadband Network, there’s enormous opportunity for the development of innovative businesses outside of our capital cities, catalysing Australia’s economy as a whole.
Benjamin Chong is a partner at venture capital firm Right Click Capital.