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Tech companies test drive innovations in Australia

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Launching cutting-edge innovations can be an uphill battle, which is why many tech companies from the US and Asia use Australia as a test market. They prefer to introduce their products ‘in Australia ahead of other markets because it is a developed yet still secluded market, so the impact of failure is less’.

While the US might be the world’s largest economy and the most technologically advanced, this actually works against startups trying to break into the market. Competition is too strong and regulations around raising capital are simply too rigid.

In a recent article by the Australian Financial Review, co-founder of the Global Public Offering Fund, Jeff Stewart, argued that the IPO market in the US is dead, leading hundreds toward exchanges in Australia to facilitate start-up growth.

“It’s almost impossible for a tech company to get a float worth less than $US3 billion ($3.8 billion) or $US4 billion underway in the United States,” said Stewart. To put that in context, tech superpowers like Oracle and Amazon wouldn’t even exist if they had attempted to raise their first rounds of capital in the current market.

Stewart’s data shows that there were only 18 US companies that raised less than $US50m on the stock market in 2016, whereas 20 years ago there were 557.

“Part of the problem is that companies trying to go public in the US are prone to litigation and enormous expense,” says Steward. “Floats are fewer but larger because by the time the company reaches a state is can afford to list, it is mature.”

Being able to trial a new business model or innovation without the risk is particularly appealing to already-established American tech companies. According to The Australian, that’s because Australia is large enough to ‘have the diversity and the nuances of a major economy, while being small enough to not have to scale the product extensively to go to market’.

The US and Australia may have a similar physical size, but in Australia business leaders tend to live ‘within proximity to each other on the East Coast – in Sydney, Melbourne or Canberra’, which makes it a more tightly knit ecosystem – one that’s more favourable than the US for trialling new products.

 

Major activity is happening in the tech sector down under. Learn about the trends worth following in our new APAC Indicators report here.

 

Download the Indicators report


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