Victoria should consider doubling down on its burgeoning startup ecosystem to help fuel a post-COVID recovery that could see 15,700 new jobs added to the state’s economy by 2038.
Deloitte’s Productivity is not an accident report outlines the potential for Australia’s second-most populous state to benefit from an economic boom off the back of investment in innovation.
Head of Deloitte Access Economics, Dr Pradeep Philip, said startups are a “bridge between the current economic growth path” and a “new growth trajectory” that will define future economic growth in Victoria.
“The solution for our economic recovery lies in fostering collective action and innovation; both of which are at the core of startup ecosystems,” Dr Philip said in the report’s foreword.
“In economic recovery there is an opportunity to disrupt the old and create the new – ideas, products, systems and solutions – to solve our biggest challenges. COVID-19 has seen a rapid transition of our physical world to a virtual world; think telehealth and online learning.
“Startups are well-placed to take advantage of these new opportunities.”
Deloitte’s modelling looks at the startup ecosystem as an ongoing cycle where startups enter with an innovative idea and try to develop it into a minimum viable product that can go to market.
From there, the startup either succeeds in scaling up to a full-fledged business, or they fail.
Ideally, the entrepreneurs – undeterred by a failure – would then re-enter the ecosystem for another attempt.
That final step, where a startup returns to the ecosystem, is crucial for sustainability as the startup density (the number of startups per million people) directly affects the startup success rate, according to Deloitte.
A represenation of the startup ecosystem. Source: Deloitte
The report’s ‘high growth’ scenario predicts a Victorian scaleup success rate of 0.75 per cent (compared to 0.33 per cent in the ‘business as usual’ scenario) if it can reach a density of 750 startups per million people.
Dr Kate Cornick, CEO of LaunchVic – the $70 million state agency tasked with improving Victoria’s startup ecosystem that commissioned this report – said there are existing examples of how innovation during tough economic times can pay dividends.
“Some of the world's largest tech companies such Airbnb, Slack, Instagram & LinkedIn were all once startups – tiny companies conceived around the time of the last global financial crisis,” Dr Cornick said.
“In approximately 10 years, they have created hundreds of thousands of jobs and trillions of dollars of value – this is evidence that startups have a huge role to play in our economic recovery and wealth and job creation.”
While job creation and capital growth are intended economic effects of startups ecosystems, Deloitte notices other positive effects of including broader supply-side efficiencies and marketplace competition.
However, other Victorian industries could be heavily disrupted by innovation – especially manufacturing and mining which are estimated to lose a more than combined $2 billion under Deloitte’s ‘high growth’ scenario.