Technology commercialisation and investment
The pathway to commercialisation in Australia
As part of the roadmap’s national consultation process, extensive interviews identified the path to commercialisation as a key weakness in transitioning robotics from the R&D stage to market-ready product in Australia. While some innovations in Australian robotics have market potential, they often require significant capital to commercialise. Often, the Australian market is not large enough to justify the development of high capital expenditure (capex) technologies. Policy initiatives, such as tax incentives, can help facilitate the transition of high capex technologies to markets in and outside of Australia (Recommendation 2). Policy should also focus on sectors that have economic potential. Investment (of time and resources) should be focused on areas that show high potential to expand within the local market. For example, significant gains have been made in mining automation to the benefit of the Australian economy and similarly, scalable technologies are being developed in the AgTech sector (see Chapter 10).
The start-up ecosystem in Australia
Venture capital (VC) is widely believed to be necessary to transform old industries and create new ones [VCE17]. Venture capital is central to building a highly skilled, knowledge-driven economy with 75 per cent of Australians believing the benefits of technology outweigh the risks [VCE17]. This has enabled Australian VC founders to get funded locally and also to attract top-tier overseas ventures to invest. With Australia’s large super funds starting to invest in venture companies, Australia’s venture capital (VC) sector raised more than $AU1 billion in 2016-17. The number of venture companies has also doubled since the start of 2016 [SUA17].
Despite this, Australia’s VC funding as a proportion of gross domestic product (GDP) remains half the size of the Organisation for Economic Co-operation and Development (OECD) average. Of countries in the OECD, Australia ranks 24th, investing 0.013 per cent of GDP. Comparatively, Israel (ranked 1) invests approximately 0.38 per cent, Canada (ranked 3) invests 0.16 per cent, and New Zealand (ranked 11) invests 0.034 per cent [OECD17].
According to AVCAL CEO, Yasser El‑Ansary:
“Australia’s venture capital sector is still far too small for a country with bold ambitions to be an innovation-leader.”
This view may be reflected in that the Australian VC market does not provide as many opportunities as competitor markets such as the USA. For example, in the USA in 2017, $US72 billion was raised in 5,052 deals. During the same time in Australia, $AU700 million was raised in 135 deals. To be equivalent on a per capita basis, Australia would need to have raised $AU6 billion in 388 deals.
Similarly, Pitchbook identified 952 “robotics and drones” companies worldwide that have attempted to raise capital since 2008. Only nine of the companies were Australian. Of the $AU9 billion raised worldwide, only $AU6.5 million was raised in Australia. This included a combination of local and overseas (USA) investment and averaged less than $AU1 million per company (compared with a global average of $AU15 million per company). The data also showed that the Australian companies seeking funding were relatively immature, employing an average of only 11 employees. In contrast, over the same period, 46 start-ups in Canada raised capital of $AU171 million, at an average of $AU6.85 million per company with each company employing an average of 23 people.
Conversely, it is sometimes said that the Australian VC scene doesn’t lack money, but it does lack ‘deal flow’, meaning that not many requests are made that align with the interests of investors.
Fundamental changes need to occur in the approach of Australian start-up founders and investors if Australia is to develop a thriving eco-system of robotics and related companies.