Tech sector demands a plan to escape lockdown crisis

“Australia benefited from a “brain gain” in 2020 as many expat Australians returned home. We are now experiencing a brain drain; Australians are increasingly starting to head overseas again and we are seeing virtually no migration to Australia.

“Many businesses are finding it incredibly difficult to find employees and the degree of difficulty will increase substantially over the next few months. We are keeping our economy closed when the rest of the world is reopening.”

Nature took away 18 months of Australia being a part of the world. Let’s hope the government doesn’t take away the next 18 months. — Niki Scevak, Blackbird Ventures

OneVentures managing director Dr Michelle Deaker said her firm’s attempts to complete a new $150 million fund had been complicated by an inability to travel overseas and talk to potential backers face to face.

Though OneVentures had so far nailed down $100 million, she had found that, as the rest of the world began opening back up and normalising international travel, Australia’s hard borders and the lack of any sign of when free movement would return were becoming a commercial disadvantage.

”What I’ve noticed in my global companies is that in other markets they are back to business,” Dr Deaker said. “So where last year there might have been some slowdown, now they are signing lots of deals and revenues are increasing well.

“The world is in an uncertain place, but outside Australia the rest of the world is getting used to dealing with the pandemic. They are saying ‘We’ve got to keep going now,’ while they are vaccinating and are getting their businesses back on the road.

OneVentures managing director Dr Michelle Deaker says her firm’s attempts to complete a new $150 million fund have been complicated by an inability to travel overseas. Jesse Marlow

“I think there has been a mental shift overseas, whereas we are still pretty insular.”

Dr Deaker said 2020 had shown the local start-up sector to be more resilient to the challenges of COVID-19 than had initially been feared, and that increasing international investment in the local scene showed that people elsewhere had noticed the potential.

However, she agreed with Mr Bassat that a lack of any plan to lock in a time frame when borders should reopen, or when people could travel, was starting to make Australian companies look like an outlier. While 2020 had shown business could be conducted remotely, she said it would become more difficult for Australian-based operations as more and more international in-person meetings started happening again.

“People will start to think it is very strange when they are off doing business around the rest of the world and Australia is not present,” Dr Deaker said.

“Because I’ve not been able to get overseas and see some offshore investors that were interested in starting doing business with us, it has really slowed the process for us.

Local Measure founder Jonathan Barouch says he understands the need for the current lockdown, but that companies need a timeframe for when they will stop.   Peter Braig

“They’re almost not interested to get on Zoom any more because the rest of the world is flying and doing business. They don’t understand that we’re actually not able to leave the country. So we need certainty around when they are going to open the economy up, and when they believe they will have the vaccination levels up to where we can get the show back on the road.”

Blackbird Ventures partner Niki Scevak said he was keen not to complain too much about Australia’s isolation because the ability of technology companies to work remotely put them in the blessed category of businesses. However, he said the inability for Australian company founders and executives to get overseas was already proving to be a barrier to growth.

In the past year, some of Blackbird’s portfolio companies had paused opening up customer-facing US offices to add to their product team in Australia, while others had slowed international hiring because of their inability to travel, or have new hires visit Australia to be welcomed into the culture of the company.

“If Australia is to create global champion start-ups then Australia needs to be a part of the world not isolated from it,” Mr Scevak said.

“Nature took away 18 months of Australia being a part of the world. Let’s hope the government doesn’t take away the next 18 months.”

From a company founder’s perspective, Local Measure chief executive Jonathan Barouch said a lack of clear government decision making was hurting its ability to employ the necessary staff.

Tech companies had always been reliant on talent coming in from overseas to bolster local skills, but a lack of clarity and consistency about how immigration post-COVID-19 would work meant Australia looked a less attractive place to live.

“When we finally do get overseas talent to move here it is on the basis that they can occasionally go home to see their families and friends,” Mr Barouch said.

“With the international borders closed and no sense of when they are open we are finding it harder to attract talent here and the industry risks losing talent who call it quits on living in Australia.”

Founder and CEO of Ethical AI Advisory and executive chair of the Artesian Capital backed Boab AI accelerator Dr Catriona Wallace says Aussie tech companies are starting to be disadvantaged in comparison to global rivals. Janie Barrett

Mr Barouch said he was keen to avoid pointing the finger at whose fault it was, but that it was unhelpful to have vastly different approaches to COVID-19 response in different states.

It felt inconceivable to even plan for members of his company’s Brisbane office to come to Sydney for work events, due to the speed with which borders were locked down, yet this contrasted starkly to some of his vaccinated US-based employees, who had just travelled interstate to Miami for a two-day workshop, and were starting to get invitations for large-scale conferences in the latter months of this year.

“It would be very helpful to set a national timeline on when we’d expect to open up, be able to easily get talent from overseas and even attend customer or partner meetings overseas to help drive revenue,” Mr Barouch said.

“Start-ups are pragmatic enough to know we can’t do it now, but we need to be able to work backwards from a realistic timeline.”

Alister Coleman of Folklore Ventures said the technology sector was a net beneficiary of uncertainty because it had the capacity to be more nimble to opportunity. The only issue with the government setting a timetable or guidelines for opening up was doubts that the people making decisions would be accountable for the certainty of delivering those outcomes.

“The challenge we are facing is that the national cabinet isn’t willing to collectively shoulder accountability for delivering a solution, and this unaccountability results in the public and businesses shouldering the cost,” Mr Coleman said.

Blackbird Ventures co-founder Niki Scevak says some of his portfolio companies are having to slow their international expansion plans. 

Founder and CEO of Ethical AI Advisory and executive chair of the Artesian Capital backed Boab AI accelerator Dr Catriona Wallace said that while high levels of investment made it appear that local tech companies were immune to the uncertainty of the current lockdown and the regularly shifting projected end dates, they were in fact becoming disadvantaged against global rivals.

Younger Australian tech firms were starting to suffer because locally based corporations were less willing to engage and spend money with them due to lockdown, uncertainty, budget conservation or increased risk aversion.

“The Australian start-up sector may appear to be weathering the lockdown and uncertainty,” she said. “However, this is only at a domestic level. With other economies emerging out of lockdown and with high levels of vaccination and travel opening up – the respective start-up communities of these economies will get a jump on Australian start-ups.

“The world has had the equivalent of five years’ tech advancement in 12 months, so the race is on and Australia is likely to fall behind.

Daniel Petre of AirTree Ventures is worried about the mental health impacts of regular lockdowns. James Alcock

“The uncertainty generated through lockdowns in industries such as the tech sector could be substantially reduced by the government partnering with tech leaders and corporates to create a vision during the crisis period. This just hasn’t been done.”

AirTree Ventures co-founder and general partner Daniel Petre agreed that the lack of consistent approach to COVID-19 lockdowns across states was terrible for businesses, but said he was most worried about the damage the mismanagement of the vaccination stage of the pandemic was doing to the people working within companies.

Australia must learn from COVID-19 and prepare to handle similar future problems in a less socially destructive manner.

“The economic impacts of lockdowns are there for all to see, but what is less obvious is the damage to people’s mental health that the anxiety over the virus creates,” Mr Petre said. “Coupled with the economic impact and social isolation, it is a perfect storm to fuel significant and long-term mental health issues.

”I think the big lesson from COVID-19 is that lockdowns obviously save lives but need to be used sparingly – only when there is no other easy way to keep the community as a whole safe.

“COVID-19 is a perfect test for the next, and possibly more contagious and more deadly, virus. We need to get ready for the next one, which means spending more R&D on medical research, early integration of local manufacture of all types of vaccines, and multiple, at scale, purpose-built quarantine facilities that are geographically remote from population centres.”

Read More