By Demetrio Zema, Founder & Director
It seems odd to think of Australian entrepreneurs and startups – let alone any business community – as an 'ecosystem'.
Defined by Merriam-Webster as “the complex of a community of organisms and its environment,” ecosystems are typically associated with broader biological communities, such as the Great Barrier Reef. By giving the term a specifically-human business context, the international startup community has been criticised for generating yet another ‘buzzword’ or ‘hashtag’ devoid of substance and meaning.
But these criticisms do not reflect reality, at least not in Australia.
Just as ‘ecosystem’ can describe biological communities, it can also describe a sufficiently interconnected startup community. In a functioning startup ecosystem, individual startups can have an influence on the rest of the system by creating patterns of behaviour that streamline the transaction of ideas, talent and capital throughout that system.
No current analysis of the Australian startup community could be complete without reference to the recently released Startup Muster’s 2017 Annual Report (the Report). The Report is based on comprehensive research gathered from over 2200 founders, aspiring founders, and people and organisations who support Australian startups.
Read in light of my own experiences founding a law firm dedicated to support startups and entrepreneurs, the Report reveals the undeniable reality: there IS a startup ecosystem in Australia, and it is an ecosystem that is diverse, growing in size, and in dire need of legal skills and assistance.
Diversity was a theme of the Australian startup landscape that really stood out in this year’s Report. In any ecosystem, diversity of actors drives competition and collaboration, and in-turn benefits the entire community by creating more efficient patterns of behaviour.
The Report highlighted diversity in areas including sex, culture, and age.
Women have championed this diversity with their steadily increasing business involvement. We celebrate that the share of Australian female founders has grown from 16.1 to 25.4% since 2014.
Cultural diversity is also heavily reflected. The Report identifies that 35.7% of startup founders were born outside Australia, and one in six startups have at least one employee on a working visa.
A final element to this story of diversity is the large spread of age groups involved in founding startups. Contrary to the popular stereotype of young uni grads working out of their parents’ basements, the Report found that the majority of startups are founded by individuals aged between 35 and 40 years. However, this group only represented 21.7% of founders, and was not a decisive majority.
There is no better indicator of an ecosystem’s functionality than growth, and an ability to ‘fill the gaps’ where the current infrastructure is lacking. The Australian startup community is on the rise, backed by increasing numbers of first-time founders and mounting support from the private and public sector.
The Report found that 59.1% of startup founders in 2017 were first-timers, up almost 5% from 2016, and an incredible 72.5% of future founders have never begun a startup before. Along with the growth of the sector, individual startups themselves want to grow and scale, with most Australian founders planning to undertake capital raising over the next 12 months.
More telling still is the private sector support that has crystallised around and within the startup ecosystem in response to the immense demand. The rise of co-working spaces is just one example of this – in 2017 48.8% of startups were operating out of spaces such as Gravity, River City Labs, WeWork and Fishburners. Other prospering examples include startup legal services (e.g. us!) and accounting services (e.g. our numbers friends over at Vital Addition).
Still don’t believe there’s a growing startup ecosystem? You know things are getting serious when the public sector gets involved, and Australia has seen government support across national, state and local levels. For example, the Queensland State Government announced its Advance Queensland initiative in mid-2017, committing $420 million over four years to foster innovation and growth. The Report confirms that this support is reaching the startups in need, with 29.2% of startups having successfully received a grant or scholarship.
The results from Startup Muster’s Report reflect the demand we see every single day for legal support for startups. In fact, founders identified legal assistance as the third most beneficial thing for their startup, behind only mentorship and co-working.
In addition, founders considered themselves least competent in legal skills, with only 6.7% of founders considering themselves ‘strong’ in this aspect. Moreover, 24.8% of founders identified legal assistance as a ‘need in the next 6 months’. It seems clear from these results that of the many ‘hats’ worn by startup founders, the hat of a legal expert sits least comfortably.
Solutions to the legal gap have been generated through the revitalisation of the legal industry from within the startup ecosystem. A range of startup legal service providers have arisen, providing this growing community with greater accessibility to legal knowledge and a more human approach to legal assistance.
But there are still gaps, and we see many startup owners taking a casual approach to their legal affairs, opting for DIY alternatives such as copying-and-pasting other websites’ privacy policies or terms and conditions, or using online legal document generators. This is reflective of the blaze-your-own-path trend of startup owners, and of the pressures of time and money faced by all founders (indeed, according to the Report, the second most suggested book for startups was ‘no books’). However, these DIY alternatives should be approached with caution, and, if in doubt, you should engage a lawyer.
The Startup Muster 2017 Annual Report shows that the Australian startup landscape is diverse, growing, and in dire need of legal skills and assistance.
These elements prove the reality of the existence of a startup ecosystem in Australia, beyond mere buzzwords. Patterns of behaviour have emerged that enable individual startups to have an influence on the rest of the system by streamlining ideas, talent and capital. New startups will emerge to fill the gaps as needed, as shown by the private sector growth and the entrance of startup law firms on the market.
So, like any thriving ecosystem, the Australian startup ecosystem will continue to work together to grow and to overcome challenges for mutual benefit.
At Law Squared, we partner with passionate entrepreneurs and businesses who need our technical help and expertise. We’d love to have a chat with you, so feel free to drop us an email firstname.lastname@example.org
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