The companies that will drive global economic growth over the next decade will be technology companies, many of which do not yet exist. The key question for Australia is whether these companies are home-grown (in which case Australia stands to benefit from their economic impact).

The scale of economic impact being made by technology companies can be seen in many countries, including the US, where five of the top six companies by market capitalisation are technology companies - Apple, Microsoft, Amazon, Alphabet (Google) and Facebook. The combined value of the top two, Microsoft and Apple, is $3 trillion, larger than the combined value of the entire ASX at roughly $2.1 trillion.

The companies that capture the economic value in the industries of the future will be those that are able to implement technology and business model innovation faster and more effectively than their competitors. The losers will be startups that are constrained by inexperience, lack of technical skills, lack of capital or uncompetitive regulatory environments.

Given the speed at which technology is pervading every industry, Australia has no choice but to embark on an economic transformation in which it actively develops an environment that is conducive to the creation and growth of technology-based businesses that are capable of competing on a world stage.

A commonly expressed view in Australia is that startups don’t create large numbers of jobs and therefore have limited impact on the broader economic prospects of the nation. Notwithstanding the evidence we’ve already identified suggesting this is untrue, this view also fails to take into account the fact that formation of startups is not an end- point in itself, but a necessary step in creating large, globally significant, sustainable companies that drive economic growth and prosperity, and create large numbers of high-value jobs. These companies are, by definition, startups in their early years. Some of the most valuable firms in the world were startups just a decade ago.

This misconception has arisen in Australia partly because we have very few examples of technology companies that have gone on to achieve substantial global growth and create large numbers of jobs. That perception may be gradually shifting as more successful Australian tech firms become part of our narrative.

Many emerging startups remain private companies for significant periods before listing. When Facebook listed on the NASDAQ in May 2012, it debuted at a market capitalisation of US$104 billion (about the same as the present-day valuation of Australia’s largest company, Commonwealth Bank). Yet even here, the value of high growth technology companies is evident - Facebook has since grown at a remarkable rate, boosting its market cap to around US$530 billion.

Mapping the existence of high-value, privately held companies can provide a strong indicator of a flourishing tech sector. Here, too, Australia is starting to improve, according to data from CB Insights (Figure 18). Over the last two years, Australia’s burgeoning ecosystem has begun to add high-value businesses to this list for the first time. In 2018 Canva joined the club, and in 2019 was joined by Airwallex and Judo Bank. A handful of other Australian tech firms are likely eligible, but haven’t had a valuation event. Over the next three years StartupAUS estimates 5-10 Australian companies are likely to be added to this list.

crossroads 2019 WEB Charts Figure 18