The state of innovation – Western Independent

A suitcase, a shaky shareholders agreement, and a head full of ideas.

That’s all 23-year-old Chilumba Machona had when he packed up his life in Zambia in 2019 to fly halfway across the world to Perth, pursuing a startup idea three years in the making. Sponsored by an Australian investor he’d interacted with over Zoom and buoyed by the promise of funding and fresh co-founder energy, Machona felt his agritech app was ready for its next stage of growth. 

“In my head I thought I was young and it was such a good deal,” he reflects, subdued but amused.

“I just packed everything up and went to Australia the first chance I could without any security or contract of any sort.”

The entrepreneur and self-described ‘Chief Technology Optimist’, now 26, is slow to open up about his first business failure. Despite a $10,000 USD loan from his parents, a newfound business partner to fund his operations and what he describes as obsessive 14-hour days, the venture ultimately folded earlier this year. 

“Almost every day looks like a good opportunity to jump ship,” he says of his chosen career.

“But I don’t think I regret it, to be honest. I’m pretty happy I did what I did.” 

Far from quitting, Machona is now eight months into his second startup, this time with a dedicated team aspiring to help customers grow plants and crops through software and technology. 

He belongs to a growing movement of young people eschewing traditional corporate careers for a shot at creating impact and change through entrepreneurship. It’s a coalescence of unlikely factors: a state government looking to diversify its economy through innovation, shifting attitudes towards “meaningful work” and economic conditions rife with uncertainty. 

It also substantiates recent findings from a McKinsey study indicating 31 per cent of employees would leave their job due to a lack of meaningful work. Given the uncertainty of the past three years and looming financial insecurity, some Gen Z workers are deciding — as an article from The Observer titled “I’m gonna have to make my own money” points out — entrepreneurship may be the way to take control of a financially independent and socially-conscious future.  

Unfortunately for startups in Western Australia, the cost of failed innovation can be staggeringly high. 

For Machona, the question of whether to pay himself or his company first sometimes put him between a rock and a hard place. 

“If I had to convert the number of unpaid hours I spent [on my first startup]…it sounds kinda silly but for six years of work that’s almost $300,000,” he says. 

“I spent a lot of money from my savings on research in the beginning, which I didn’t get paid for. Looking back, I only got paid for the first three months.”

The valley of death

Data from the Australian Bureau of Statistics indicates that small businesses – those employing less than 20 people – represent 97 per cent of all businesses in WA. Of those, less than half survive beyond their first five critical years of operation. 

Complicating this insight is the fact that not all small businesses are startups, so in reality there’s no accurate statistical measure of just how well WA startups are faring, especially in the wake of COVID-19. The more often quoted figure from Startup Genome’s 2022 Global Startup Ecosystem Report puts the failure rate of startups at around 90 per cent — because the so-called “valley of death” acts as a filter for bad ideas. 

The death valley curve (pictured below) describes the critical pre-revenue period in a startup’s early life during which founders burn through their initial cash investment in the hopes of proving their business model. But 90 per cent don’t make it past this phase.

While Australia’s decision-makers are yet to arrive at a standard definition for what constitutes a ‘startup’, the generally accepted approach from peak body StartupAUS focuses on their high growth potential and use of technologies for disruptive innovation — all within operationally and financially lean models. “Fail fast and fail early” is the motto most entrepreneurs learn to live by.

So, funding innovation becomes a paradox of inefficiency: without failure, the million-dollar idea may never precipitate. How do policy makers make sure funds are effectively allocated?

Funding complexity

The push to diversify WA’s economy beyond its resources sector dependency has been a defining element of the state’s approach to innovation policy.

Current state government support for early stage innovators comes in the form of a $16.7 million New Industries Fund announced late last year. It’s a four-year funding package nested within the state’s broader Investment Attraction Fund, worth $180 million. 

But if the intention is to generate catalytic support for startups, WA’s peak body for impact investment and social enterprise is unconvinced the data currently exists to ensure impact is occurring where it’s being promised. 

“I think a lot of investment often focuses on individual initiatives or jobs and growth,” says Impact Seed Founding Director Kylie Hansen. 

“I don’t think it’s sophisticated in terms of the levers that actually drive innovation. 

“We don’t just innovate for the sake of innovation — we innovate for some bigger purpose. Just measuring the stuff we’re doing doesn’t help measure the impact we’re trying to have. 

“I don’t think we’ve had any meaningful work done on impact yet.” 

While the complexity of WA’s current innovation funding may feel underdeveloped in comparison to the eastern states, Hansen is optimistic about the direction the state is heading towards in terms of collaboration and shared measurement.

One example is the Dealroom WA data platform launched by the state government through the New Industries Fund in September to begin mapping out the entire innovation ecosystem for public viewing. The real-time dashboard hopes to act as a central hub of information and resources for startups, innovators, investors and policy makers to engage with each other.

And after a decade of growth, appetite for increased collaboration across WA’s innovation ecosystem is growing. 

Catalytic funding for early stage ideas, coworking spaces and educational “accelerator” programs enabled through Spacecubed and Lotterywest’s Innovative Society Initiative are organic indicators of the community’s excitement for enhanced entrepreneurial activity. 

Despite this, veteran players who have been around since the beginning to witness the bloom in startup activity know the challenges most budding entrepreneurs face today are fairly similar to ten years ago.

Curtin University Director of Executive Education Steven Brown, head of the university’s well-reputed Ignition incubator program, says the task of nurturing early stage innovators through the precariousness of ideation and successful scaling is critical to fostering a healthy environment for innovation. 

“In some respects, WA can be a difficult place for innovators and early stage entrepreneurs because we don’t get the same level of funding compared to the eastern states per capita of the population,” he says. 

“But until you come in and see the diversity of ideas, you don’t really appreciate the passion people have in such a range of different and broad areas.

“For a lot of them, their goal is to give back — to solve a social problem. It’s not so much about starting a business and making millions as much as it is about them doing something they’re really passionate about.” 

Failing fast, failing early

Amid the excitement ruffling the waters of innovation across WA’s startup and social enterprise community, many people will be looking with keen interest to see where the Department of Jobs, Trade, Science and Innovation’s updated innovation strategy leaves them.

In the meantime, the future of the state’s startup community is being proactively built up through meetups, coworking hubs and community F*ck Up Nights designed to share the lessons learnt from the failures built into the entrepreneurial journey. 

Perth-based 23-year-old James Audcent knows this, because he’s gone through seven startups and counting on his pursuit of making a difference through business. 

“I think one of the hard things we have to unlearn as we go through university and school is that failure isn’t a bad thing,” he says, admittedly sheepish as he recalls the opportunistic glamping business that once formed part of his portfolio of work. 

“That’s particularly important in the entrepreneurship space where you have to see failure as learning, because that’s what it is.”

The data science and computer science graduate now funnels his efforts into one endeavour: a consultancy-type startup hoping to leverage the skills of passionate tech talent for not-for-profit impact. It’s seen him attend this year’s Curtin Ignition program, as well as score a guest speaker invite to this year’s F*ck Up Night event in Perth. 

Mr Audcent’s certainly no stranger to failure. 

“If you’re releasing something into the world and you’re not a little embarrassed by it, then you’ve spent too long on it,” he says.

“So it’s always — how do you reduce the time it takes to learn, with everything you do, rather than making it perfect? Because perfect is never perfect.” 

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