Kickstarting Aussie Startups - Stock Options

This is the fourth post in a series on kickstarting Aussie startups. The first post is here.

In my previous posts I focused on how the government can encourage investors to back startups through some relatively straightforward taxation and policy changes. In this post, I'm switching tacks and focusing on ways of incentivizing employees in startups.

Traditionally, incentive stock options have been the most flexible and tax-efficient way to incentivize employees. Options give employees “skin in the game” without incurring tax liabilities until they are exercised and (presumably) worth something. At least, that is the way they are supposed work. Unfortunately, Australia’s tax treatment of stock options is now amongst the most backward and punitive in the world. Since the tax changes that came into effect on 1 July 2009, Australia taxes options at the time of their granting. Given that options typically come with restrictions, for example, vest over several years and cannot be traded until exercised, this means employees are being taxed for gains that they may never even realize! Suffice to say, this removes a key incentive for employees to join startups.

That said, private (unlisted) companies can find legal workarounds around these restrictions, but quoting Scott Farquhar, the co-founder of Atlassian:

"It's very difficult; just the legal and the tax structures that you have to set up in Australia took us hundreds of thousands of dollars in legal fees and tax advice and so forth ... whereas if you go to the States it's a relatively simple document that's pretty standard that everyone signs and it might cost you two or three grand in legal fees.”

This is definitely not the kind of financial outlay that your average startup can afford!

Further, public companies have no such recourse and, as a result, have stopped issuing stock options to Australian employees. Instead, restricted stock has become the chief means of incentivizing employees in public companies. Unfortunately, restricted stock lacks the flexibility of options since, under the current tax regime, employees incur a tax liability at the time of vesting. Invariably this forces employees to sell shares to cover their tax liabilities. Everyone loses in this model. The employee loses “skin in the game” and the Australian Tax Office (ATO) loses tax receipts on future capital gains. In addition, 3 years and counting and there is still no clear guidance from the ATO to confirm whether it is even permissible to allow vesting of restricted stock with time frames of less than one year, e.g., quarterly vesting.

Proposal 4: Tax stock options upon exercise

Defer taxation of stock options until the point of exercise and mandate that employers withhold the income tax. This simple approach, which works well in the US and the UK, requires minimal administration by the employer and minimal risk to the employee. There are no loop holes and no potential for rorting, and it preserves maximum revenues for the government (albeit deferred). Finally, it works for startups and multinationals alike.

Let's put the incentive back into incentive stock options!

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Dreaming of a Silicon Beach

It goes without saying that technology has changed a lot since my student days at Brighton High School in Adelaide. Today, it seems like every teenager has a smartphone. In many schools, both public and private, every child is given a laptop to use. The tools for learning and creating are now more accessible than ever.

Yet despite having these tools, our students and our country risks remaining the consumers, rather than becoming the creators, of technology. In short, it’s the difference between usinga smartphone, and creatingan app that reaches millions of people. At Google, we believe education is what will unlock this potential and that’s why we believe there must be a greater focus on science and maths education in Australia.

As an employer of hundreds of engineers in Australia, Google has a front row seat in the area of computer science. Right now, we’re seeing too few Aussies studying computer science, resulting in a workforce lacking a key skill.

A recent reportby our nation’s chief scientist Ian Chubb, also showed that university graduation rates in maths, engineering and science are low by international standards. When it comes to high school, OECD testing shows our students are stagnant in maths and slipping in science.  

This is not only a problem for Google and industry, but also for Australia’s future prosperity. Digital technology is a proven driver of economic growth. Over the next five years, the internet economy in Australia is likely to grow by $20 billion. That’s represents a growth rate twice as fast as the economy overall.

Of course Google benefits when more people want to become computer engineers, but science, technology, engineering and maths education are the building blocks to a whole range of industries such as healthcare, finance, manufacturing, energy and resources. These skills are vital to our innovation economy and essential if we’re to become a nation of creators.

Supporting teachers is central to fixing this problem, yet our education system has not caught up. For example, computer science education is currently piecemeal. Some schools don’t offer classes at all, and when they do, it’s left to under resourced but passionate teachers to pick up the slack.

On our part, we at Google recently announced funding of nine universities across Australia and New Zealand to deliver free computer science training and workshops to high school teachers. The Computer Science for High Schools program takes the “teach the teachers” approach and recognises that professional development for teachers to keep up with new technology are insufficient.

As a technology company, we believe in the power of the web to help people discover, connect and learn. Australia can be home to a Silicon Beach of innovation, but for that to happen we need an educated workforce who have the right skills for the future.

Originally posted as an AFR opinion piece.

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Kickstarting Aussie Startups - Crowdfunding

This post is the third in a series on kickstarting Aussie startups.  The first post is here.

“Crowd funding” is a new way for startups to raise funding from smaller investors who do not qualify as so-called “sophisticated investors” and would otherwise be ineligible to invest.  President Obama's “Startup Act” proposes a crowd funding model that allows businesses to raise up to $1 million a year using regulated online investment platforms that permit smaller investors to participate in capital markets offerings. The US SEC would be tasked with providing protections to investors who would be limited to investments of no more than $10,000 or 10% of annual income.

Opportunity #3:  Leverage Australia’s broad investor base

Australians are avid investors in the stock market, and have among the highest per-capita ownership of shares in the world. We also have small business trading platforms, such as ASSOB, but such platforms do not favour unsophisticated investors.  That is because companies seeking investment are still constrained by the so-called “20/12 rule", which allows only $2m to be raised over any 12 month period from a maximum of 20 retail investors (specified under Section 708 of the Australian Corporations Act).

Proposal # 3: Crowd fund Qualified Small Businesses

Relax the 20/12 rule to enable crowd funding of Australian Qualified Small Businesses (QSBs). This would enable ordinary Australians to make investments in startup companies, within reasonable limits.  For example, along the lines of the proposed US guidelines, investments could be limited $10,000 per investor or 10% of annual income.

Imagine what we could do with a whole nation investing in startups?

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Kickstarting Aussie Startups - Tap into Super Funds

This post is the second in a series on kickstarting Aussie startups.  The first post is here.

Opportunity #2: Superannuation

Australia has over a trillion dollars in superannuation funds, the 4th largest retirement funds industry in the world, and way more per capita than any other developed country

Yet almost none of that capital is invested in startup companies.

Proposal #2: Put Super into Qualified Small Businesses

Mandate that Australian super funds invest at least 0.5% of their assets into Australian qualified small businesses (QSBs), either directly, or indirectly via venture capitalists.

Details, details

Although 0.5% is a tiny percentage, it represents $5 billion, dwarfing the amount of venture capital currently available in Australia. It would obviously take a few years to ramp from $0 to $5 billion. Investing $500 million per year for 10 years seems achievable though.  Imagine funding $1 million to 500 new startups every year.? Even so, that's only one new startup per year for every 44,000 Australians.  How hard can that be?

Next time, “Crowd funding”.

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Kickstarting Aussie Startups - Qualified Small Businesses

Succeeding as an entrepreneur can be difficult at the best of times, and doing so Down Under can be doubly so. Firstly, there are the tyrannies of distance and a smallish population that we all learned in school, i.e., limited domestic market, limited access to capital, and remoteness from global markets, etc. Secondly, there are those vestigial "cultural inhibitors", such as Aussie poppy-lopping tendencies and the abuse paid out to failed entrepreneurs. Last, but not least, there are few tangible incentives for investors to back Aussie startup companies over conventional investments. 

Helping startup companies to succeed should be one of our top national priorities though. In that spirit, I’d like to offer a few suggestions that could make a real difference to kickstarting startup activity in Australia, heavily influenced by my years spent in Silicon Valley.

Opportunity #1 
In Australia there are no general tax incentives for investors to invest in small businesses .

Over the years there have been some specific incentives limited to particular industries, such as the film industry. More recently, the Clean Energy Finance Corporation (CEFC) was set up by the Australian Government to encourage investment in clean technology. Specialized programs can be useful, but they limit the pool of investors and they require governments to pick winners - neither great!  As a consequence, many investors in Australia have traditionally tended to  go with safe conventional investments, such as property or mining.

In contrast, US tax law defines a class of business, known as qualified small business (QSB), for which there are tax breaks to encourage investment. Section 1045 of the US tax code allows taxpayers (other than corporations) that have held stock in a QSB for more than 6 months to defer the gain on the sale of such stock if they reinvest the proceeds of the sale in another QSB (within 60 days of the sale). This is a very good incentive to encourage investment in startup companies (although the 60-day provision is usually way too short to identify and invest in another company.) 

The UK took a different approach recently with the introduction of their Seed Enterprise Investment Scheme (SEIS), which encourages investments into startups by offering a straight 50% tax break to those investing up to £100,000, regardless of their normal tax rate.  It is more generous than the US QSB scheme in that it enables tax relief in the tax year that the investment is made, but it has been criticized for having unwieldy rules that discourage regular retail investors though.

Proposal #1

Implement an Australian QSB model, implementing the best of the US and UK models.  For example, extending the re-investment rollover grace period to at least 1 year makes sense. Also, allowing some upfront tax breaks is desirable, although it is not clear that they need to be as generous as the UK SEIS model. The key thing is to provide general incentives to encourage investment in startups that are not limited to specific industries.

Next time, “Tapping into Super Funds”.

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Nothing Ventured, Nothing Gained

In amongst all the technical workshops at yesterday’s Google Developer Day in Sydney was a panel discussion on venture capital and entrepreneurialism. Getting an idea off the ground takes as much business judgment as it does technical know-how, so we brought in a few experts that have been around the block with a start-up or five.

Rebekah Campbell, founder of Posse told us how it took one-and-a-half years and “more than 1000 meetings” to raise enough money to get her idea off the ground. She talked about the various forms of funding sources, such as government grants.

Many in the audience asked Mick Liubinskas, co-founder of Australian angel investor group Pollenizer, about the do’s and don’ts of attracting investment. His advice? Do be stubborn about sticking to your vision. But don’t wait forever to launch. A fast launch is essential to testing your idea or concept. And don’t be so inflexible to not consider a different approach.

Scott Farquhar from Atlassian told us about the importance of keeping focus and how making lots of mistakes are okay (such as opening up, and then quickly closing, a New York office after realising it was in the wrong place). Just make sure the mistakes aren’t fatal ones, he says.

What came out strongly in the session is that you need to take the leap and not be afraid of failure. While Australians celebrate success, we do not do so well at embracing those who tried and failed. Business people who lead failed companies are too often tainted with innuendo of wrongdoing, when we should look to them as pioneers who can bring wisdom to their next venture. At Google we say: “fail fast and iterate.” We cultivate an environment where failure is fine, as long as you do it quickly and learn from it.

Behind most people’s stories of commercial success are often a history of start-ups which didn’t go the way they intended. Just ask Pollenizer’s Mick, who has worked on 150 businesses - not all of them hitting the mark.

At the event I asked how many people in the room wanted to do a start-up one day. Three-quarters of the 100+ crowd put up their hands. So the good news is that there’s certainly no shortage of budding Aussie entrepreneurs wanting to give it a go.

Originally posted on the Google Australia blog

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You cannot innovate without failure

Australia has had mixed success when it comes to being a nation of innovators. A recent federal government report concludes that while Aussies are great at incremental innovation - which primarily means adapting overseas innovations - we fall behind when it comes to creating our own opportunities and bringing new things to an international marketplace.

Our bias towards incremental innovation is nothing to be ashamed of. Australia's resource and agricultural industries are some of the most competitive in the world due to our ability to improve existing technologies. And despite our country's size, we are blessed with the people, education and capital to foster success. So if it is not resources that are holding us back, is there something about our culture that discourages that big-picture thinking?

From my experience, what may be holding us back from innovation is our attitude towards failure. It might sound counterintuitive, but big innovation and failure are intimately intertwined. Any innovation is essentially a market experiment and as with any experiment, it carries considerable risk and high failure rates. Innovators in America, and particularly Silicon Valley, understand this only too well.

“A distinguishing characteristic of the US economy, of US culture, if you like, is failure is never permanent. You're not kicked out of the game,” said Harvard professor and an expert on entrepreneurialism, Bill Sahlman.

“As a matter of fact, if you are part of a failed venture, as long as you didn't lie, cheat or steal, you're considered 'experienced'.”

While Australians are comfortable with success, we do not do so well at embracing failure. Australians can be harsh on entrepreneurs who try and fail. For example, business people who lead failed companies are too often tainted with innuendo of wrongdoing, even if there is no proof of doing so. The moral taint of trying and failing in Australia is high, and because you cannot innovate without failure, many great ideas do not even get off the ground.

Recently, I was asked to fill a questionnaire in order to join an Australian advisory board. Of the 10 questions I was asked, there were multiple ones about whether I was involved with any companies that had gone into bankruptcy or receivership. Having spent years in America where being part of a dot-com bust was worn as a badge of honour, the contrast in having to disclose bankruptcy or receivership like a criminal record, rather than as an opportunity to talk about experience, was stark.

In that environment, why would would any Australian university graduate want to pursue a start-up and risk a career that has not yet even begun? As a culture we need to embrace failure as much as we embrace success.

The publication of Steve Jobs' biography revisits the time when he was pushed out of Apple - a company he co-founded. It was no doubt a difficult time for the entrepreneur, but instead of being tainted by this perceived failure, he was able to use that experience to move on and eventually rejoin the company, building it into the success it is today.

If you look into the history of many innovators - past and present - you will often find similarly rich examples of failure being a pit stop on the way to great success.

At Google, an appetite for failure is built by the way we do things. We are in an incredibly competitive industry and you need to keep innovating or you will become irrelevant to users and the market. How we deal with that it is through our culture of innovation, staying agile, taking risks, tolerating failure and learning from every mistake.

Google Wave, a product that tried to reinvent the way we collaborate, was developed by the Australian engineering team. While it didn't work out as a standalone product, the experience gave us a new understanding of how people use technology to collaborate. Many of the features we developed for Wave can be found in other Google products today.

Failure doesn't have to be expensive, it can be cheap and fast. At Google we have a saying: “Fail fast and iterate.” This is something we need to train all entrepreneurs to do. This creates an environment where people are encouraged to tackle large problems and take those big bets. If you have a work culture where bringing your mistakes to the table every week is a normal thing to do, it feels less like failing and more like learning.

The upside is that it has never been a better time to innovate. For Australians, the internet has made the tyranny of distance almost irrelevant and opened up a global market for our ideas.

Last month Julpan, a company founded in New York by an Australian-educated engineer, was bought by Twitter for an undisclosed sum. The fact that the company was only one-year-old shows how great ideas can quickly have enormous reach. While there are other reasons why start-ups like Julpan choose to head abroad rather than stick around and grow locally, they all point to a less than optimal culture on innovation.

Australia has the smarts to become a hotbed of innovation. We just need to create an environment where it is OK to take the risk.

Originally posted as an SMH opinion piece.

PS: I chose this image for this post because I think these words are good advice for any entrepreneur.

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The race that stops a nation starts online search trends

If the number of Google searches a horse gets is an indicator of our favourite for the Melbourne Cup, then “Americain” is racing ahead.

In yesterday’s search analysis of Melbourne Cup horses, Americain took the lead in the rankings, but a number of other thoroughbreds were galloping closely behind including, “Jukebox Jury” and “Dunaden”.

As we know, race-day fashion can draw almost as much attention as the race itself. Online searches for fascinators have increased consistently with online searches for the Cup. There have been more searches for the fashionable headwear throughout September and October than any other time of the year, but surprisingly, hats top the number of searches for headwear, including a dramatic rise in the search for men’s top hats.

In Google Image searches, Melbourne Cup fashion was in the lead until the final horses were confirmed. Over the weekend and today Australians have been searching for images of the horses they will put their money on.

As for who’s searching for the Cup online? Interestingly, the ACT beats out Victoria in terms of regional interest in the Melbourne Cup, followed closely by Western Australia.

A number of celebrity guests have been rumoured and confirmed for cup day. In order of the most searched this month here are some of the expected famous faces:

1. Kim Kardashian
2. Leonardo Dicaprio
3. Dita Von Teese
4. Sarah Jessica Parker
5. Cadel Evans

Happy Melbourne Cup day from Google Australia!

Posted by Kate Mason, Google Communications, Australia and New Zealand.

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What's killing Australian innovation?

Last week I had the opportunity to speak at the Festival of Dangerous Ideas held at the spectacular Sydney Opera House. My co-panelists were Martin Rogers, biomed entrepreneur and founder of Prima Biomed, and Prof Alec Cameron, Dean of the Australian School of Business. Our topic: “What's killing Australian innovation?”

My view is that the future of innovation in Australia is neither as dark as that topic suggests, nor is it all sunny. A recent Federal Government report concludes that we’re very good at incremental innovation, which essentially means adapting overseas innovations. Yet despite being blessed with ample talent and capital, plus a reasonably strong education system, Australia produces relatively few global innovations. Arguably, countries with much smaller populations, such as Finland, Switzerland, Israel, and Taiwan, have performed much better. 

So what’s holding us back then? 

From my experience, what may be holding us back from achieving our innovation potential is our attitude towards failure. It might sound counter-intuitive, but big innovation and failure are intimately intertwined. All innovations are essentially experiments which carry the prospect of failure. Innovators in the US, and particularly Silicon Valley, where I lived for 16 years, understand this only too well.

Sadly, Steve Jobs, one of the greatest innovators of our time, passed away yesterday. I watched his 2005 Stanford University commencement speech (well worth the time) in which he describes how “failure” has shaped his life for the better. In particular, his getting fired from Apple, the company he founded, liberated him to think afresh, and start, not one, but two new companies, Next and Pixar.

Australians love success, but we hate failure. As a result, we can be very harsh on entrepreneurs who try and fail. Yet if you look into the history of many innovators, just like Steve Jobs, you will find many examples of failure being a way point on the road to success.

It’s high time we started to embrace failure as much as we embrace success.

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Broadband pays

New research released by Ericsson, Arthur D. Little and Chalmers University of Technology today shows that doubling a country's broadband speed boosts its GDP by 0.3%, and that the benefits accrue with subsequent doublings.

What does with mean for Australia with its trillion dollar econonmy ($1039B in 2009, $925B in 2010)? According to Measurement Lab, the median download speed in Australia is a mere 4.23Mbps. This means that Australia could double its broadband speeds four times (4 -> 8 -> 16 -> 32 -> 64Mbps) and still be under the 100Mbps download speeds that the National Broadband Network (NBN) will deliver. Such a 16-fold increase in broadband speeds would amount to ~1.2% of GDP growth stimulus, or ~$12B per year. If so, the $43B NBN would pay for itself in under 4 years. Even a modest 0.5% increase in GDP (~$5B/year) would pay for it within a decade.

For those of you still wondering what we're going to do with all that bandwidth, take a look at this chart plotting TV image resolution by year.

This shows the evolution from the original 405 line system in 1936 to 1080p in 2004, a 10-fold increase in image size from 0.2 Megapixels to 2 Megapixels (data here).  What's interesting is that the real action has happened in the last decade, with the advent of high definition (HD) TV, first 720p and more recently 1080p. Further, the TV/video industry is hardly about to stop innovating any time soon; the next standard, is likely to be so-called "4K" with whopping 12 Megapixel images!

And video will be just one of many applications that benefit from faster broadband.

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Creative Australia is online

Today, any Australian with a little motivation can create content and upload it for global distribution. For the first time in history, we all have a global broadcast platform at our fingertips: the internet.

The ability to broadcast ourselves, as individuals, was far, far out of reach for most of us for a long time. But today is a very different reality. So have you ever wondered what Aussies are doing, now that the tools of content production and distribution are in their hands? We have. So we got together with others in the digital space to take a look at just that.

Together with ninemsn, Yahoo!7, AIMIA, the Games Developers Association of Australia and the Interactive Games and Entertainment Association, we identified some examples of creative Australians producing great content for online distribution. This showreel includes just some of them like video blogger Natalie Tran, Christiaan Van Vuuren (better known to the YouTube audience as “The Fully Sick Rapper”) and like Keith Loutit’s time-lapse work.

Digital platforms are witnessing an incredible growth in the number of talented Australians producing content. Together, they are getting Australian stories out to Aussies and the world.

Posted by Ishtar Vij, Policy Counsel, Google Australia

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Smartphones at the dinner table? Smartphone trendspotting down under

Here’s a question for all of you smartphone owners out there: If someone asked you whether you’d rather give up your phone or your TV, what would you say?

Earlier this year, Google teamed up with IPSOS Research to learn the answer to this exact question (and many others) by asking 30,000 people in 30 countries about how they use their smartphones, and where (on the bus? at the office?). It’s the first time anyone has asked this many people the same questions, for free: that means we can compare and contrast behaviour and trends across different age groups, different cities, and even countries.

So what did we learn about Australia? To start with, those of us at Google Australia were particularly proud to discover that Australia has the second highest smartphone penetration in the world -- ahead of the US, UK, and Japan. This is a recent achievement for the land down under. The majority of smartphone owners we surveyed had bought their device in the preceeding 12 months, which means that Australia went from lagging to leading the worldwide smartphone revolution in just one year. We estimate that each month, 1-2% of the entire population of Australia buys a smartphone.

Here are a few other fun facts we found when we took a look at the numbers:

• Not just on the go: You may think that your smartphoneis an “on the go” device, something you can use to kill time in line at thegrocery store or check email on the train. But our survey found that 81% of Australians used their smartphones at home during the past 7 days--compared to just 66% on the go. Nearly 1 in 2 use their smartphone while watching TV, while 1 in 3 use smartphones and another Internet-enabled device at the same time.
• Smartphones are good for business: 49% use their smartphone to research and then call businesses--while 45% visit a business they’ve found using their smartphone.
• We can now indulge our obsession with real estate 24x7: 1 in 5 Australians we surveyed had looked for an apartment or house with their smartphone--a figure 33% higher than the US or UK.
• Search is big on smartphones: 2 in 5 of Australian smartphone owners use mobile search daily--more than the UK or Germany, and almost as high as the number who use desktop search daily.
• Apps, apps, apps: our Australian survey respondents had 25 apps on average per smartphone--that’s versus 23 in the US & UK. They’re not just free apps, either; Australians averaged 8 paid apps per phone.
• And now, the answer we’ve all been waiting for... 1 in 5 Aussie smartphone owners would rather give up their TV than their smartphone.

So what does this mean (aside from smartphones at the dinner table)? First, Australians are buying more smartphones, faster, than the rest of the world--and they’re using them more, too. Second, as more and more of us embrace the smartphone revolution, we’ll be watching more videos, searching for more businesses, buying more apps, and sharing more via mobile. In other words, there are a host of new opportunities for developers, web publishers, video creators, retailers, and advertisers to build and grow their businesses on mobile.

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If you want to learn more, stay tuned: we’ll be making our global survey results public, in their entirety, for everyone who wants a closer look at the global mobile revolution.

Posted by Jason Pellegrino, Head of Mobile Ads, Google Australia and New Zealand

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Innovation and the importance of failure

Last night I was interviewed by Paul Barclay on Australia Talks on ABC Radio National on Google's culture of innovation and the importance of failure.  I could write all day about why failure is actually a GOOD THING (perhaps a future blog post), but here is the 4-minute audio version. The full show can be found here.

And while on the subject of innovation, I'll be talking at the Festival of Dangerous Ideas on the controversial topic of what's killing Australian Innovation at the Sydney Opera House on October 2nd.  Come along and join in the fun.

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Net speed the key to transforming lives

The web enables access and community at the touch of the keyboard: it's a radically democratic and inclusive technology. So what does unprecedented access to information and communications mean for Australia?

A BBC survey last year on attitudes towards Internet access found that Australians are among the most firmly convinced that Internet access should be a fundamental right, with 85 percent agreeing that this is the case. I believe that one of the key opportunities for Australia, now and in the future, is making smart and strategic investments in high-speed broadband. We need a world-class infrastructure to anchor our digital economy. Bringing super-fast broadband to people across Australia will open up huge opportunities for individuals, communities, and businesses.

One of the primary benefits of high-speed broadband is speed. But why does faster internet matter even more than the access we have already? The answer is this: speed drastically affects our experience of web sites and services. It turns out that we do much less online when internet speeds are slow. I know I get frustrated and leave, but even if you’re more zen than I am, traffic data shows that you will spend less time on websites when they’re slow.

According to Aberdeen Group, a one-second delay in website load time means that 11 percent more people leave a website than they would otherwise. Imagine how many leave after three or five or 10 seconds? This works in reverse, too; people spend more time on websites when they load quickly. We shrunk the Google Maps home page by 30 percent so it loaded faster; traffic was significantly more. All of these milliseconds and percentage points really add up to success or failure for businesses and website owners.

Access to broadband becomes all the more important as Australia’s companies move online and find new ways to do business and reach customers. Take, for example, livestock auction site Auctions Plus, which allows farmers to view, bid on, and transport livestock with the click of a mouse. This isn’t what usually springs to mind when we think of online shopping, but it’s a beautiful example of what the digital economy and high speed Internet access can mean.

In a country as big as this one, a site such as Auctions Plus makes a big difference to farmers, who can now buy stock from their smartphones in the back paddock and avoid a three or four day round trip to the stockyards. Or Sydney-based Freelancer.com, the world's largest outsourcing and crowdsourcing marketplace for small business, now with hundreds of thousands of customers around the world. These entrepreneurs have been turbo-charged by the Internet.

From health and education, to tourism and manufacturing, to resources and energy, companies who invest heavily in web technologies are statistically more successful. Small businesses who leverage the internet make up the digital economy: a platform for growth for the entire Australian economy.

There's yet another and arguably bigger opportunity where we can be pioneers and developers of this technology that will underpin future decades of economic prosperity. I believe that there's never been a better time to be in IT and to be an entrepreneur. Firstly, your audience is more connected than ever before. They are both looking for you, and are open to new opportunities to collaborate and connect.

We know that having a website, for instance, is as important as having a phone number in today's business landscape. Secondly, we now have unprecedented access to new platforms upon which to run businesses. Fifteen years ago when I founded NetMind, my first start-up company in Silicon Valley, we had to build everything. We developed almost all of our own software, built our own IT infrastructure, scaled our own servers and had no platforms upon which to monetise the business easily.

Now, in contrast you can re-use open-source components, outsource your infrastructure to a cloud provider and use online advertising tools with minimal time and money. Today, entrepreneurs can focus on the essence of their business and be very nimble: they can achieve global reach and really concentrate on the problems they're trying to solve.

I hope that budding entrepreneurs will be able to realise more and more great ideas enabled by technology. I'd like to see Australians in first place not to just take advantage of the products and services that stem from high-speed Internet, but also to be developing and commercialising them.

Fast broadband is a transformative and disruptive technology: in many ways, it's a lot like electricity. Many people didn't anticipate the myriad applications that would stem from its use until it was ubiquitous and connected to every home.

As Vint Cerf, my colleague at Google, likes to say, 99 percent of the applications of the Internet haven't yet been invented, so you can imagine the possibilities that are just around the corner. I believe that people in Australia are and will continue to be very enthusiastic about the potential of super-fast Internet connectivity.

I know firsthand that technology can change lives for the better, and faster broadband is a vital part of the technology mix to allow that to happen in Australia.

Originally posted as an opinion piece in The Australian.

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An Aussie's take on Google I/O

I spent last week at Google I/O, Google’s annual conference for developers held in San Francisco. This conference is all about making the web a better place -- the nuts and bolts of software development that most folks don’t ever think about when they add apps to their Android phones or when they log into their Gmail. What’s interesting about all these developers getting stoked about building the apps of the future is that they take one thing for granted: high speed Internet connectivity. That’s not to say they don’t recognise that sometimes connectivity is slow or erratic -- they do, and we’re all trying to find ways to make sure our apps can work in those situations. What I mean is that their starting assumption is that high speed connectivity is fast becoming like electricity or running water -- never far away when you need it, and plenty of it. I love this optimism -- and it’s this optimism that is bringing the National Broadband Network to Australia.

Out of all the exciting announcements that came out of Google this week, every single one of them relies on high speed broadband. YouTube movie rentals -- tick. Syncing your music library and movies from Android Market across your PC and your Android tablet and phone -- tick. Using a Chromebook, where your apps, games, photos, music, movies and documents will be accessible wherever you are and you don't need to worry about losing your computer or forgetting to back up files -- tick. These products will run on the networks we we have now, but just imagine their potential -- and the potential of the ideas of all the developers in Moscone Center and those around the world watching Google I/O streamed over YouTube -- when we have high speed Internet everywhere.

Most of us in the Google Sydney office wish we had a dollar for every time someone asked us about the NBN, “Yeah, but what are you going to do with all that speed?” or “What’s Google’s vision for how to use all that bandwidth?” I think we saw a taste of it at Google I/O.

Originally posted on the Google Australia blog.

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The possibilities of an Australian Digital Economy

I read an article recently about an Australian livestock auction site, AuctionsPlus, which allows farmers to view, bid on, and transport livestock with the click of a mouse.

It’s a unique kind of online shopping, but one that I can imagine in a country as big as this one, makes a big difference to farmers, who can now buy stock from their smartphones in the back paddock and avoid a three or four day round trip to the stockyards.

The digital economy can be a nebulous concept and while there’s lots of talk about it - much of this is in future tense. What makes the sheep auction site fascinating to me is that it epitomises beautifully the digital economy.

It’s using the Internet as a platform for industry. It’s innovating. And it’s happening now.

The digital economy is a platform for growth for the entire Australian economy. Industries old and new are moving online, and finding new ways to do business. This is true for tech companies -- Australian start-ups like Atlassian are growing up -- but it is equally true for companies working in more traditional industry sectors, too. From health and education, to tourism and manufacturing, to resources and energy, and for businesses large and small, companies who are moving into this space are statistically more successful: recent UK research reported that small businesses who leverage the internet report sales growth four times greater than those who don’t.

The digital economy connects Australia to the global movement online; but it’s also specifically valuable for Australia. It allows Australia to confront the challenges of the tyranny of distance by connecting us to the rest of the world in real-time. And it takes advantage of our strengths -- particularly our highly skilled, net-savvy and innovative population -- and keeps them at home, rather than shipping them overseas. Over twenty years ago I left Australia to work in Japan and then in Silicon Valley in the US: young engineers at Google can now work on global platforms while looking out the window at the Sydney Harbour Bridge.

If you’ll permit me to labour my agricultural analogy for a minute, consider the digital economy as the farm of the future. Generations of Australian farmers have worked the land to build an agricultural sector that more than a century on is still a significant economic contributor. The digital economy is a platform that can support this and other sectors of our economy to grow into the future -- it’s a platform for future-proofing our economy. But like the land, we can keep planting but we need all of the elements to work together for a bumper crop.

1. We need to improve the soil quality

If any country knows about the importance of soil quality, Australia does. You need healthy soil for a garden to grow, and we need world-class infrastructure to anchor our digital economy. The ubiquitous, high-speed broadband of the National Broadband Network will position Australia well to grow the digital economy and to enable a range of innovations and opportunities which would be limited by out-dated infrastructure.

2. We need to water the crop

In the same way that we fund scientists to research new medicines and treatments, we need to support new ideas and new innovations in the digital space with finance, in the form of venture capital and private sector investment. There’s an absence of ‘smart money’ in Australia to support new start-ups here -- ‘smart money’ is venture capital that comes with the added value of advice, experience and contacts. Funding isn’t the only thing a start-up needs to succeed, but it’s critical to getting a good idea off the ground.

3. We need to feed our crop

You can fund all the good ideas in the world, but you need people to have the good ideas in the first place. Strong universities capable of effectively partnering with industry are critical to a vibrant ecosystem. For example, the Massachusetts Institute of Technology (MIT) has calculated that their alumni have founded more than 25,000 companies with a combined annual revenue of more than USD2 trillion. Australia has some excellent universities but we can do much more to develop the relationships between the university sector and industry to support the commercialisation of ideas developed in universities -- from classroom to customer -- and we must continue to support and inspire students pursuing education in the fields of science and maths.

4. We need to refresh our seed stock

The interchange of people and ideas stimulates innovation. Large companies need start-ups to partner with, and conversely small companies need larger companies to reach customers, and to grow with. Large international companies should also be encouraged to invest in the digital economy here, in skills and in research, to further seed new ideas and new collaborations.

5. It needs oxygen to grow

And we need keep the Internet open. The Internet thrived because it is open -- with engineers being able to build on each other's work, each iteration improving, and driving the web forward as a whole. To flourish, the web needs oxygen; online, oxygen is openness. As Tim Berners-Lee said recently, the whole idea behind the internet was that ‘any person could share information with anyone else, anywhere.’ Online, the fastest way to move things forward is to share and iterate -- again, and again. Closed systems are all or nothing bets -- but in contrast, an open web is constantly being improved upon by the entire community. It gives oxygen to innovation.

6. We need to tend the crop

The lines in the middle of the road weren’t necessary when we travelled on horseback, but when we started driving cars we adapted. We came up with a simple and practical solution which greatly improved road safety: the road line. Online, we need to adapt to the changed environment; we need to evolve the rules of the road. We need to ensure privacy, safety and security are respected in this new environment, but we should look for the best ways to do this that fit the environment. We need to empower people with the skills and knowledge to be safe, smart and responsible when they’re online, so everyone can navigate the information super-highway with safety.

Our digital economy crop is growing well, but it’s early in the season. If we create the right conditions for growth, Australia’s digital economy can look forward to many bumper crops to come."

Alan Noble, Director of Engineering, Google Australia & New Zealand.

Originally posted at ITNews. Cartoon courtesy of ITNews.

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The opportunities of the NBN

Port Augusta, in my home state of South Australia, is staring down the detractors of rural and regional Australia.

It's a town with a fascinating history as a crossroads in our vast country, connecting West to East and back again. In 1917, Port Augusta was the beneficiary of the pre-Federation promise to the West Australians of a Trans-Australian Railway. The railway physically connected Perth, through Kalgoorlie, to Adelaide, providing new opportunities for businesses and individuals to prosper. This was a visionary project: a nation-building venture.

Nearly a century later, and Port Augusta is again the beneficiary of a nation-building venture. The town will again be linked to Australia and the world through inclusion in the National Broadband Network's fibre optic coverage plans.

Being a major hub for telecommunications networks has served Port Augusta, its people and its economy well; unlike many rural and regional towns across the country, Port Augusta's population has grown by almost 7 per cent since 2001. The impact of better services through the delivery of super-fast broadband to the town will cement Port Augusta's achievements. The National Broadband Network will provide towns across Australia with new opportunities to grow.

At present, there is a lot of discussion about the implementation and construction of this vital infrastructure. This is appropriate given the significant taxpayer dollars involved.

But to borrow the words of my colleague Ian Birks of the Australian Information Industry Association, it's "the trains and not the tracks" that present the exciting opportunities.

Just as the trains of the Trans-Australian Railway linked the wheatfields of the Spencer Gulf to the gold mines of Kalgoorlie, and brought passengers through Port Augusta to the east, so too will a super-fast broadband network bring a freight train of innovation to our shores.

The National Broadband Network will be the digital equivalent of the Trans-Australian Railway: linking towns small and large, bringing new life and new opportunities to our economy and our communities.

And these innovations will be driven by users - by the Australian people who are seizing the opportunities online with gusto. More than 80 per cent of Australian homes are already connected to the internet; the National Broadband Network will provide more people across the country with access, and with improved services.

Thirty-seven years after radio came into being, it reached the milestone of 50 million users. Fifteen years after the advent of television it reached the same milestone. The world-wide web reached 50 million regular users after only three years, and it's now estimated that more than 200 million people come online across the globe each year.

As more people get online, users' needs, behaviours and expectations evolve.

How would a new bank fare in Australia today if it didn't provide online banking services? Where ten years ago we would have spent our lunch hour in a queue, we now expect to be able to avoid that hassle, to bank without leaving our desks or our living rooms.

Yet in Australia today, of the nearly two million small businesses who make up a staggering 96 per cent of all businesses, 39 percent do not have a website.

Meanwhile, four out of five Australians research products online; 45 per cent of Australian internet users publish their opinions about products, services and brands and a staggering 86 per cent read other consumers' opinions online. This represents a huge missed opportunity for businesses to find new customers and to participate in the expanding digital economy.

These businesses - plumbers, B&Bs, hairdressers - rely on the Yellow Pages and word of mouth to find new customers and to establish their reputation. Yet today's word of mouth is transmitted as often through Facebook or Twitter, as it is over a cup of tea. Today's users find businesses as often on Google Maps from a mobile phone as from a street directory.

With new and faster technology, our expectations are changing. Now, I expect to be able to search the restaurant I read a review about, call them from that page, and be able to find them on Google Maps. If my expectations aren't met, I may still turn up for dinner, but each expectation not met is a hurdle. And in a growing market which is becoming more competitive, Australian businesses don't need hurdles.

Access to the Internet across Australia today can be expensive and unreliable, particularly in regional areas. Yet we have seen Australian companies take advantage of opportunities to reach new markets both at home and abroad. Australian start-up companies like Atlassian and PC Tools have thrived because of the power of the Internet to reach customers around the world.

If we can get rid of the barriers to business through a super-fast broadband network, Aussie businesses right across the country will not only have the same opportunities as the rest of the world - but potentially a leg up as well. The access provided by the National Broadband Network means that the world is now our marketplace.

The evolution of users' expectations - and the users themselves - are driving innovation.

For example, currently we are witnessing the convergence of mobile and social trends online. These media were quick in the adaptation of their sites to mobile and these days it's hard to find a new phone without Facebook, YouTube and Twitter apps.

We are witnessing this trend, absolutely - but we're also the lead actors in pushing its development forward. Users are driving this bus.

And developers are rising to the challenge.

They are making the most of new technologies - every time our technology improves new things become possible. The openness of the internet is an environment built for innovation, and environment best equipped to meet - and to exceed - users' needs and expectations.

When four engineers in a Sydney suburb came up with the idea that became Google Maps, they needed a printer for those maps to be useful on the go.

Today, rather than dog-earring tattered street directories or print outs, we're pulling up Google Maps on our mobile phones.

Our behaviours have changed: we have evolved with the technology. But we've also driven innovation for greater usability, for personalisation, for a product that works for us.

We're seeing hassle-free upgrades to cloud-based web applications - do you even know or care what version of web mail you are using now? And high-speed broadband promises even greater capacity and new possibilities.

When the user is driving the bus, developers and companies need to respond to what the user wants. And what users want is services and devices that work for them - that adapt easily into their lives, and which improve their quality of being.

The opportunity before us in Australia is the acceleration of this exciting phenomenon. It's mobile phone convenience now - but it will be health, education, small business tomorrow. But more than acceleration - this is an opportunity for innovations we can't yet conceive of. And with the technology to support innovation, users will be in the driver's seat.

Nationwide access and affordability are critical to this, and competition for retail services through the National Broadband Network will be the essential enabler of innovation. Transparency in the delivery of services and devices is also important so that users can make the choices that are best for them. And our regulatory and policy settings must continue to place users at the centre.

We need to empower users to take their rightful place at the centre of this new revolution. We need to educate people, young and old, country and city, to be digital citizens, in the same way that we teach our kids to swim. We need to empower users to be safe online, to act smartly and responsibly - to have the knowledge and skills to take advantage of the opportunities in the online world and the know-how to deal with any risks.

Australia has an opportunity to be ahead of the game, to be in the driver's seat when it comes to innovation, to communication, and to facing and adapting to the challenges of the future.

Super-fast broadband gives us a platform - like the Trans-Australia Railway did - to connect to a new generation of opportunities.

Let's think about the possibilities. And take the opportunity to innovate.

Alan Noble

Originally posted at ABC Technology.

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