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Now is the time to invest in Australian technology businesses

Published 03-FEB-2021 09:45 A.M.


5 minute read

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As Australia recovers from its pandemic-induced recession, it has reached a pivotal moment. One which could see it meet its ambition of being a global technology powerhouse. But it needs investors, Government and businesses to back Australia’s next tranche of high-potential technology start-ups to rival Silicon Valley, New York and London writes Giuseppe Porcelli, CEO at Lakeba.

The world economy is going through a significant period of uncertainty. COVID-19, geopolitical tensions and worldwide recessions all presented cause for concern for many investors. Since the COVID-19 crisis began, global GDP has fallen by 4.2 per cent.

While 2020 had a devastating economic impact worldwide, we are starting to see hope. COVID vaccines are rolling out. Brexit is concluding. And the US has seen a peaceful transition of power.

Economists are also predicting V-Shaped recoveries around the world. None more so than in Australia, with Deloitte forecasting the national economy will grow by 4.4 per cent in 2021. If Australia continues to suppress the coronavirus, it may just be on the cusp of another boom.

Out of the ashes come new opportunities

Recessions create a need for change. New founders emerge looking to take advantage of the changing environment. At the same time, the pace of change forces incumbents to pivot. Those that don’t keep pace are culled. Leaving those that rise from the ashes of the recession to take advantage of the reduced competition for talent, office space and customers to thrive in a new business environment.

There is a long history of recessions driving innovation. If we look back through history, some of the world’s biggest companies started in a recession: Apple, Microsoft, IBM, Disney, CNN, Uber and Facebook. In fact, according to reports, over 50 unicorns were founded following the last Global Financial Crisis.

Following the world’s pandemic induced recession, we will likely see another tranche of unicorns come to market. These will be the businesses that capitalised on the rapid digitisation that took place due to the necessity of physically distancing in 2020. Companies like Zoom, which saw its share price increase from US$67.28 in January 2020 to US$349.61 in January 2021.

While Silicon Valley companies may have been quick to grow during 2020, as we begin the new year, Australia is looking well placed to see the next phase of growth. We’re recovering much quicker than most of the rest of the world. Sales are bouncing back, commodity prices are on the rise, and house prices remain strong. Australia’s suppression strategy has put the country and its economy in good stead.

Invest in Australian made digital businesses

Digital transformation was the lifeboat that saved many businesses during the pandemic. Cloud technologies were rapidly adopted as social distancing and work from home policies made it impossible to conduct business physically.

At Lakeba, we saw this firsthand as many of our digital businesses experienced an uplift in customers. None more so than Verimoto, which has seen virtual inspection requests grow by 258% since the pandemic.

It’s not just the rapid digitisation brought on by the pandemic that will make Australia’s digital businesses attractive. Government policy and regulation around digital innovation is also world-leading. For example, our open banking regulation – Consumer Data Right (CDR) – is one of the most progressive open data programs worldwide. And it’ due to be expanded to Australia’s utility sector in the years to come.

Australia has made significant steps in improving its regulatory framework to develop new technologies and increase its adaptability and business agility. With the positive economic outlook and growth in new businesses, Australia is well-positioned to emerge as the unicorn hub of this latest global recession. Particularly in the fintech space as our financial services industry continues to innovate in digital financial products.

This is likely to be catalysed throughout 2021, as cash-strong funds, both at home and abroad, invest in the world’s growing economies. These funds are pouring money into markets in a desperate search for yield in a low-interest-rate environment. However, there will be a need to be diversified to maximise yields. Spreading investments across many industries experiencing V-shaped recoveries and digital transformation.

Digital technologies join commodities as our next big export

Suppose Australia can stay the course, continue to suppress the spread of COVID-19 and doubles down on its growing digital economy. In that case, it could join Silicon Valley, Shenzhen, London and New York as a unicorn hub.

Canva, Nearmap, Airwallex and Judo Bank are paving the way. We can expect more to join the club in the coming months. Particularly in fintech, as the Government continues to push CDR and increased competition in the banking sector. As open banking matures in a post-COVID world, our start-ups can export their technologies to other countries slower to adopt open standards.

Only time will tell. But one thing is certain. Australia is on the up and is capitalising on the digital transformation that gripped the nation during the pandemic. If the investment community, Government and entrepreneurs double down on digital businesses, we could see more Australian businesses achieve unicorn status throughout 2021.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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