Can the Victorian government build a Silicon Valley with their cheque book?

Many cities and regions have tried to build their own Silicon Valleys, from demolishing entire suburbs to attract a corporate headquarters through to spending millions on enticing film productions.

An interesting experiment is happening at the moment in Melbourne where the Victorian state government is spending millions on subsidies to businesses, government enterprises and academic research centres to set up operations in the town. The government has even gone as far as enticing the Sydney based startup festival Sydstart to Victoria’s capital city, where it will have to renamed.

Opening the chequebook

Having an open cheque book is fine, but in the absence of a broader strategy that ties in educational, financial and other vital factors for building an industrial hub  it’s hard to see how spending taxpayers’ funds on ad hoc projects is going to create a sustainable local tech sector.

The National Broadband Network security office subsidy is particularly galling given it’s a payment to a federal government owned corporation and it’s highly likely the facility would have been based in Melbourne anyway given the organisation’s Network Operating Centre is already in the city.

Added to the embarrassment of the NBN announcement are the overwrought claims of job creation. While it’s possible a total of 300 building staff might be involved in the construction, the idea the centre will employ 400 IT and telco security staff is surely stretching credibility.

The failed games industry

Sadly for Victorian taxpayers this isn’t the first time their government has tried to use their cheque book to attract high tech business. In the late 1990s a similar effort was launched to attract video game developers.

For a while this worked but ultimately the Victorian games sector declined in the face of a high Australian dollar, a shift in the economics of studio produced games and competition from Queensland who sought to build their own subsidised centre on the Gold Coast – which also failed.

At least though the Victorian government is trying, unlike its neighbour in Sydney who are in the process of selling off their Australian Technology Park hub and replacing it with a poorly articulated thought bubble of a technology precinct based out of a disused power station in a transport blackspot.

Sydney’s failure

In the process of coming up with these ideas, the New South Wales government managed to alienate the most successful of Sydney’s tech startups, Atlassian who last week floated on the NASDAQ stock market for $605 million.

One of the notable things of Atlassian’s story, and that of most other successful Australian tech startups, is how little direct government support features in their development.

That direct government support like subsidies feature so little in these company’s successes really tells us what really works for governments wanting to develop an ecosystem – providing the environment for skills, capital and distribution networks to develop. Throwing money at big corporates or flashy events does little except offer a good photo opportunity for the minister.

Without a long term plan it’s hard to see how Victoria’s ‘splashing the cash’ will end up any better than previous efforts with other industries. For smaller businesses, it’s probably worth reminding the politicians that they exist and pay taxes so spreading the love, and money, beyond the big end of town would be appreciated.

Paul Wallbank is the publisher of Networked Globe, his personal blog Decoding The New Economy charts how our society is changing in the connected century.