Kate Pounder on why Australia’s tech sector struggles more with deep tech than SaaS

Over the past 10-15 years Australian startups have seen massive success in the software-as-a-service (SaaS) space. Unicorns like Atlassian, Canva and Culture Amp have led the charge, but represent just a small portion of the plethora of successful Aussie businesses in the space. But when it comes to deep tech, we’ve struggled in comparison. Tech Council of Australia CEO Kate Pounder shares some thoughts on why that is.

Pounder took the stage at SXSW Sydney this week as part of the Screw Silicon: Welcome to the Global South panel. The session focused on the growth of the startup sector in Australia and the success it has seen, particularly over the last decade, when cloud computing really took off and more funding entered the ecosystem as additional VC firms opened up shop or expanded.

And as the panel pointed out, the government also helped things along as useful tax laws and employee share schemes were put in place. These were very normal in other countries, but new for Australia.

A huge chunk of that success has been due to Saas businesses. But as we’ve seen moves into deep tech — and its more demanding needs — it hasn’t skyrocketed in the same way.

“Where I think we’re different is that we’re still starting from a lower base than other economies. I think we’re still to prove that we can do with deep tech what we have done in Saas, because it’s obviously got some different fundamental components. Manufacturing for one is often really different,” Pounder said during the session.

Pounder pointed out that it’s not that Australia doesn’t do deep tech. In fact, we have a great research base, talent and high performing universities underpinning the space. Australia isn’t shying away from biotech, robotics or space.

And there’s also money going into the sector. We’ve seen big raises go into deep tech companies this year, despite the tighter funding environment. In the biotech space there was $105 million for Loam Bio. On the quantum front, Silicon Quantum received $50 million back in July. And those are just a couple of examples.

And according to the latest Cut Through Quarterly report, hardware, robotics and IoT was the third most popular sector for investors in Q3 of 2023.

“I think the question for us as a country is: can we scale those companies and those industries to the same degree we’re able to do with software,” Pounder said.

“If you look at just some of those companies, they need physical space [and] a substantial amount of capital to invest in building those sites and getting the specialist equipment.

“That’s a very different funding profile to a software company that can grow very fast without having to make those capital intensive investments. Then you have to work out things like manufacturing and developing a global supply chain, which is a different business model to software.”

According to Pounder, it’s about getting those business models and policy settings right so that, as a nation, we can be successful in deep tech. She also says that there is a knowledge gap within the government that requires more explanation and collaboration.

“Imagine you’re a politician or you’re a public servant. You’re working across every industry and lots of different policy issues. You’re not necessarily going to have that kind of close knowledge,” Pounder said.

“So I think I think we have a role as an industry to be good at describing ourselves, then go to government with good ideas and then to build a trust with governments so they see the value for the country in investing in the tech sector and they see the value of taking that advice and getting policies in place.”