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  • Holger Dielenberg

Rise of Applied Technology startups as App bubble bursts

We believe the startup world has reached a turning point. The days of App startups with highly inflated valuations and ‘unicorn’ investor hype is coming to an end.

Apps are now used in nearly every aspect of our lives and the App market is reaching saturation. The App startup phenomenon rose out of the 1990s boom. Startups develop digital applications aiming to either remedy deficiencies of existing products, create entirely new categories services or disrupt entrenched business. Using the sheer reach and connective impact of the internet, startups have created new business models that value rapid growth over profitability.

We must remember that for all the hype surrounding App startups, there are relatively few billion dollar exits per total number of startups; less than 5%. Furthermore, employment stemming from App support is usually pushed offshore to cheaper labour outfits and profits generally funnel into few pockets. Whilst unicorns like Canva, Airwallex and Culture Amp are glamorous and the exit valuations are eye watering, the economic impact from these success stories are narrow and do not help build ecosystem density or cross sector industry collaboration. Ultimately, unicorn exits do nothing to help further innovation culture.

In just 30 years of development, the world has reached peak App. In fact, some are predicting lean times ahead for App start-ups after 10 years of bull market mania.

Like other technology sensations, the App bubble is set to burst. Balance needs to be restored in our startup ecosystem. The next steps will be to support the development of physical innovations in areas like medical, mobility, clean economy and smart city technologies, thereby underpinning job growth in these sectors.

For designers and manufacturers, the end of ‘app hype’ marks the opening of new opportunity space. The term we use to describe this space is Applied Technology.

Applied Technology is where the digital and physical realms meet. The application of existing scientific knowledge, techniques and processes to the creation of innovative physical objects that enhance and change our lives. Applied Technology encompasses design, manufacturing and use of smart physical products.

Development and commercialisation of Applied Technology products is now possible due to a whole spectrum of new advancements. These include digital fabrication and advanced manufacturing techniques, plus technologies like the internet of things (IOT), artificial intelligence (AI) and connectivity (bluetooth, cloud computing, Wifi). On top of this powerful design software and rapid prototyping equipment is now more accessible and affordable.

The turning point is triggered by these technologies and equipment being accessible to every small innovator, tinkerer and entrepreneur around the world. We believe Applied Technology will bring a scale of change similar to when the internet was made available to billions of people around the world via affordable home computers.

Since 2018 we have been using the term Applied Technology to describe Australia’s modern design and manufacturing landscape. The term is slowly being adopted in Australia and worldwide. With the help of government funding, Swinburne University and RMIT are now starting to offer diplomas and degrees in Applied Technology. These are engineering and digital technology courses developed in conjunction with industry partners.

The term Applied Technology is home grown by Owen Hill in 1975 in Australia. He was a pioneer producer of home computers, the MicroBee computer being the first commercial personal computer manufactured in Australia.

In our presentation for the 2018 Melbourne Knowledge Week, Australian Made Has A New Heartbeat, we talked about how Applied Technologies in the fourth industrial revolution allows innovators to combine things in ways never before possible. Moreover, it can help Australian entrepreneurs to overcome business scaling challenges like the tyranny of distance, our small population, gender imbalance and high labour costs.

Promising Melbourne startup, Jaunt Motors use Applied Technologies to convert classic old Land Rovers in electric vehicles. Jaunt were one of Space Tank’s larger tenants. In their early development, they completed Space Tank’s Bench to Business incubator program funded by LaunchVic. Jaunt have expanded to their own factory premises in Williamstown and have grown their EV conversion capacity from 2 cars to 8 cars at a time.

Space Tank has had over 800 individuals come through its business Makerspace since it started operations in 2015. We have supported the growth of some innovative product developers like Bastion Cycles using ergonomic 3D design and carbon fibre and 3D printed titanium, Eutropia Aerospace micro rocket propulsion systems, UpperLimbCo orthotics, Freo2 oxygen delivery systems and Freeform Composites carbon 3D printing technology.

Based on our experience and position in the startup ecosystem, we believe that Melbourne is in a perfect position to harness the post app potential of Applied Technology.

Two ambitious projects are gaining momentum; the Fishermans Bend innovation precinct and the Brunswick Design District will bring together future generations of change makers, innovators, business collaborators and investors. It is encouraging to see these precincts focusing on business growth in creative and advanced manufacturing.

Melbourne has a strong manufacturing base with a history of innovation. We have a strong technology startup ecosystem. There is a great opportunity to join and align these areas to create the foundations for a bold new era of Australian made innovation.

However, these aspiring innovators and entrepreneurs will need better support. Government must rethink who it offers grants to and revise old fashioned eligibility thresholds for funding. Government funded infrastructure should not be University biased but aligned with industry leaders to support creative innovation and new business growth. These support platforms must be sector agnostic and independent of institutional monocultures.

We should learn from the success of new Venture Studio models that focus on collaboration and commercialisation. Some successful international examples of these are Newlab New York, Toronto’s MaRs innovation district and Munich’s Unternehmer TUM.

It is encouraging to see Victoria’s Fishermans Bend development board conducting industry research to understand the challenges faced by young innovators and creative manufacturers, and to create the best support framework that responds to their needs.

We believe that more needs to be done by organisations like Startup Victoria and Launch Vic to support creative enterprises, advanced manufacturing and Applied Technology startups. Launch Vic focuses heavily on App developers in their efforts to grow Victoria’s Startup ecosystem but ignores physical product development. Startup Victoria focuses on the creative sector but so far cannot adequately support the commercialisation of creativity or economic viability of creative practitioners. To their credit these government departments have been successful in their area of endeavour, however it is time for Launch Vic to consider the green fields beyond the App and for Creative Victoria to help niche creative manufacturers become more economically meaningful.

Thanks to Covid, political vision for sovereign manufacturing and strengthening Australia’s supply chains are finally catching up with public and industry opinion.

A shared and immediate challenge facing our governments, businesses and institutions, is to transition our society from an economy based on finite resources with limited options, to a future where infinite knowledge and creative enterprise create unlimited opportunities to thrive. Creatives, entrepreneurs, designers, engineers and startups will be the most important people leading the way.

If we want to achieve innovation across all sectors, then we must recognise that real value lies with the crowd and not with the unicorn exits. We must look beyond Apps, towards the possibilities inherent in design and Applied Technologies.

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