Startup Factory Innovation Report: Why it’s time for Australia to lead in digital-physical innovation

Holger Dielenberg
Aug 12
4 min read

Updated: Aug 13

What if Australia could be the launchpad for the world’s next wave of high-impact, advanced manufacturing startups? What if we could stop losing billions in opportunity at the grassroots of our innovation economy and instead, become a beacon for global talent, investment and sovereign capability?

The just-released Startup Factory Innovation Report is both a wake-up call and an actionable blueprint for how Australia, especially Melbourne, can seize this crucial moment. If you care about entrepreneurship, advanced manufacturing, future jobs or economic sovereignty, this is the report you’ll want on your desk.

Australia is at a crossroads. From peak app to peak opportunity.

For years, our innovation story was one of digital apps and software unicorns. But the world has changed and so have the rules of innovation. As app markets become saturated and Artificial Intelligence makes building software its own kind of commodity, real value and global advantage are shifting to the places where digital intelligence fuses with physical products and systems.

The intersection of digital-physical worlds is where the biggest opportunities now lie

Think medtech, energytech, advanced manufacturing and agritech. Fields where Australia has the research talent, industry depth and urgency to lead. Yet, as the Startup Factory Innovation Report reveals, we’re still funnelling most support to software and leaving thousands of ambitious entrepreneurs, hardware designers and engineers stranded in the infamous valley of death: the chasm between brilliant concept and bankable, scalable product.

The Startup Factory – a new blueprint for innovation.

The Startup Factory proposition is both bold and practical. Drawing on hands-on experience, international case studies, and broad stakeholder consultation, the report makes the case for a sector-agnostic, collaborative Business Makerspace for Melbourne, modelled on global exemplars like New Lab (NY), UnternehmerTUM (Munich), and Toronto’s MARS District.

We need this now because as the report shows, our manufacturing entrepreneurs are raring to go. But they’re blocked by high factory rents, scarce funding for physical product ventures, disconnected communities and a funding landscape that remains risk-averse and SME-focused. As a result, Australia keeps losing its best ideas, inventions and innovators to overseas ecosystems and misses out on billions in economic value, jobs and strategic capability.

Startup Factory is not just another accelerator. It’s a purpose-built, independent Venture Studio and makerspace that actively co-builds deep-tech and manufacturing startups. It helps founders move from prototype to commercial product with less risk, more support and stronger partnerships across industry, government and academia.

Melbourne has the perfect strengths and skills sets to launch into a new age of manufacturing technology

Here’s what sets Startup Factory apart:

Real infrastructure: State-of-the-art prototyping labs, co-working space and advanced manufacturing tools. Shared and accessible.
The Venture Studio model: A hands-on, co-founder approach that pools resources, expertise and risk. Actively creating and launching startups, not just coaching them.
Portfolio funding: A diversified, milestone-driven model that allows governments and investors to support a broader array of startups with lower risk, maximising the odds of discovering the next big Australian success.
Cross-sector collaboration: Purposefully bringing together engineers, software talent, manufacturers, corporates and universities. Unleashing creativity where digital and physical worlds collide.

Why does this matter – right now?

Australia’s future prosperity and security depend on building sovereign manufacturing capability and a thriving, future-focused innovation ecosystem. The report shows that countries moving fastest to blend digital and physical innovation – using AI as a force-multiplier, not a disruptor – are already pulling ahead.

By acting now, we can:

Plug critical gaps in support for early-stage physical technology startups.
Turn the nation’s tyranny of distance and talent drain into a collective advantage.
Attract international investment and keep world-class IP onshore.
Deliver major economic, social and regional benefits: creating quality jobs, robust supply chains and resilience in the face of global shocks.

Stakeholders are ready – will government catch up?

One of the most exciting revelations in the Startup Factory Innovation Report is the enthusiastic support from industry (Bosch, Rocket Seeder), academia (University of Melbourne, ANFF), and investors who see the chance to build something world-class – if government joins in with conviction and clarity.

This report is not just analysis; it’s a call for action. It lays out clear steps for policy, funding and partnerships that can turn our advanced manufacturing dreams into a new competitive edge for Victoria and Australia.

Don’t be left out of Australia’s next innovation leap. Seize the opportunity and download the report to discover:

What’s holding back our best manufacturing entrepreneurs.
The data and case studies behind global best-practice innovation hubs.
Steps we can take to future-proof our job market, sovereign capability and economic growth.

The window is open, but it won’t stay open for long. Be part of a movement that puts Australia back on the map as a manufacturing and innovation powerhouse.

Download the full report here

Ready to take action? Read and share the Startup Factory Innovation Report.