Telstra's softly, softly start-up strategy

The 800 pound gorilla of the Australian technology sector – Telstra – has gently lifted the covers from its shiny new start-up accelerator program, tiptoeing carefully into the market so as not to scatter the nascent incubator community that has taken root in Sydney.

And behold! This is a nice vehicle. Telstra might have arrived on the start-up scene late, but it has come with a fully-developed plan, a grown-up leadership, and a steady hand. Called muru-D, this Telstra initiative is good news for the local tech sector.

It is also good news that Telstra has brought a modest – rather than voracious – appetite to the scene. Rather than consuming companies whole, or tearing them apart to study their entrails for signs of useful innovation, the company has a nuanced game plan.

Muru-D is a six-month program. Telstra will aim for a twice-yearly intake of up to 10 companies. These will each enjoy six months rent-free, will receive a $40,000 investment and enjoy the patronage of business mentors and coaches, as well as – more importantly perhaps – access to Telstra partners and suppliers.

In return, Telstra will take a modest 6 per cent equity position in each of its selected start-ups. That equity stake does not include strings attached to special voting powers, or right of veto, or mandatory sale conditions, or exclusivity, or other hideous conditions that often make large telco investors the kiss-of death for tiny innovators.

Muru-D is going to attract a lot of interest. First round applications close at midday on November 25. It will also operate as a shared work space.

The Telstra initiative is not the last corporate entry into the Australian start-up accelerator/incubator scene we will hear about this year. There are others coming.

The tech start-up sector in Australia is healthier than it has ever been. It is attracting more and better founders. And now it is attracting our biggest corporates, and that is worth noting, because Telstra’s initial muru-D location is likely to be the first step in a much grander engagement.

Muru-D 'co-founder' Ann Parker has been in Sydney for month, having been recruited from Telefonica’s Wayra accelerator program in London. The Wayra program has locations across Europe and Latin America and has hosted nearly 200 start-ups through its competitive accelerator program.

Parker has brought with her to muru-D some of the ambitions of Wayra. Certainly if muru-D can prove out its model early, the expectation is that it will open in other locations. While other Australian cities might be exciting, muru-D (and Telstra’s involvement with the start-up sector) would start to get really interesting if it looks at building out a network well beyond our borders and into Asian markets. And this is certainly an ambition.

The first muru-D accelerator is based in Sydney’s Paddington. If we are operating under the assumption that nothing ever happens in the telecommunications sector by accident or coincidence – and we are – then it is no surprise whatever that it is located in Malcolm Turnbull’s electorate.

Mr Turnbull congratulated “this great leviathan” – Telstra – on its initiative, marvelling that its management had been able to turn “this gigantic institution” from a lumbering beast resistant to innovation into a company capable of “embracing innovation in this insurgent manner”.

And of course yes, this is impressive. Telstra is trying something new with muru-D, and yesterday it was at pains to leave an impression of openness. It wants to work in the space without owning everything, and without smothering everything it touches.

The company wants partnerships, and it certainly wants to attract investors and mentors and educational institutions. At face value this is all good stuff, but the proof will be in the pudding. Most people have the good sense when dealing with gorillas to approach with caution.

The minister spoke only briefly on policy issues related to start-ups. Of course the tax treatment of employee share option schemes was raised, and he indicated the government will certainly be looking with interest at the Treasury review of the issue that is due later this year. And start-up industry leaders have been given reason to expect positive changes will be made in this areas.

In relation to the local start-up sector and the Australian government's ambitions for a greater engagement with Asia, I would suggest another priority. And that relates to policies that will encourage select international students to become founders in this country.

Most of our students in ICT, engineering, physics and mathematics are international students – from China, India, Indonesia, Malaysia. These students have restricted work rights in Australia. It is difficult for them to pursue careers as founders.

They are specifically precluded from programs like muru-D, which requires its applicants to have work permit in Australia.

Some of our best and brightest science and technology students at universities are not ours. They are from elsewhere. But we should be doing what we can to encourage them to stay, and to create new businesses.

James Riley has covered technology and innovation issues in Australia and Asia as a writer and commentator for 25 years.

He has a special interest in public policy as it affects the tech sector and has written for newspapers and trade magazines, including The Australian, the South China Morning Post, InformationWeek and PC Week.

Contact James at james@innovationaus.com