Home Articles Small, savvy & self-funded: The 3S formula of your typical Australian start-up

Small, savvy & self-funded: The 3S formula of your typical Australian start-up

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Have you ever wondered what drives our entrepreneurs? Why they become entrepreneurs in the first place?

The Australian Centre for Entrepreneurship, based at QUT was doing exactly that when they conducted comprehensive surveys of 1,400 start-ups over a four year period from 2007 to 2011.

The study, which they have called The Comprehensive Australian Study of Entrepreneurial Emergence (CAUSEE), is the most thorough study of emerging new ventures ever conducted in Australia. This research conducted by the ACE suggests most Australian start-ups are motivated by opportunity rather than need.

“This is a positive sign indicating entrepreneurs seek and seize opportunities rather than set up businesses because of job loss or lack of other alternatives,” said ACE director, Professor Per Davidsson.

Professor Davidsson said that despite being driven by opportunity, most new businesses started off small and stayed that way with owners preferring to build ‘small and manageable’ firms rather than chase maximum growth. People watch their weight, now their businesses too! Similarly, the majority of new firms are not particularly innovative.

“However, compared to start-ups in the US, Australian start-ups are actually likely to be more innovative, emphasise research and development and be based on new technologies,” he said.

Professor Davidsson said more than half of all start-ups were self-funded, relying on neither friends, family nor banks for major funding. Talk about boot-strapping!

“Doing much with little and letting revenue fund business development are the hallmarks of skilled entrepreneurs,” he said.

He said an interesting aspect of the study was that the Global Financial Crisis set in midway and had surprisingly small effects on the emerging firms.

“Other research has found that the GFC led to lower entry rates as potential entrepreneurs delayed plans to start businesses. However, our data suggests that although about one third of the start-up attempts were terminated during the study, this was not because of the GFC,” Davidsson explained.

“The onset of the GFC did not kill off or radically change many start-up efforts that were already under way.”

He said companies that folded often did so without suffering financial loss and even rated their experience as positive with a proportion closing one business in order to start-up another.

The research was published in the Australian Small Business: Key Statistics and Analysis launched recently by Federal Small Business Minister Brendan O’Connor.

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