Here's why startups get excited about innovation hubs

The Australian tech community is disappointed with the NSW Government’s decision to sell the Australian Technology Park to a consortium led by Mirvac and the Commonwealth Bank.

There are a number of reasons the tech industry was so hopeful about a centralised tech industry, one of which is a theory called clustering.

It simply means concentrating people and businesses results in great productivity gains.

It’s the reason cities are more efficient than regional areas – cities have the scale for buses, trains, shopping centres and hospitals. It’s why Las Vegas is known for casinos and Los Angeles for film.

It’s also a big reason behind Silicon Valley’s success. The region began its tech journey in the 1950s with a few technology companies, Stanford university and a couple of US government research centres. The concentration of talented technologists lured similar minds, who started their own companies and hired graduates.

Over the coming decades this snowballed, with the likes of Intel, Hewlett Packard, Oracle and Apple setting up shop in close proximity to each other.

The concentration of companies drew investors, who in turn fostered more startups. The founders of these businesses stayed around, to invest and advise other startups.

It is a virtuous cycle, as the concentration of technology talent encourages ever more concentration.

And this is even before we get to the cross pollination that geographic concentration allows. Steve Jobs worked at gamemaker Atari. Marisa Mayer, the CEO of Yahoo, used to work at Google. Peter Thiel, one of the first investors in Facebook, was a co-founder of Paypal. Marc Andreessen, venture capitalist and director at Ebay, co-created Netscape.

“The benefit of having a large single space is that you can attract things you otherwise wouldn’t attract, and you can share things you otherwise wouldn’t share” explains Murray Hurps, general manager of Startup Space Fishburners

“So you get something for nothing just by having that concentration of startups.”

And it’s a model that many other countries and regions have tried to emulate.

London has East London Tech City, Berlin has WISTA park and Paris has Paris-Saclay. All of these hubs host large technology companies and startups, events and spaces. And perhaps more importantly, they are very visible. They draw attention to their industries from around the world.

“We know from experience in Australia and overseas that giving industries a place makes a real tangible difference to their chances” says Alan Jones, startup evangelist at BlueChilli.

“It makes talent easier to access, makes it a focal point for investment and knowledge sharing.”

“It makes people think that this is something that they could have a future career in.”