Google Australia's managing director Nick Leeder says Sydney must become a "Silicon Beach" if it wants to be a major global city, but cultural flaws are holding us back.
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"Just as New York created Silicon Alley and that entered into the lexicon, I think that should be an ambition for us," he said.
Mr Leeder made the comments at the City of Sydney's CityTalk innovation event at the State Theatre last night, where lord mayor Clover Moore announced her intention to act as a "broker" between investors and start-ups struggling to obtain finance.
Mr Leeder said in a panel discussion that Australia was a "conservative thinking country" that was not comfortable with failure, but we need to adapt to the rules of the new world.
"If you take a big risk in this place you can face-plant very quickly and get punished for it ... here failure is seen as a terminal black spot," he said.
"We've all failed at things in our careers and we should be much more ready to understand that that is part of the learning process."
Google Australia's call for the nation to do more to support technology start-ups comes amid a major video series on the topic published by this website. View the full Digital Dreamers coverage here.
The City of Sydney opened up a creative and cultural hub for entrepreneurs at 66 Oxford Street in February.
Sixteen tenants including tech start-up AroundYou moved in and the co-working space has been such a success that Cr Moore is converting two more buildings on William Street to create more space for start-ups.
"People started collaborating almost as soon as they moved in. It was quite remarkable to walk around the building and hear their stories," said Cr Moore, adding that she was taking expressions of interest for the William Street property.
She said start-ups needed affordable space, advice, encouragement and support, but the biggest challenge was finance. A lack of venture capital is forcing Australian talent to go offshore.
To that end Cr Moore said she had asked her staff to "look at ways the city could act as a broker or blind date some of these venture capitalists with start-ups".
City of Sydney is following the lead of other co-working spaces such as Fishburners, which opened in April last year in a building in Ultimo and filled up with 60 entrepreneurs within six weeks.
"There's a real groundswell of start-up activity in the tech sector at the moment and that's attributed partly to just how cheap it is to start a tech business these days," said Fishburners director David Vandenberg.
"You can start a technology business these days with the money in the bank ... and as a result there's a lot of young businesses starting in bedrooms around Australia."
But Mr Vandenberg said the problems arose once start-ups wanted to get out of the bedroom and expand further.
"When they start looking for money they just find that the doors keep closing for them so they just end up inevitably looking overseas," he said.
Cr Moore concurred: "The people with that kind of money to spend are putting it into property, into mining, into exploration."
Mr Leeder expanded on his thoughts in an opinion piece published on this website today. He said the high-tech brain drain was not good for Australia's future but said the country had all the ingredients to create a world-class technology industry.
ABC managing director Mark Scott said Australia should look at building innovation the same way it built the film industry, which is no Hollywood but is punching above its weight on the world stage.
"If you go back 40 years there was a decision to really create and build a film industry ... in the range of new digital industries we need the same level of targeted approach and investment and education," he said.
"The film industry is the classic example. Really, eight films lose money, one film might make its money back but the 10th film makes enough money to paper over all the losses - that's the venture capital model."
TED curator Chris Anderson, who gave the keynote talk at the event, said he was "frustrated" that federal governments around the world were locked up and "unable to make decisions on our future" - but big things could get done at city level.