Technology sector warns of risk of hard landing for innovation bubble

Australia is trapped in an “innovation bubble” that could leave investors holding the bag, warns Catapult Sports’ boss.

Catapult Group International executive chairman Adir Shiffman.

Australia is trapped in an “innovation bubble” that could potentially leave investors holding the bag, warns Catapult Sports executive chairman Adir Shiffman

Founded in 2006, Catapult’s business is a good example of a homegrown technology business that has combined sound GPS hardware with a software subscription model to deliver a comprehensive performance analytics solution for elite athletes.

Having seen the local market dynamics change perceptibly in the past eight to 12 months, Mr Shiffman is worried that the sudden surge in capital being plied into the technology sector is unlikely to deliver the promised return on investment.

“We have gone from almost no capital in the market to almost $5 billion very quickly, but I am not convinced there’s $5bn worth of high-quality investible assets in the Australian market,” he said.

“How do you think the market and high-net investors are going to feel when in five to seven years from now the bulk of their investment has not delivered a return? The risk is that the negative returns will in the long run damage the sentiment towards the technology sector on the whole.”

Mr Shiffman’s concerns are primarily driven by the fact a large proportion of technology outfits garnering attention are relying on buzzwords to raise capital.

According to Mr Shiffman, aspiring Australian start-ups need to make technology central to their business model and look to develop purpose-built intellectual property that gives them a competitive advantage at a global level.

“I don’t want to see another business that’s just doing what guys in the US are doing. When you look at some of the marketplaces out there, just how hard is their tech stack?” Mr Shiffman said.

Catapult has proved that an early investment on genuine tech can pay dividends in the long run.

With a bevy of professional teams ranging from AFL heavyweights to NBA and NFL outfits using Catapult’s technology, the next step for the ASX-listed company is to seal deals not just with individual teams but with leagues and sporting bodies.

An illustration of that evolution is the deal Catapult sealed in October with the National Basketball League that will see the company’s technology used to track players and provide fans with live game-day data.

According to Mr Shiffman, leagues are finally waking up to the potential of using the data that until now was deemed useful only to teams.

“Leagues are much more focused on how they can use data analytics to deliver more value to fans,” he said.

The NBL deal is a departure in strategy for Catapult, which has had no previous connections with any of the teams.

Fortunately, Mr Shiffman said the NBL’s management was very receptive to the idea of an end-to-end deal that not only sees the teams leverage the technology for better performance but also uses the analytics to forge a more compelling connection with the fans.

“Every league is on the table for us now,” Mr Shiffman said.