The call is clear – government and angel investors need to do more to help startup businesses.
The call is clear – government and angel investors need to do more to help startup businesses.
Nobel Laureate Barry Marshall made the case at a Business News Success & Leadership breakfast earlier this month, and the head of the nation’s principal lobby group for tech startups, Peter Bradd, has echoed the call.
Mr Bradd, the new (and first) CEO of StartupAUS, spoke to Business News during a recent visit to Perth, where he also met local members of the startup scene.
“You can put your money into property or shares, but with a startup you can really make a difference.” Mr Bradd said.
“Most of my friends who have made money in tech startups continue to invest in them because of this reason. And it’s fun.
“It’s not hard to connect with the startup community here in Perth. You can walk down to Spacecubed and talk to Brodie (McCulloch), or attend an Innovation Bay dinner.
“If you get it right, the carry on deals can be fantastic. And it does not cost a lot to get involved; with $10,000 you can make a meaningful impact, if you do it early.”
Mr Bradd said government also had a crucial role in this regard, and pointed to the support received by startups in the UK, as outlined in StartupAUS’s recently published report ‘Crossroads 2015’, which is in stark contrast to how things operate in Australia.
“In the UK, the EIS (Enterprise Investment Scheme) encourages investments in small private companies,” Mr Bradd said.
“This allows you to invest into those schemes, and if you make a loss you get income tax relief, and if you make a capital gain you are exempt from capital gains tax.
“So the worst case is a tax write-off. It’s a very successful scheme, and other countries are looking at it. We are trying to encourage the government here to introduce this.”
The ‘Crossroads’ report highlights the fact that 40 per cent of Australian jobs could disappear due to digital disruption in the next decade. It is the fast-growing sectors (such as tech startups) that are creating 70 per cent of the new jobs.
“If you consider that Apple, Google and Facebook are collectively worth more than the entirety of the ASX ... and that Facebook only started in 2004, Google in 1998, and Apple’s growth was mainly in the past seven years, then we need to take this sector really seriously.”
“Singapore has a $5 billion program, China $8 billion, South Korea a $5 billion fund ... and they do co-investment.
“In Singapore, if you can find investors to put up 15 per cent of the money, then the Singapore government will do the remaining 85 per cent.
“Our government needs to realise that talent is perfectly mobile; anyone can buy a flight to Singapore for a couple of hundred dollars, and they’re gone. They’ll give you a visa, funding, better tax deductions – why would that person stay in Australia if there are better things in Singapore, UK, Canada, US, even New Zealand? At a minimum, we must keep our talent here.”
The ‘Crossroads’ report argues that there are eight conditions for a vibrant startup ecosystem in Australia: a pro-entrepreneurship right culture; guidance from experienced entrepreneurs; right regulations; collaborative culture; visible successes and role models; risk tolerance; availability of capital; and technical skills.
Barring iiNet founder Michael Malone, there have been few tech success stories to shout about in this part of the world, but Mr Bradd said this need not matter.
“Over here your ecosystem is well developed, plus you have people like Bill Tai and Larry Lopez who have solid Silicon Valley experience,” he said.
Money makes a difference, too.
“About $100m is invested annually in tech startups in this country, yet $200m is invested in the Melbourne Cup on one day,” Mr Bradd said. “The amount gambled on poker machines is $10 billion.”
Professor Marshall called for a $100 million fund to kickstart investment in startups.
