LOST BUSINESS: Robbie Adams says scrapping the Commercialisation Australia program will cost his business immediate international opportunities. Photo: Attila Csaszar

Budget slashes start-up support

It's a case of 'where to now?' for the start-up sector after funding cuts in this month's federal budget.


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The only way I can understand this is that they will eventually introduce or promise new programs or additional funding, probably before the next election. Startups and small business are the engine and future of the economy. Any reduction in funding is short-sighted and goes against what is happening around the world. Even with a real budget crisis, which we don't seem to have, it would be a bad idea.

With every change in Government there is a recurrent trend for the innovation programs to be renamed and rebadged. I remain hopeful that the new program will provide much needed support in a similar manner to that provided by CA but under a new "name"... although it will be months before implementation happens so start-ups will have to stand on their own whilst the formalities of the new program are worked through by the bureaucrats in Canberra. Meanwhile yet more of our most talented people will head for new opportunities in the US, UK and Singapore where the respective governments are smart enough to either get out of the way of innovation (eg positive option plan tax treatment) or actively supportive of the innovation ecosystem (UK and Singapore innovation funding is huge).

From my perspective it is a shame that CA won’t be taking applications. Vine Collective is entering a Proof of Concept stage now and we were going to apply for the CA Proof of Concept 50/50 co-funding scheme. While there was no guarantee we would be successful in our application, having the ability to seek help of this magnitude from the government would have been a huge benefit for us while we are trying to get things off the ground. Only time will tell what the new EIP scheme will offer. Management advice would be great, but in my experience (which is very limited in this space by the way) this is already offered in different shapes and forms through organisations such as ICWA and Spacecubed as well as programs like Incubate. Hopefully there will be a focus on financial assistance in the EIP.

While much of the discussion around the Federal Budget has focused on the cost-side, it is the revenue-side of our economy that needs a greater spotlight. Our debt-to-GDP ratio is far lower than Germany's, but Germany has invested heavily in manufacturing, technology and innovation and will continue to leverage those revenue streams. Australia is relying on a finite resources sector to keep our economic growth afloat, as manufacturing struggles and investment in technology is barely evident. How do our politicians think the Australian economy will continue to grow in the next 20 or 50 years? If they have a plan, they're keeping it quiet. My message to Canberra is to start investing in the future of our economy. One of our best hopes is through supporting technology and innovation. Last year PwC predicted that "The Australian tech startup sector has the potential to contribute $109 billion to the Australian economy by 2033", and the flow-on effect would probably be far greater still. But unless the government equips Australians with the right skills, helps our entrepreneurs access global markets, and raises our early-stage funding to international standards, we won't be able to get there. Australia already trails the leaders in technology and startup investment and with this recent budget we're sliding further back. Cutting $400 million from entrepreneurship and innovation is nothing more than myopic. I hope politicians wake up soon before my generation has to pick up the pieces.

At a time when there is such intense focus on Australia's productivity, it seems counter-intuitive to cut back a program which aids the development of the very businesses and technology that will help boost our productivity in the long term. With a slowing resources sector Australia needs to foster innovation now or risk losing the economic prosperity it has become accustomed to. Australia is already a long way behind other developed nations in terms of support for start-ups and this cut-back only puts us further behind. It's disappointing as it comes at a time when the startup culture is gaining serious momentum around the country.

Last year for me was great for all the advised and support from the start up community. I received education from ignition, the oz app contacts were amazing, spacecube support and all the commercial business learning events and mentoring really helped. It taught me how to plan for commercial business and think beyond the SME style business, and also how to run a business with a lean approach to not waste time or money. The support and education went far beyond though but it would be impossible to put it all in one email. It's definitely allowed be to grow as a business professional, knowing that my path forward is well research and strong. I applied for the CA skills and knowledge grant at the start of this year, after over 6 months of research and preparation for it. I think my application is void now and I hope the new scheme offers good solutions too but I can't lie, it's annoying to have to go through the process again, as it's creates stalls in momentum in the start up community and delays the opportunities these support programs create for businesses.

I read transcript for a speech made by Phillip Lowe, the deputy governor of the RBA, a couple of months ago called "Demographics, productivity and Innovation" that I find is particularly relevant to this issue. The main issue that this speech addressed was how would Australia cope with it's ageing population, from a productivity perspective moving forward. During his speech, Lowe pointed out that as a society ages it inherently becomes more risk adverse at a cost to its productivity. Lowe was of the opinion that it would be critical to develop effective systems to support entrepreneurs to address this issue moving forward. Lowe made five recommendations for addressing these challenges: • The way in which we finance innovation, including the access to start-up capital for new businesses. The Financial Sector Inquiry will no doubt look at this issue. • The incentives for innovation that we establish through the tax system. • The way we support human capital accumulation and research. • Our business culture and the way we promote and support entrepreneurship. • The way in which we promote competition in our markets, for it is often competition, or the threat of it, that is the driver of innovation. I believe this speech outlines how important entrepreneurs (or people who are willing to take risks in the business environment) are at driving increases in productivity within a society through innovation. I don't need to spell out the fact that without productivity improvements a society with an ageing workforce can only go backwards. Therefore I find it particularly disturbing that in a budget that has apparently been designed to "protect our nations future", the government has chosen to slash funding in the area identified by one of our nations leading economists as being essential to addressing the challenges faced by our ageing society. It would appear that we should be investing more in finding ways to support these risk takers within our business environment as they are the ones driving the innovation essential for growth. I think that this issue reflects the overall pessimistic theme of the budget where the government is desperately looking for ways to save money, rather than supporting programs designed to drive new growth, to the great detriment of our country.

In relation to CA and the IIF, the Government's Commission of Audit (CoA) report states: “there is no clear reason for the Commonwealth to provide this assistance in competition with private sector providers.” While it would be wonderful if this was true and Australia's technology sector was highly competitive internationally, and churning out tech startups that were the envy of Silicon Valley VCs. The reality is that our tech sector is young, small and malnourished compared to global norms. Perth's per capita early stage funding is ~$3/person/year compared to Silicon Valley's average of $3,945, Israel $170, USA $75, Norway $50, France & Britain $14, New Zealand $10 and the 2012 Australian Olympic team $14. Investors need good deals, and despite all the hype that you can build a billion dollar company on ramen noodles and a laptop, startups still need funding to build the innovative tech that attracts money - whether that be from a customer or investor. It's a catch-22 situation that in the valley is bridged by experienced super angels that consider early stage funding a hobby. In Australia's case we either need wealthy miners to start taking punts on early tech or government to help bridge the gap. Probably both. One of the strengths of CA (despite the CoA's uninformed comments) was that CA funding didn’t compete with private sector funding sources, rather it was matched funding that facilitated and encouraged private sector funding. If we don't create a healthy local funding market that attracts foreign investment in innovation (like Israel successfully does), founders - whether that be Twiggy from Fortescue or the boys at Atlassian - will continually seek capital from US and European markets.

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