Dear Reader,
By now I trust that many of you have seen the outcomes of last night’s Australian Federal Budget Announcement. While I must admit that I am disappointed with some of the decisions made, those affecting the Australian start-up community – a community Talent avidly supports – greatly concern me.
As a business owner I understand that tough decisions must be made to reduce this nation’s deficit. However, I was hopeful these would not affect our burgeoning local start-up market; and therefore I want to take the time to offer a word of support and encouragement to the Australian start-up community, in light of several budget decisions affecting access to research and development and to government grants.
Our comments are known here and in the wider APAC region about the rate of growth in the Australian technology sector compared to our counterparts in New Zealand, Israel, and the United Kingdom. While many of my peers feel it is time to leverage a prime opportunity for positive change in the technology sector, it is apparent that Australia will need to continue to overcome barriers to grow this important industry; including potentially lowered confidence levels as a result of these decisions.
Our main concern with the 2014 budget is the decision to abolish two of Australia’s primary start-up funding programs – the Innovation Investment Fund and Commercialisation Australia. While we saw the demise of the Government’s venture capital arm (responsible for assisting over 503 new businesses in Australia) coming with the suspension of grants earlier this year; coupling this with the Innovation Investment Fund’s discontinuation comes as a harder blow to local start-ups working in an already risk averse environment.
These two programs, as well as another six key programs that have been cut, have been vital to ensuring the sustainable growth of our local technology start-up industry; and now they will be vital to saving the Australian Government $845.6 million over five years – which I feel is short-sighted.
It would be remiss of me not to comment on the new Entrepreneurs’ Infrastructure Program, which will provide $484.2 million over five years in funding. While I support any initiative to assist Australian small business, we are yet to see concrete evidence of how this program (which will leave a financial support shortfall) will be brought to life.
So what does this mean? Well, while Australia continues to lament the softening of the mining boom and reduce access to start-up funding, we risk missing opportunities that our counterparts across the world are taking advantage of.
My fear is that our focus on big thinking start-ups that go on to become larger industry players supporting local employment, research and development, and economic benefits will be lost; and this fear is heightened when coupled with a reduction on venture capital opportunities – which is already particularly small in Australia and destined to continue to reduce year on year without the Innovation Investment Fund’s involvement.
Australia is making progress in the start-up market, and while, many of us would like to see faster progress, we must now focus on ensuring that the sector is supported to continue its current rate of growth.
Earlier this year, Philip Lowe, Deputy Governor of the Reserve Bank commented that we have an ageing nation that is becoming risk averse at the expense of encouraging youthful innovation.
“A more risk-averse society is naturally less inclined to support and finance innovation, to implement new processes and to apply new technologies,” Lowe said
“We are likely to face a greater challenge than we have to date in generating productivity growth. This means there is likely to be more of a premium on getting policies right in some key areas related to innovation” he added
Lowe said Australia needs to address: access to start-up capital for new businesses, tax incentives for innovation, support for research, business culture and assisting entrepreneurs and promoting competition.
Unfortunately, it appears that like Lowe, Australian start-ups are going unheard. While Commercialisation Australia and the Innovation Investment Fund have received some criticism of late, we feel the solution is not to abandon these initiatives but rather work to improve them. We only have to look at Callaghan Innovation and the support it is providing New Zealand’s start-up economy with research and development grants to local technology businesses some 2000km across the Tasman.
Earlier this week I said “While other regional tech start-up scenes languish, particularly Australia’s, dependent almost entirely on dwindling private sector funding, New Zealand’s ICT industry is the fastest growing industry there. Exports have doubled over the past six years and at more than $7 billion it’s the country’s third largest export earner.”
I also spoke with Candace Kinser, CEO, New Zealand Technology Industry Association, who outlined that “In New Zealand innovation is the priority. R&D spending is up 18.9% over the past two years and New Zealand’s high-tech manufacturing companies are spending on average 8% of revenues on R&D. We expect the ICT sector in New Zealand to be the biggest contributor to the country’s GDP by 2020”.
It has never been clearer that as a nation we must rally together to support our local start-up industry to counter any blows to confidence in the start-up scene. It was only last week that I stated in a media announcement that “We need to create confidence within the many brilliant individual technology professionals currently ensconced in their daily humdrum, to sow the seed of belief, that their ideas are valid and they can get it to the next level. They need a sense of bravado and a certain amount of self assurance – without this nothing ever gets started.”
We can counter the abolishment of Commercialisation Australia and the Innovation Investment Fund by connecting venture capitalists with local technology start-ups, by boosting the number of start-up hubs locally, and by showcasing technology professionals and giving them platforms to be recognised.
Recently #StartupAUS published the Crossroads report which suggested practical tactics and strategies to sustain the Australian start-up scene; many of these I support.
In this report Adrian Turner, Founder, Mocana Corporataion and Bordondi Group, outlined “The solution for Australia requires strong, co-ordinated leadership that cuts across industries and states. The need for a shift in government policy, educational curriculum, cultural and capital investment to build a viable and sustainable ecosystem could not be more urgent”.
From supporting entrepreneurial behaviour by university researchers and supporting national programs to raise awareness of start-ups in Australia to developing a national network of student start-up incubators and entrepreneurship centres, the report outlines many ways that we can foster the Australian start-up ecosystem despite last night’s cuts. Of course there are costs associated with this, but nevertheless we should encourage the industry and government to help support these grassroots initiatives.
The fight for the development of the Australian start-up scene is not over. There is no denying that we are facing set-backs with last night’s announcements, but let’s refocus our energies and efforts on non-traditional ways to support the industry.
Let us continue to support the Australian start-up community and showcase our brilliant local talent.
Richard Earl,
Founder and Managing Director
Talent International
