StartupAUS - a not-for-profit entity with a mission to transform Australia through technology entrepreneurship - has called on the government to urgently develop an overall strategy to accelerate the growth of Australia’s tech sector and to bring the country into line with the rest of the world when it comes to supporting startups.
StartupAUS says many of the key issues affecting the startup ecosystem such as lack of venture capital, lack of technology and entrepreneurial skills development, and a lack of investment in soft infrastructure, have simply not been addressed in this year’s budget.
The organisation does, however, acknowledge the government’s moves to support crowd-sourced equity funding and to fix the tax treatment of employee share schemes, and applauds financial measures that make it easier for Australians to start new companies.
“Startups are emerging high-growth technology-based businesses that are tackling global markets and have the capacity for massive and sustained growth, enabling them to become significant global businesses within a short period of time. Worldwide startups have been shown to be a major source of job creation and economic growth.
“On the other hand, most small businesses provide less differentiated products or services, are often trading in a confined geographical area, and although they provide an income to a significant proportion of the workforce, are generally not a major source of economic growth or job creation.”
As Peter Bradd, StartupAUS board member, comments, “The budget does contain big wins for small business, but not the big wins we need for tech startups in Australia”.
"People ask me where are the future jobs going to come from. We know that high-growth businesses create the vast majority new jobs. In the United States, research from the Kauffman Foundation shows that the fast growing 4% of companies there create 70% of the new jobs. Research in the United Kingdom has seen similar findings of 1% of companies creating over 68% of new jobs, and the conservative government has implemented the Future Fifty Program to encourage more growth-stage digital businesses.
"It is widely accepted that tech startups are amongst the fastest growth companies. This demonstrates that the Government is grasping the problem of moving away from an extractive economy to a knowledge driven one, with services and small business prioritised.
“However, we need to put tech startups on the top of the agenda if Australia is to safeguard its economic future.”
StartupAUS urges the government to use the learnings from other countries that have been set out in detail in the recent Crossroads report for building a competitive startup ecosystem in Australia, as it develops its own startup-focused policies and programs, “and to engage with the startup community to ensure it is developing programs that will have the maximum possible impact”.
According to StartupAUS, the government has no commitment to creating and implementing a national innovation and entrepreneurship strategy, but it wants one urgently developed and for a central agency to be established to drive the innovation agenda.
It further comments that, “The lack of policy co-ordination and funding for implementation reduces the effectiveness of existing government programs, while decision making regarding regulations and support for startups is falling through the cracks as a result of there being no single portfolio with responsibility for innovation and startups”.
And, while acknowledging that the government’s announcement of plans to reduce red tape and lower costs of business formation is positive for small businesses, StarttupAUS says it is of limited relevance to tech startups, “which are still lacking many of the basic support programs available to startups in other countries”.
In further criticism, StartupAUS harks back to the government’s budget last year announcing “saving of $845.6 million over five years” by scrapping Commercialisation Australia and the Innovation Investment Fund – “a reduction of support of nearly $170 million a year”.
Of this week’s budget, StartupAUS makes the point that the Entrepreneurs’ Infrastructure Program (EIP) is now the government’s only substantive program remaining to support tech startups, and that’s now been subjected to funding cuts totalling $27.3 million over five years.