Monday, 07 May 2018 11:49

Start-ups need more govt support: Budget plea Featured

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Start-ups need more govt support: Budget plea Image courtesy of Stuart Miles at FreeDigitalPhotos.net

The Australian Government has come a long way in offering grants and tax incentives for the start-up community and its investors, but according to one tech start-up it is still very difficult to get the right level of support for a startup in Australia to truly thrive.

Speaking ahead of tomorrow’s Budget to be handed down by Treasurer Scott Morrison, Tim Bos, co-founder and chief executive of sharing services marketplace ShareRing, said in Australia, the government needed to do more to fund the overseas expansion or relocation of a start-up.

“In addition to this, whilst we have a great R&D Tax Incentive, it is only good if you can afford to hire the majority of the skills from within Australia. Sometimes this is just not possible, either because of cost, or resource availability. It would be great to see the government take a more global approach to these types of incentives.”

According to Bos, the government seems to reward a start-up for doing everything in Australia, which he says “stymies our ability to actually grow our companies to a point where we can find the best talent and the most customers”.

“For example, in Silicon Valley, a lot of governments from other countries actually support a company when they decide to relocate part of their business there, because they know that, ultimately, the skills and income will likely flow back to that country’s economy.

“Australia almost got there with their launch of the 'landing pad' in San Francisco, but it was an underfunded, half-baked effort to build the Australian start-up community there.”

In pre-Budget comment, another start-up chief — co-founder and head of Strategy of Blockchain venture studio Typehuman, Julian Waters-Lynch — says he wants to see measures that contribute to well-informed regulatory evolution towards cryptoassets.

“Just like the Internet, the technological revolution that began with the bitcoin blockchain creates great opportunities for entrepreneurship and innovation, but it requires appropriate regulation to unlock.

“Our interest is in the potential of blockchain technology to unleash a wave of innovation that addresses many current social challenges, and an area we are particularly interested in is regulatory development towards cryptoassets.”

According to Waters-Lynch, many places around the world are rethinking their regulatory approaches to blockchain-based innovations. “Countries like Singapore, Estonia and Switzerland have led the way here, other countries are catching up. France, for example, just reduced its capital gains tax obligations on cryptoassets from 45% to 19%.”

Waters-Lynch says he believes cryptoassets should be redefined as a novel asset class, with particular clarification of the legal difference between ‘security tokens’ and ‘utility tokens’.

“We are seeing some interesting regulatory innovation emerge on the subject, most recently in the state of Wyoming in the US. In Australia, we find many entrepreneurs and startups want to do the right thing, but the regulatory details around how they handle and issue cryptoassets is still a grey zone.”

In his pre-Budget comments, Dr David Ballerini, the co-founder of Melbourne-based payments start-up Liven, said the innovation agenda was released only two years ago, but he maintains the Turnbull Government has failed to live up to its promises.

“In late 2015 the Turnbull Government talked the talk, saying they were committed to embracing innovation and science in Australia, but they failed to walk the walk and back this up in the 2017 Budget, proving that the innovation agenda was more hype than substance, with most of the benefits going to traditional industries instead of start-ups.

“As they neglected the start-up community in 2017, it seems likely they will again with this year's Budget, with recent talks of capping the R&D Tax Incentive scheme already scaring away investors from Australia’s nascent start-up environment.”

According to Ballerini, if the government “continues to let down” the entrepreneurs of Australia with this year's Budget, they risk accelerating the "brain drain" of Australia’s best and brightest entrepreneurs – “those who have the passion and capability to shape the future of our economy, instead look overseas to locations where they are better supported in their project endeavours”.

Ballerini says that in addition to losing Australia’s best entrepreneurs, the government neglecting Australian start-ups will also run the risk of alienating investors, particularly those from overseas. “This would be a huge blow to early-stage companies looking to raise the capital that is essential to their growth,” he warns.

“As well as helping contemporary startups get a leg-up in the competitive international landscape, it is critical that the budget lay a strong foundation for the next generation of budding entrepreneurs, and the best way to achieve that is to invest in education and in particular the STEM fields.

“We are on the brink of a technological revolution as blockchain explodes across global industries. Investing in technology and innovation is Australia’s best bet for getting ahead, and ensuring students have access to the resources required to help them develop into leaders. Information technology is critical for Australia’s economy as we move away from manufacturing industries and into a service economy.”

According to Ballerini, it’s time the government bring back and build upon programs such as the defunded Commercialisation Training Scheme to give STEM students and researchers the tools they need to translate their tech skills into entrepreneurship and market-focused innovations.

“If the Turnbull Government is serious about innovation, as it has claimed to be in the past, then instilling entrepreneurial spirit into the next generation of young Australians should be leading the agenda. Invest in programs that educate our rising techstars on topics of entrepreneurship and commercialisation of technology. These values have not typically been included in the curricula of Australian schools and universities in the past, but it is essential that they become mainstream within Australian culture if we hope to remain at the forefront of global innovation,” Ballerini concludes.

“There should be no talk about R&D programs being reduced or capped, rather R&D incentive schemes should be expanded,” warns Ben Thompson, founder and chief executive of HR, payroll and benefits platform Employment Hero.

Thompson says the biggest technology companies on earth (Apple, Amazon, Google, Facebook and Microsoft) are growing by about 40% each year and collectively spend $70 billion on R&D.

“This compares to just $20 billion spent by all Australian businesses combined. This year's budget needs to help Australian businesses keep pace by opening up, rather than narrowing, the opportunity for R&D subsidies,” Thompson suggests.

And, Shendon Ewans, co-founder and chief executive of digital bill payment service Gobbill, says the R&D tax incentive is an important lifeline for start-ups to continue investing in innovative solutions.

“Gobbill has spent the last three years and most of our funding on R&D to develop artificial intelligence in fraud checking and bill payment automation, which has allowed us to file local and international patents and export contract opportunities.

“This is testament to the fact that the tax incentive should remain. Any notion to reduce or cap it may have an adverse effect on Australian innovation,” Ewans cautions.

As iTWire has also reported, a number of ICT firms have expressed fears that the federal government may change the R&D Tax Incentive in Tuesday's budget, making their existence in Australia that bit more difficult.

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Peter Dinham

Peter Dinham - retired in 2020. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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