And with the company itself matching the government funding dollar for dollar, the program is an extremely cost-effective way for the government to both trigger and nurture innovation.

In our case, we had secured $1.2M of private equity funds from Singapore to meet the dollar-for-dollar CR criteria. And we were just days away from a decision on the grant application – that we were expecting to be positive – as the matched funding element was the final milestone we were required to achieve. After close to 18 months and 1000 hours of effort (easily $200k), it is an injustice to have the doors slammed on us after so much work.

Sure, Treasury will say that industry will get on with it anyway, and this is true. However, the government is grossly naïve to think that they cannot positively influence the acceleration of a competitive advantage for Australian technology in helping companies get traction in the market early.

Let’s keep working together to bring about a positive change.

Michelle Melbourne, Intelledox

There is very little early stage VC money available in Australia and in much smaller amounts per investment than in US. (we have VC funding but I see my peers in similar companies in the US getting 10x the investment for similar businesses).

Large funds in Australia may have 100-200m to invest. Recently I pitched to 2 funds in US who between them had $13 billion under management and $2 billion to invest immediately.

We spent time and wages worth approx $10k in preparing and was within a week of lodging our application when Comm Ready was axed

Its ok for a Government to take office and make changes to programs or launch replacement programs. However to cut a program and provide no replacement and no plans for a replacement for the foreseeable future is not very forward looking.

Governments think in years, innovation businesses think in weeks or days. It will mean a lost year for Australia’s Innovation Businesses and nothing will get that back.

Sadly without sounding too liberal, I just dont thinkLabor gets Business, its just something that pays wages for their union workers.

They dont understand how to start, grow or run one they dont understand what it takes.

They dont understand that it takes 1000s of entrepreneurs all having a shot at the title to produce a BHP, QANTAS, Google, Westfield or any of the innovative businesses that we all admire and that employ millions of workers.

Mike Nicholls
CEO
Enikos

As a consultant to technology-intensive manufacturing businesses I’ve worked with clients to plan for CR, prepare CR applications or ensuring the CR grant was used effectively. This experience suggests that:
1) The companies that were recipients of CR grants, and therefore most affected by the cancellation of the CR scheme, are early-stage knowledge-intensive, high-growth: exactly fitting the description of the only manufacturing sector capable of survival in the face of competition from countries with low labour costs.
2) CR reduced the risk to investors and thereby encouraged risk averse super funds to invest in these knowledge-based industries; greatly increasing the volume of VC funds
3) By reducing the amount of equity capital that start-up firms needed to raise, CR gave those firms flexibility about the source of funds and limited the number of firms selling out prematurely to off-shore interests
4) CR enabled some firms to pursue product development projects that would otherwise not have been viable and also encouraged conservative firms in declining industries (TCF, Automotive etc) to venture into new, uncertain but growing sectors after decades of stagnation

Lets keep up the protests to ministers and the Innovation Review. This issue is too important to just become budget road-kill.

This decision to cancel Commercial Ready will without a doubt result in the premature death of many Australaian innovation companies that would otherwise have been successful wealth creators for Australia, and the migration of many others overseas.

However, I think that Larry Lopez (Comment 26) is absolutely correct in saying we need to build a private venture capital base in Australia. There is an interesting commentary from ABC Radio’s counterpoint program on this very issue at http://www.abc.net.au/rn/counterpoint/stories/2008/2255607.htm

We cannot wait while governments procastinate over this vital issue. All those disaffected by this decision, and in fact all Australians, need to work together to help stimulate innovation investment from the private sector, both locally and overseas.

I’m hoping that James and the innovation community would be interested in this as a way forward, albeit a long term one.

Entrepreneurs are typically a focused mob but usually on their own obsession, I agree we need a greater voice together

Worse it makes the decision to move the whole operation OS. So instead of the 2 dollars spent here developing talent and supporting the lawyers, accountants and ancillary support industries like design, marketing etc – the one dollar will be exported and spent OS.

The upside is that somewhere a ring road will get funding!!! Winning thinking.

The government was probably right in saying that most projects will still go ahead without Commercial Ready but they will go ahead with far less benefit to the Australian economy.

For example, we are now planning to outsource a lot of the development work for our project to Eastern Europe where I have had success with web developers working for my web development company Digital Monkey. They will get the work done but the money will flow out of Australia.

Also, we expect the project to take almost twice as long without assistance. This will result in a less commercially viable product due to the massive impact on time to market and the reduced competitiveness that it will most likely bring. This gives our competitors in the US, Japan and Europe a boost.

While this is all bad, I think the axing presents an opportunity for us to lobby for something that I believe will be even more beneficial to startup tech companies than Commercial Ready – tax incentives for Angel Investors to invest in R&D focused companies. This coupled with the removal of prohibitive finance laws which prevent real Angel Funds from being setup would provide a real stimulus to the commercial funding of R&D in Australia.

This will not only help in the short-term, funding startup technology companies, but it will also help to develop Australia’s venture ecosystem from the ground up. Such tax incentives in California are instrumental in encouraging the development of Angel Funds which then feed companies into the venture funds.

The abandoment of inovavtion in his country cuts to the core of the governments naivety and lack of understandings of the potential impacts that we will see as a result of this ill concieved policy change.

We have previously resisted grant assisstence from our Asian neighbours due to the availabbility of CR grants and and our desire to develop our technologies and the skill sets around them here in Australia for our collective benifit.

The lobbying efforts of all are now required to force change and a rethink by the governent. This cut makes the government look ordinary on many fronts so lets make sure all hear and know of this policy disaster or should I say lack of policy disaster.

Maintain the rage and hopefully we as a group can seek change.

I have seen this advice so far in the comments:
Allan Aaron says
“its imperative that anyone with an interest in seeing this situation redressed makes a strenuous argument to the national innovation review at innovationreview@innovation.gov.au and, of course, to their government representatives.

Tim says:
Perhaps James or Chris could offer a place where participants could contribute their thoughts.

Paul Cheever says:
….I now want to prepare and distribute across the governments and the Panel a profile of active venture interests stories

Liesl asks:
If we want to take an active role in lobbying government, and show quantifiable national benefit of the grants, and the loss to the country of CR dying, where should we make a noise?

I also want to add to the earlier comments about cultural support of innovators. I have also built companies in other countries, and in Australia being an entrepreneur still seems to have the flavour of scorn than glory attached, relative to other countries. It felt very nurturing having a government grant which said “Good on you, keep doing what is in your DNA to do, dont go overseas or start a chain of coffee shops.”

Liesl

That being said, the way the cancellation of the program was handled is shameful! At a time when Australia is thriving and the government is awash in resource generated tax revenues, it is imperative that other industries not be dealt unexpected policy blows. The resource boom will not last forever, Australia must continue to build its knowledge based economy. Pulling the rug out from under a number of good companies does not indicate to me that the current Federal government are the progressives they purport themselves to be.

In the long term we must work to build a viable and well funded venture capital base in Australia. Then we won’t have to worry about the capricious behavior of government.

Many of the countries where VC thrives enjoy active local investment in venture funds from local institutions. Sadly this isn’t always the case here. Until this occurs on a broader base here in Australia, we will remain handicapped. The VC industry must continue to deliver strong results, and the investors must keep an open mind to local VC as part of their alternative investment policy.

In the short term let’s hope there aren’t anymore surprises looming.