Home Articles The decline of Australian startups: What can we expect from the Government?

The decline of Australian startups: What can we expect from the Government?

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Last week’s ANZ Bluenote highlighted an alarming fall in the number of new Australian startups, total startups, and an acceleration in those exiting. This is concerning for a number of reasons, as pointed out by the authors, including:

  • Startups (and small business growth) are a key economic bellwether;
  • A few successful startups can create a substantial number of jobs;
  • It appears Australians are not capitalising on technological shifts as they could be; and,
  • It spurs questions about how enterprising and entrepreneurial Australia actually is.

The benefits of a strong, entrepreneurial startup ecosystem are well known; a much-cited recent report (commissioned by Google Australia and produce by PwC) suggests startups could contribute well over $100 billion and half a million jobs, amounting to 4 percent of Australian GDP by 2033.

The value to the economy is certainly impressive, but the human value of entrepreneurship is also considerable, with new goods and services hopefully making life easier, safer, more interesting and more fulfilling.

That startups are an essential part of the economy and should be nurtured is increasingly accepted as a given. Enterprise is intensifying its efforts to partner with startups, rather than shut them down or buy them out, and various Australian governments have tinkered with programs to nurture startups. We will know current Government’s position more fully after its report on the new Entrepreneurs’ Infrastructure Programme (EIP) is released, although there was little in the discussion paper that appeared to be aimed at the tech startup scene.

The great disconnect between the rhetoric about local entrepreneurship and Australian reality outlined by ANZ are concerning, and somewhat confusing. The startup ecosystem does not appear to be getting the support it needs to realise its potential economic benefit, and Australia’s falling entrepreneurial engagement clashes with our self-image of being innovative and pioneering.

The reasons behind the recent decline in Australian startups are undoubtedly complex, but commonly offered insights include a lack of local venture capital, unreliable government policy, a focus on funding enterprise and government research (e.g. CSIRO and biomedical), lowered confidence post-GFC, a shortage of niche top-end talent, and the generic Australian being a “difficult” place to be a startup.

But, this misses the point: entrepreneurs will be entrepreneurs regardless of the settings. As they always say, if this was easy, everyone would be doing it.

This raises questions about what the startup ecosystem wants, what can be done to help it, and how much of what types of assistance it should receive. What the sector wants is relatively unclear, but some involved in supporting, incubating and accelerating startups have made their case strongly in submissions on the EIP consultation.

StartupAUS noted in its submission that the level of finding for the Commercialising Ideas stream of the EIP if funded at well under half the level of the former Commercialisation Australia. To conclude that this will not assist in altering the course of events outlined at the start of this article seems reasonable. To conclude it may exacerbate the decline also seems reasonable.

AngelCube argued for something of a public private partnership in its submission, suggesting the Government use venture accelerators as a vector for supporting startups that have already passed something of a gatekeeper or vetting process. Given the Australian Government’s preference for providing support to established business sectors (or not, if you’re car manufacturing) rather than in a piecemeal fashion, this also seems unlikely, however wise it may appear.

This distinction between established businesses and startups is essential.

Given the contribution of small business to the economy, and that small business has a seat at the Cabinet table, it is perhaps not surprising the EIP appears to be focussed on small business.

The absence of a Minister for Innovation or similar, and that startups are (rightfully) at pains to differentiate themselves from small business generally, places the startup ecosystem somewhat out in the cold as a political level.

Australian governments are very receptive to guidance from industry, and particularly inclined to holding consultations. Enterprise and other lobby groups often contribute to the shape, tenor and implementation of government policy.

Not having a widely-recognised, formal and vocal peak body will make startups’ aims of being understood and supported at a Commonwealth level more challenging. Groups without a voice at the table or the ability get their concerns echoed around Canberra can struggle to get their desired outcomes.

Given the proposals in the EIP consultation and the weak advocacy position, it appears the startup ecosystem should perhaps prepare for a less-than-ideal outcome from the looming policy iteration.

Dominic Collins is a public affairs professional, specialising in stakeholder engagement, position development, communications and advocacy. You may remember him such articles as Three things Game of Thrones taught us this week. He is a consultant at edgelabs. And, is currently being an intern for a 12 year old, socially-minded entrepreneur.

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