Mixed report card for government innovation push

StartupAUS’s CEO is keeping his hopes in check ahead of the budget

The chopping and changing of ministers and somewhat “diluted” messaging on startups have taken their toll on the momentum of the government’s much-vaunted ‘ideas boom’ some 18 months after the launch of the National Innovation and Science Agenda, according to StartupAUS's CEO.

But although he’s keen to help steer the national conversation back to what he sees as the vital role tech startups occupy in Australia’s future economy, Alex McCauley sees signs of hope.

The government’s innovation portfolio has gone through three ministers since the $1.1 billion NISA was unveiled in December 2015.

Senator Arthur Sinodinos was sworn in as minister for industry, innovation and science on 24 January this year. The senator replaced Greg Hunt, who was given the portfolio in a July 2016 ministerial reshuffle. Hunt’s predecessor was Christopher Pyne, who held the role for less than a year after being appointed in September 2015.

Computerworld spoke to McCauley ahead of the federal budget, with the StartupAUS CEO keeping his hopes in check in terms of big bang measures to boost the tech startup sector.

The changes in the ministry have had the effect of disrupting some measures previously in the pipeline to aid startups — for example, Hunt was keen on a national investment fund for scale-up stage companies — and there’s also the reality that the “appetite for spending at the moment is pretty low,” McCauley said.

His hopes for the budget “are tempered by my perceptions of reality,” the CEO said.

The government’s innovation push has to an extent “become a less focussed conversation,” McCauley said.

“I think it started very clearly as ‘We want to build a local tech sector in Australia and we want to support that at a government level’. Now I think it is a much broader innovation message that the government hopes has got more political appeal.”

However, McCauley added that decisions by the government, such as measures that took effect in July 2016 offering tax incentives for angel investors (including a tax offset and 10-year capital gains tax exemption) and the government’s Early Stage Venture Capital Partnership rules, have had a positive impact on the startup ecosystem.

“Having said that, I think there is a sense that startups are no longer at the top of the agenda and that the innovation message has become a bit diluted,” McCauley said.

The CEO said that he is concerned that the definitional distinction he draws between ‘startup’ and ‘small business’ is getting blurred in government messaging and policy.

The most recent edition of StartupAUS’s Crossroads report argues: “The term ‘startup’ is widely recognised to mean an emerging high growth technology-based business … whereas a ‘small business’ is generally considered to be a business that is providing less differentiated products or services, is often trading in a confined geographical area, and even if it experiences growth will remain a small business over an extended period.”

“Startups, on the other hand, start small but have the capacity to experience massive and sustained growth, often enabling them to become significant players in global industries within a small number of years,” the report — the third from StartupAUS —adds.

“For me one of the really big things is to keep coming back to why startups are important at a national economic level,” McCauley said.

“When people say to me, ‘Oh but isn’t it just a few small companies – isn’t this a small part of the economy — why should we care?’ The answer is that it’s the small companies that are growing that turn into global giants.

“They might not be startups any more when they’re Atlassian or a Seek or Carsales — but they were once fast-growing tech startups. And those are the companies that we are looking to support and engage and they’re companies that are going to employ exponentially more Australians as they grow.”

The employment potential of the startup sector is “really undersold,” he added.

“Lots of these products [from startups] have a global market, so there’s lots of export dollars available for technology products that don’t have a natural border here.

“It’s about national income, it’s about growth, and it’s about jobs — and those messages are messages, I think, that resonate politically but not necessarily messages that people associate with startups.”

McCauley said that while there is some concern that federal political momentum may have “tapered off a little bit”, “the state governments have sort of stepped into the breach in a lot of ways – particularly with Queensland, New South Wales and Victoria dedicating a lot of money to building local startup ecosystems.”

“I think there’s still a lot of activity from governments around the country to boost the startup sector,” the CEO said.

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