Yesterday Prime Minister Malcolm Turnbull, with Industry, Innovation and Science Minister, Christopher Pyne, announced his innovation agenda for Australia’s future. This package of strategies are designed to stimulate the #IdeasBoom, unlocking the creativity and innovative thinking that lives inside many Australians and turn that into jobs. Startups are risky ventures and early stage investment is hard to come by in Australia, with most investors not willing to invest on an idea, instead waiting until an idea becomes a company and the company shows profitability and user demand.
At that stage there’s very little risk to investors, the riskiest times are out of the way and if a company can show sales heading up and to the right, then who wouldn’t invest. What Australia struggles with is funding an idea through its implementation and assist the early stage growth. This is the riskiest part as often an idea is still unproven.
The Government measures aim to help investors look at startups differently in the hope that less of our talented Aussies need to move internationally to fund their idea and start their companies in countries where they hire staff and pay taxes. One way would be direct Government investment in startups, but with the current financial position of our budget, that startup risk is not a luxury the Government can afford. Instead Turnbull suggests tax incentives to Angel Investors and Venture Capital funds will yield the result we’re all after.
Under the innovation package announced yesterday, much of which won’t arrive until after the next election, will offer a 20% tax deduction on startup investments up to $200,000. Given the tax liability of many large businesses are well north of a million dollars, this incentive will likely makes investment firms consider startups in a more serious way. While not every startup will be the next Google, the rate of success required can at times be as little as 1 in 10 successes to make the investment make sense. This is also a common strategy by Governments around the world.
Technology startups have a long history of becoming billion dollar acquisitions down the track, or some even reach the height of a publicly trades stock. Owning even a small percentage of a startup that booms leaves investors with a massive pay day.
Failing fast
One area that Turnbull spoke to, was the issue of companies failing. When the business hits hard times (maybe they had problem scaling, or made a bad technology decision, had competitors enter the market etc), staff typically loose their jobs. Following what happens in the US, companies would now have an equivalent to a Chapter 11, just without the court intervention. What this means is the Government would allow a company to restructure and possible even pivot the company direction, while keeping employees in jobs. There is certainly a risk that this props up businesses that are destined to fail, especially if the problem isn’t product, but bad founders.
Turnbull says that we need to shift the mentality from a failed business as being the end of the line and instead learn from it and quickly move on. He’s right, this has long been the staple of international startups and while it’ll always be easier for successful founders to get funding on their second and third projects, failing shouldn’t be seen in the negative light it is today.
Scientific Research
Prime Minister Turnbull also spoke about the need for scientific research, much of what happens at CSIRO and Universities, to focus more on commercial opportunities for their work. Currently research applications are submitted, approved, funded, conducted and the results published and the cycle repeats. The focus has not been on an actual output form this Government funding of science research. Now the Government suggests, the innovations like that of WiFi in the past, should look to commercialisation, rather than the next funding grant.
We’ve all seen the announcements of a study like ‘the effect of light refraction form disco balls on adolescent mice’ and think to ourselves, why on earth did someone pay to find that out? In an environment where the focus shifts from curiosity about how the world works, to one of making the world and our lives better through innovation that ships as products and services, it will transform the research landscape in Australia.
Programming in schools
It’s widely understood that 40% of the jobs that exist now, won’t exist in the short-to-medium future, many of our exiting jobs, set to be replaced by robots and automation. Australia needs to be producing highly skilled students, that are ready to program those robots, not compete against them. Business efficiency and reliability is a driving force that means in many ways, humans will never be able to compete with robots, but they can in creativity. To achieve the level of coding skills required, the Governmetn is investing $51 million for programming and STEM skills (science, technology, engineering and mathematics).
There’s also a further #13 million for efforts in solving the disproportionate skew of males in STEM areas, focusing on women in tech, and highlighting success stories like high profile female CEOs and founders that have made it to the top of their industries.
Final thoughts
Overall the announcement is a very positive one, I’ve heard many of these investment problems from startups for years and its actually surprising how quickly this became a public issue, with both sides of politics now fighting for the best innovation policy. In relation to policy that directly effects young people, this is right up there. It is disappointing that Turnbull can’t see the link between the best internet strategy (FTTP) and the best innovation strategy. There are businesses and ideas that could only work with a base level of internet connectivity in Australia and with the current rollout of a mixture of technologies, that unfortunately won’t be reached. Designers, developers, programmers, founders all inevitably have to cater for the majority and the reality is, the majority of Australians won’t have ultra-fast internet, sadly other countries will.
The Government launched a new website yesterday to detail the lengthy announcements and you can read all the detail at http://innovation.gov.au/
