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Government rules mean Australia could miss out on creating the next Facebook or Google

Image: Fishburners.

If Google, Facebook, Amazon, Twitter or Uber had been started in Australia, they would have been excluded from support under the Federal Government’s Industry Innovation and Competitiveness Agenda as they don’t fall within the priority sectors.

Because of that, Australia’s peak startup advocacy body StartupAUS says the Government “misses the mark” by assuming startups have the same needs as small businesses.

“Policymakers need to understand that tech startups have different needs from small businesses,” StartupAUS said in its Crossroads report released today.

A bunch of internet-based business models don’t fall under the Government’s five priority sectors, which include advanced manufacturing, food and agribusiness, medical technologies and pharmaceuticals, mining equipment, technology and services, as well as oil, gas and energy resources.

“The proposed sector bias would have the undesirable effect of excluding them from government support – even if they have the potential to be successful on the same scale as tech companies such as Amazon, Google, Facebook, Twitter and Uber,” StartupAUS said.

“It is worth noting that these five companies have a combined market capitalisation of A$1.1 trillion, but had they been started in Australia they would be excluded from support.”

The StartupAUS Crossroads report is required reading for the country’s startup community. It lays out an eight-point action plan which it estimates, if implemented, the startup industry could contribute more than $100 billion to GDP and create over half a million new jobs by 2033.

But it isn’t advocating to establish a replica Silicon Valley Down Under. Instead, it warned against that, saying it world be “fundamentally flawed” and instead inspiration should be taken from the US tech capital.

To promote Australia’s startup sector here’s what StartupAUS thinks needs to be done.

  1. Create a national innovation agency which is responsible for entrepreneurship programs.
  2. Increase the number of entrepreneurs
  3. Improve the quality and quantity of entrepreneurship education
  4. Increase the number of people with ICT skills
  5. Improve access to startup expertise
  6. Increase availability of early stage capital to startups
  7. Address legal and regulatory impediments
  8. Increase collaboration and international connectedness

Pointing to government funding cuts in the 2014 budget where the $300 million Innovation Investment Fund was abolished and the new Entrepreneurs Infrastructure Program was allocated about half that amount, StartupAUS notes that despite a number of developments over the past 12 months, Australia is under-investing in establishing entrepreneurs.

Australia has one of the lowest rates of angel investment and venture capital investment in the developed world. New Zealand has a higher rate.

StartupAUS says by increasing the funding available to startups under the Entrepreneurs Infrastructure Program, offering tax incentives for angel investors and establishing a seed co-investment fund, more private capital could be unlocked and enable more Australian high-growth tech companies to establish themselves.

Compared to government support in our regional neighbours, Australia is performing poorly, StartupAUS says. As a nation it now has one of the lowest rates of startup formation in the world, and one of the lowest rates of venture capital investment.

This chart shows Australia has a relatively low rate of tech startups per million people compared to the rest of the world.

“Tech startups could contribute $109 billion of GDP and add half a million jobs by 2033, but to unlock this potential we need more young Australians having a go,” Google Australia engineering director Alan Noble said.

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