Australia still building billion-dollar businesses despite headwinds

Australia continues to build on the fundamentals to support a thriving homegrown start-up ecosystem, with a rapidly growing cohort of $100 million+ companies and the average Series A (later stage funding round) almost doubling in size since 2015, according to Crossroads 2020, the comprehensive annual review of the start-up ecosystem by peak industry advocacy body StartupAUS.

The report also points to global evidence that high-level development jobs typically remain where start-ups are founded, highlighting the value of creating technology businesses locally. Local job creation by venture-backed Australian start-ups was estimated at over 4500 in 2018 alone.

Talent remains the leading constraint to start-up growth, despite the addition of the Global Talent (Employer Sponsored) initiative, aimed specifically at helping start-ups get access to the best tech talent in the world. Other key challenges include the continuing decline in Research and Development expenditure, particularly in the form of the tightening R&DTI, the risk of collateral damage to start-ups from technology regulation aimed at global players and a decline in seed capital and deal-flow.

StartupAUS CEO and author Alex McCauley said, “Along with being known for our sunshine, sporting prowess and lifestyle, Australia is increasingly becoming known for having fostered a generation of remarkable economic success. Our latest Crossroads focuses on how we might be able to maintain that enviable economic record in the decades ahead. Global trends make it clear that technology must play a fundamental role in driving our future of prosperity.”

Professor Glenn Wightwick, UTS Deputy Vice-Chancellor, Innovation and Enterprise said, “We are at a crossroad with start-ups and innovation in Australia. This year’s report is essential for our young entrepreneurs, our policymakers, and our leaders in industry, research, and academia to understand the state of our start-up ecosystem, and to get to grips with what is needed to grow the world-class businesses that will generate the jobs for Australia’s economic prosperity.”

Daniel Nadasi, Engineering Director at Google Australia said, “As Australia looks to increase digital technology investment, our start-up community has a more important role than ever.”

Stephen Rue, Chief Executive Officer NBNCo and leading partner said, “Australian start-ups know instinctively that digital technology is the lifeblood of growth. So, too, is ensuring businesses have the right connectivity to support their needs.”

Regulatory risk

As governments across the globe are faced with thorny regulatory questions on how to address concerns of the populace at large about the role of technology in society, Australia chose to place itself at the leading edge of policy in this regard, with a number of high profile pieces of legislation aimed at curtailing the activities and a widespread ACCC review of the power of technology platforms. There is a real risk that the resulting policy outcomes catch local businesses in the crossfire, causing significant disproportionate harm to Australian start-ups.

The report recommended the following measures:

  • Amend the R&D Tax Incentive to more clearly support Software Claims.
  • Broaden the Early Stage Innovation Company Tax Incentives.
  • Make targeted amendments to legislation affecting employee share schemes.
  • Amend the assistance and access legislation (tola) to reduce scope and increase safeguards.
  • Introduce copyright safe harbour protections for technology companies.
  • Improve speed and certainty for start-ups under the export market development grant.
  • Increase access to public data sets and fund strategically-coordinated, large-scale data collection efforts.
  • Reduce payroll tax for fast-growing young companies.
  • Improve Australia’s entrepreneur visa to make it competitive.
  • Invest in innovation ambassadors tasked with attracting cutting-edge R&D projects from global tech firms.

The StartupAUS Crossroads Report 2020 is supported by a broad consensus of corporate and community partners, including StartupAUS’ Leadership Partners, Google, ACS & UTS, alongside leading investors, scale-ups, and established corporates.

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