Don't shove us off the life raft, start-ups squeal at federal budget cuts

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Short-sighted savings that represent a shove off the life raft for high tech hopefuls whose bright idea might become the next Facebook or Freelancer.com.

That's the verdict on the 2014 Budget from the ICT start-up sector, following the decision to save $850 million over five years by axing seven programs targeting start-ups and innovation, including Commercialisation Australia.

Hamish Petrie, managing director, ingogo, has accused the government of short term thinking.Credit: Rob Homer

The agency has supported over 500 companies with grants totalling more than $200 million, including high-tech success stories Ingogo, a taxi app developer, and digital publishing pioneer Liquid State.

The assistance programs will be replaced by a five-year, $484 million Entrepreneurs' Infrastructure Fund, with details on how this will operate yet to emerge.

Meanwhile the national technology research agency NICTA has been moved to a self-sustaining funding model. It will receive $84.9 million over the next two years but must find for itself after 2016.

The cutbacks have been condemned as short-sighted and perverse by both wannabe entrepreneurs and those who've already made it.

The Best Day founder Whitney Komor has been on the tools since 2011, trying to turn her idea for an online activity planning service into a website, app and viable business.

It's taken longer and cost more than she expected, even with the $1.6 million leg-up she's received from angel investors and venture capital backers.

"This is why entrepreneurs like myself are in need of support from the federal government to keep us moving forward in order to reach a sustainable position," Komor said.

"I have long been planning to apply to the Commercialisation Australia program to help accelerate The Best Day's development and market growth.

"Without this opportunity, it will be significantly harder to expand to the US in time to be first to market."

Ingogo founder Hamish Petrie said scrapping the program represents short term thinking by the government and will leave a funding gap that cash strapped start-ups like The Best Day will struggle to bridge.

"If we want to diversify Australia away from digging dirt out of the ground, it is essential to help foster the start-up eco-system, otherwise Australian consumers will be paying more and more of their income away to foreign technology companies, many of whom pay very little tax here," Petrie said.

Given most start-ups compete on an international stage and other countries offer significant assistance programs, it's likely many will either fail sooner or flee to more hospitable jurisdictions, Petrie predicts.

Steve Baxter, the founder of ICT incubator River City Labs and a board member of StartupAUS, a not-for-profit group formed in 2013 to foster technology entrepreneurship in Australia, agrees.

"Commercialisation Australia was bureaucratic and could use some reform but it's disappointing to have it axed," Baxter said.

"It's already very hard to grow a global business from Australia – there's no venture capital markets to speak of.

"Companies have to get assistance or move, so if there's no assistance, what's the next piece of advice you have to give them?

"Overall, I'm pretty downbeat on [the Budget]. There's no vision besides budget repair ... It's an exceptionally inward looking plan if there is one."

Tank Stream investment manager Rui Rodrigues said the budget will hurt innovation in general and start-ups in particular.

"We would've liked to see a continuous commitment to innovation with alternative measures supporting the cuts and compensating the reduced investment," Rodrigues said.

Total investment in innovation had been significantly reduced, a move which was out of step with the government's objective of creating jobs, he added.

Suzanne Campbell, CEO of the Australian Information Industry Association was disappointed the budget did not include mooted changes to the employee share options scheme (ESOP) which would allow start-ups to attract high-calibre staff in return for shares in the business.

"In delivering his budget speech tonight, the treasurer said 'the government's focus will be on strengthening the overall business environment so that enterprise large or small can create more jobs in Australia', in this context it is disappointing that the government did not seize the opportunity to announce changes," she said.

Founder of the online jobs marketplace Freelancer.com Matt Barrie said the technology industry is booming globally and Australia's "completely missing the boat".

The country is already an isolated and expensive place to start a business, Barrie said.

Without more government support for new ventures and a push to reverse the massive decline in university enrolments in technology subjects over the past decade, he said Australia would be left behind.

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