Budget 2014 - Budget kills 'vital lifeline' for tech startups: StartupAus

Startups are in an uproar over the killing of Commercialisation Australia and other cuts in the federal government’s 2014-15 budget.

Commercialisation Australia, a $213 million grants program for startups, is one of several technology cuts in last night's budget.

Juxtaposed with a stock image of businesspeople shaking hands, the Commercialisation Australia website now displays a message announcing it is closed to new applications.

“The Department of Industry through AusIndustry is contacting all applicants directly with advice on the status of their application.”

The government also cut the Innovation Investment Fund, a venture capital program that has co-invested more than $300 million with private sector investors in venture capital funds to grow startups.

While closing those programs, the government announced $484.2 million for a new Entrepreneurs’ Infrastructure Programme and a Single Business Service.

“The new programme will bring research and business together to develop and commercialise home-grown ideas and equip small to medium enterprises with the management and business skills to lead change and expansion,” according to a statement by Minister for Industry, Ian Macfarlane.

Also, a new $20 billion program will provide funding for medical research. It will be the world's largest.

StartupAus, a group formed by Google and several big players in Australia's startup scene, to advocate for Australian tech startups, said the “abolition of Commercialisation Australia removes a vital lifeline for local startups and much needed support for angel investment.”

Commercialisation Australia “has so far supported over 500 companies with grants in excess of $200 million,” it said. “Much of this funding has gone to companies such as ingogo, Liquid State and 121cast who take this initial funding, build a viable business, and go on to raise additional private funds.”

As for the new Entrepreneurs’ Infrastructure Programme, StartupAus said there is “not enough information ... to form a view about its usefulness, or relevance to tech startups, at this stage.”

Steven Baxter, a board member of StartupAus and managing director of Brisbane co-working space River City Labs, blasted the cuts.

“The reality is there’s nothing in this budget that indicates the government wants to support tech startups in Australia,” he said.

“The concerning top-level conclusion is that a ‘saving’ of $845.6 million over five years is another way of saying the government will reduce its support for innovation by nearly $170 million a year.”

“Commercialisation Australia and the IIFs were not handouts, they were valuable early stage funding mechanisms that enabled great ideas to be commercialised and startups to get their product to market. Their loss pulls the rug out from under a large number of startups, and will have an immediate impact on our startup ecosystem.”

The Australian Information Industry Association (AIIA) applauds the creation of the medical research fund, said AIIA CEO Suzanne Campbell.

However, "the AIIA is seeking to better understand how the establishment of the Entrepreneurs' Infrastructure Programme will redress the abolition of programmes including Commercialisation Australia, Enterprise Connect, Industry Innovation Precincts and Industry Innovation Funds, to ensure that Australia is well positioned to create sustainable prosperity and meet emerging global competition," she said.

Startups react

Startups who had received funding from Commercialisation Australia mourned the body’s loss.

One is taxi app startup Ingogo, which had received a $250,000 grant from the government fund.

“It is such short term thinking by the government to stop it,” said Ingogo founder Hamish Petrie.

“It filled a funding void at a critical stage of the businesses development and corrects a fundamental flaw with pure market economics. There was nothing wrong with it, it wasn't broken and was performing a very important role.”

He added that cutting the program will increase the likelihood that startups “will fail or simply leave the country to more supportive ecosystems.”

BliiP Employability co-founder Tony Wheeler said his startup would not exist without Commercialisation Australia.

“We would not have been able to fund the very early stage needs of IP protection, legal structures, etc.”

Another startup, mPort, had been applying for an early commercialisation grant from Commercialisation Australia when it was informed in February that the process had been frozen and put under review.

"We're disappointed at the decision of the Australian Government to axe the Commercialisation Australia program given it was a vital source of funds for innovative and cutting edge businesses such as mPort to accelerate and commercialise their development,” said managing director Dipra Ray.

“However, given the advance warning we received in February regarding the freezing of the program, as a business, mPort has been able to plan around the likely removal of the program.”

The startup, which is building 3D body scanners, is also exploring whether it can tap into the new medical research fund, he added.

Adam Bender covers startup and business tech issues for Techworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam

Follow Techworld Australia on Twitter: @Techworld_AU


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