What Budget 2014 Means for Australian Startup

Innovation is the big loser in this year’s budget.

Budget 2014 sets Australia starkly at odds with other developed nations in supporting tech startup success. It deals a devastating blow to public funding assistance in the startup scene, contrasting the significant opportunities private funds are presenting.

While some startup leaders are predicting a mass exodus of talent and revenue from the country in the wake of this week’s budget, the more conservative are proclaiming a missed opportunity to catch up with the UK and US.

It’s an easy case to make. Recent research by PricewaterhouseCoopers (summarised in this infographic) highlighted the potential for real impact on the local economy from startups. Their study suggested the industry could contribute as much as AU$109 billion and 540,000 jobs to the Australian economy by 2033. It’s a concerning backdrop to Budget 2014, with a chorus of support and global proof falling on deaf ears.

Two major initiatives have been axed in the budget: Commercialisation Australia (CA), which has provided access to over AU$200 million to local startups; and the Innovation Investment Fund (IIF) a resource which connects startups with venture capital. 

In total, eight programs will be scrapped by January 2015, saving a projected AU$846.6 million over five years. Taking their place is the Entrepreneurs’ Infrastructure Program at a cost of AU$484.2 million over the same five-year span. While the new infrastructure program seems little more than a conciliatory gesture, there is hope for startups in the form of the private sector.

Some commentators rightly highlight a shift towards private investment in stalwarts like property and mining. However, led by opportunities like The Big Pitch, offering startups a forum to pitch for up to AU$5 million in upfront funding and operational resources, private funding is set to take centre stage in the minds of founders. There’s no lack of prospects, with Sebastien Eckersley-Maslin (himself on the judging panel for The Big Pitch competition) and his BlueChilli providing an innovative alternative for digital startups.

In spite of any private efforts to bolster Australia’s startup scene, the budget will be a bitter pill to swallow for many hoping to take the next step with their startup. It sinks the stepping stones put in place for founders to build their businesses, taking almost AU$170 million per year out of the startup sector at a time when other nations are increasing their investments in innovation.

The New Economy has gained little traction in Australia, a surprising fact with geographic isolation limiting traditional trade prospects and a talented, educated population opening the door to service-based excellence. That door is being closed by this budget, cutting off essential funds for startups and limiting the global impact Australian innovation could have.

It’s a direction contrary to virtually every other developed nation, whose backing for innovation extends from investment in STEM subject education (science, technology, engineering and maths) to relaxed regulations. Led by countries like the UK and US, startup support is benefitting local economies, with venture-backed companies contributing 21% of GDP in the US. It suggests why emigration to more temperate startup climes is tempting leading Australian startups.

The road to success for Australian startups has been well-charted by global powerhouses like Atlassian. It’s telling of the suffocating startup climate in Australia that the company recently decided to relocate to the UK. It’s a drastic decision, taking a leading light in the local scene to the other side of the world. But commentators rightly stop shy of heralding sinking ships.

Though the decision to withdraw public resources will undoubtedly impact growth in the sector, private investment could provide the silver lining to this budget’s cloud. Investors are as hungry as ever for innovation, and Australian founders can be trusted to provide it… the budget simply seems to have forced the hand of startups – something for which private venture funds will be thankful.