The latest federal government budget continues to confuse tech startups with small businesses.
Here’s a definition of a startup, from Startmate and Blackbird Ventures founder Niki Scevak.
“A startup to me is defined by its ambition to grow very, very quickly,” he says.
“And so a startup in the beginning looks like small business, but is something different in that it is aiming for a very large outcome. To grow a business very quickly you need to be aiming for a very, very large market. So you can’t be attacking something that is a small and trivial problem. So it’s a function of ambition.
“All of the high growth companies in the past decade have been technology companies. But even that, technology is an enabler of scale, but not necessarily tied to a definition of a high growth company. A high growth company can be many different things.
“These companies in the beginning look quite frankly like jokes. They’re started by people with barely a university degree, no commercial experience; they’re started in markets that are incredibly crowded.
“Atlassian was the 100th bug tracker, Bigcommerce the 100th shopping cart and Campaign Monitor the 100th email newsletter.
“These lighthouse companies grow to tens and hopefully hundreds of millions of dollars a year, employ hundreds or thousands of people; and I think if we produce more of these iconic companies, that’s the catalyst to see the ecosystem grow.”
It’s a point not missed by Australian startups. Here are some thoughts from a number of Australian startup founders and CEOs on the latest budget.
Mr Hockey tells us that “this is a budget for small business people who want to innovate and grow”, unfortunately it is not a budget for startups. The government needs to distinguish between small businesses and startups, which are typically high growth technology businesses.
Startups need more than tax deductions we need to tackle the IT skills shortage and promote education in science, technology, engineering and mathematics (STEM), which are critical more broadly for productivity and innovation. We need to reduce compliance costs and red tape so that it is easier for startups to raise capital locally.
The government must differentiate between startups and small business. To truly help the sector, and growing tech businesses like ours, we want to see more assistance for research and development in the technical space. I would use the funding for ongoing development, which means keeping the intelligence and innovation in Australia and not overseas.
The changes announced in relation to removing obstacles to crowdsourced equity funding will certainly help to provide an additional funding option for startups amongst the limited range of options that currently exist domestically.
There are some important additional steps that can be taken though to encourage much more material funding flows. This includes mandating an allocation to early stage venture funding under the Significant Investor Visa Programme and it’s something I hope the government will take a closer look as part of the review they’re currently undertaking.
The 1.5% tax break is good for existing business, but from the perspective of increasing incentive to start a startup there’s not a lot out there which makes it easier or more cost effective.
It’s a step in the right direction, but we’d love to see better incentives for startups, things like payroll tax reform. (Employee Share Option) makes it easier for startups, that are high risk, high return, to incentivise high quality staff to stay here in Australia.
This is good news for small businesses which are generating revenue; however, more investment in research and developing and early stage startups is required. Increased investment and belief from the government in the startup sector – for example, equity crowdfunding options – would enable the Australian startup scene to become more agile and enable us to build the Silicon Valley of the Asia Pacific.
Small businesses are the hearbeat of the nation. One fifth of our entire population works in a small business and that’s why it’s vital the government does everything possible to help this important sector where possible. I support the government’s tax breaks for small business. Small businesses want certainty, especially around cash flow and how they’re going to grow and hire.
We’re excited about the upcoming changes to the Employee Share Scheme laws. As a startup, we’d prefer that our team has equity in the company so that they think of the company as their own. Team members with equity think more like business owners than employees, which is exactly what we want.
We’ll get a small benefit for the tax deduction on asset purchases; everything helps when running a lean business. The reduction in the company tax rate is also positive but will become more relevant to us in the next few years.
The Australian government seems to misunderstand the distinction between small business and startups. Startups are high growth entities with huge potential to scale internationally. Whereas, small businesses are more localised and have few employees. Both entities have different needs and to have one uniform policy is to do injustice to both.
While these proposed changes are great for small business, the package will have little impact on startups and little impact on job creation, economic growth and Australia’s position on the global stage.
Do you know more on this story or have a tip of your own? Raising capital or launching a startup? Let us know. Follow StartupSmart on Facebook, Twitter, and LinkedIn.
Kye began his career at a Fairfax daily on the North-West Coast of Tasmania. He has since taken his belongings, and keen interest in technology, to Melbourne. He has a bachelor of Arts majoring in Political Science from the University of Tasmania and a Graduate Diploma in Journalism from RMIT University.
