Australian startup founders are feeling ignored by the government and disadvantaged by its policies, a recent survey has found.
Results from a survey of some 400 Australian startup founders, the State of Australian Tech 2020 report – produced by industry-driven movement Pause Fest – shows a bubbling dissatisfaction with government regulators.
Fifty-three per cent of respondents said they did not feel heard by policymakers.
When it came to specific regulatory areas, around a quarter of the surveyed startup founders said tax laws had the most negative impact on their business.
Stone and Chalk CEO, Alex Scandurra, said those results were indicative of a need for tax reform that supports high-growth technology-based companies – especially software developers.
"Right now the Research and Development (R&D) Tax Incentive does not support software development," Scandurra said.
“This means that the overwhelming majority of the companies Australia is already relying upon to create skilled jobs are excluded from this program.
“For those that do apply, payments under this program are uncertain, irregularly applied, not timely and subject to a government clawback. This discourages investment in transformative digital businesses at the time when they are most needed to create jobs.”
Scandurra’s comments have been echoed by startup advocacy groups and Australian unicorns, Atlassian and Canva, in submissions to a senate committee overseeing the R&D tax incentive changes that passed the lower house in February.
In its submission, StartupAus said reinterpretation of what counts as eligible R&D over the past three-and-a-half years locked out companies from claiming back software development.
“This is undermining a bedrock platform of government support for the emerging technology sector,” StartupAus CEO Alex McCauley said.
“Retroactive enforcement measures (clawbacks) have meant a growing number of companies are facing serious financial challenges as a result, breeding uncertainty about the future of the program for startups and established software firms.”
StartupAus wants to see clearer language for software development included in the legislation.
Atlassian – which pays zero tax in Australia thanks to the R&D Tax Incentive scheme – took a similar advocacy position, calling for the government to pause clawbacks and use the scheme as vehicle for “providing a one-time stimulus” for startups.
It’s lonely at the top
A spokesperson for the Minister for Industry, Science and Technology told Information Age the government "recognises the critical role innovative startups play across the economy in creating new high-value jobs".
“As we navigate the COVID-19 pandemic, the Government is looking at our policy settings and identifying ways to refine our extensive support,” the spokesperson told Information Age.
“The minister continues to engage and collaborate with the tech sector – from startups to large multinationals – to understand their issues, explore solutions and share success stories.”
Founder of Australian digital platform BioJars, Suke Ridler, was highly critical of the government's support, saying she was still struggling to get approval for her 2019 R&D grant application.
“The government has been quick to act to save existing businesses, yet it appears that a coffee shop has more priority over a startup developing new knowledge and intellectual property,” Ridler said.
“The challenge and financial commitment to act on an idea, drive it through to [a minimum viable product] and into the market is long, hard and not a path for the fainthearted.
“It can be demanding, lonely with the need for deep reflection and self-talk to keep going, not to despair – you’ve done the research, [you know] there’s nothing like it out there. But the uncertainty is always lurking in the shadows.”
Indeed, Ridler’s feeling of loneliness is shared by many of Australia’s startup founders and was recognised as one of the most challenging aspects for nearly half of respondents to the State of Australian Tech 2020 survey.
An even bigger problem facing startup founders, perhaps unsurprisingly, was a lack of funding.
Sixty per cent of the founders surveyed identified access to capital as a major problem, with a third saying they started their business without receiving outside support.
This despite the Preqin and Australian Investment Council Yearbook 2020 reporting that venture capital fundraising from 2015-19 was nearly double the total amount raised in 2010-14.
A third of startup founders said their financial situation has actually gotten worse since starting their businesses.
Diversity is also an ongoing issue for Australia’s startup ecosystem which is overrepresented by men (61 per cent) and people who identify as caucasian (82 per cent).