Victoria’s startup agency LaunchVic will be dissolved as a standalone entity and the state government will reduce funding to its VC fund as part of wide-ranging cost-cutting public service reforms.

The Victorian government released its response to the Independent Review of the Victorian Public Service late last week, with an aim of saving $4 billion through the slashing of 1,000 jobs including 300 executive positions and the merging of a number of public entities.

One of the key changes will be the consolidation of LaunchVic and investment fund Breakthrough Victoria into one body to avoid duplication and reduce costs.

LaunchVic was launched by the Labor government in 2016 to act as the state’s startup agency, administering its grants to ecosystem supports and running a number of mentorship and education programs.

Breakthrough Victoria was launched in 2020 to invest $2 billion over a decade through an independent investment company, providing the cash to local tech businesses, but has had its funding slashed in recent years.

Combining forces

The two bodies will now be combined into one, with the state government to now work with both entities to “identify the best path forward to drive sustainable growth with a consolidated function”.

“Victoria is a powerhouse for innovation and startups, and bringing these entities together will secure and strengthen that position to make it easier for startups to grow and succeed,” Victorian Minister for Economic Growth and Jobs, Danny Pearson, said.

“LaunchVic and Breakthrough Victoria play vital roles in growing startups, businesses, jobs and economic value across Victoria’s priority sectors.

“We are uniting the capabilities of Breakthrough Victoria and LaunchVic into a single entity to strengthen and streamline support, ensuring they continue their critical work.”

The change stems from the recent public service review and the Innovation and Commercialisation Review, which found there was duplication across the government’s tech funding and support initiatives, and an opportunity to “provide end-to-end support for businesses as they move through the commercialisation lifecycle”.

The review of the Victorian public service recommended that LaunchVic’s grant and facilitation and capacity uplift program activity be handed over to Invest Victoria, and for LaunchVic as a standalone agency to be abolished.

This is because the activities that LaunchVic performs “overlap with activities undertaken by Invest Victoria and other parts of government”, the review found.

The management of LaunchVic’s existing equity investment should be passed across to Breakthrough Victoria, the review recommended.

The Victorian government supported these recommendations in principle.

The review also called on the state government to reduce its overall investment and level of risk exposure from equity funds investment, and to make Invest Victoria the “single entry point in government for all industry support provided by government”.

In its response, the Victorian government confirmed it would be cutting the amount of funding provided to Breakthrough Victoria, and scrapping the Equity Investment Attraction Fund pilot program.

This pilot program was a $20 million fund launched in late 2022 to bring early-stage Australian and international companies to expand to Victoria or relocate their operations to the state.

It involved the state government providing funding to these companies in exchange for an equity stake.

The cuts to Breakthrough Victoria are on top of the $360 million over four years that was slashed from the fund in last year’s budget, with its investment profile also extended to five years.

‘Short-sighted’

The LaunchVic announcement was met with shock and disappointment from the Victorian and wider Australian tech and startup sectors.

“Disestablishing LaunchVic is the worst idea I’ve ever heard, from a government that has had a very good track record of sustained investment into productivity uplift,” University of Technology Sydney director of entrepreneurship Murray Hurps said in a post on LinkedIn.

“I can safely say that LaunchVic has been the envy of every state government and set the highest bar possible for this model.”

University of Newcastle senior manager, entrepreneurship Richard Berry described the decision as a “travesty”, while Rachel Wong, who participated in LaunchVic’s 30x30 program said it was “wild”.

“The team, the programs, the results and the passion are unmatched,” Wong said on LinkedIn.

“I have personally benefitted so much from this organisation.”

Emerson Keenan, whose startup Kali Healthcare received support from LaunchVic, questioned the decision by the state government.

“I know it’s a nuanced discussion, and elements of the LaunchVic programs may well continue in other forms, but to cut something that is clearly working so well for building innovation and entrepreneurship in our state seems to be very short-sighted,” Keenan said.