You may have heard that the Victorian government has announced that it will invest up to $60m of funding to encourage entrepreneurship. Last weekend I took part in a workshop hosted by Collabforge and Dandallo Partners. It was an unconference format. If you are unfamiliar with am unconference, it is a loosely structured format, kind of like a big brainstorming session, letting ideas bubble to the surface for further investigation.
What does startup innovation have to do with small business?
If you’re one of our regular readers, you’re probably wondering what startup innovation has to to with small business. More and more startups are realising that small business have been taken for granted and are looking at providing services and products to help small business. DragonBill is all about helping small business with cashflow and reducing stress in payments. So as more startups innovate, you will have more choice in the tools you use in your small business.
Startup Innovation Future
The highlight of the startup innovation workshop was when we be broken into groups to discuss topics affecting startup innovation. Those topics would be suggested by and chosen by the group – people voted with their feet. So we got started, anyone with a topic they wanted to discuss was invited to give a short ‘pitch’ to the group. I’m interested the UK SEIS program, I went to a few sessions about it when I lived in London and wanted to talk about it. I pitched what I knew and it seemed to resonate.
We had about 20 people in the group, and the discussion was interesting and robust at times. I was fortunate to be leading the discussion with some very knowledgeable people in the group from a variety of industries, including George from Pause Fest and Peter from Culture Amp. For me the discussion could be distilled down to:
- Should the government foster an environment for startup innovation or
- Should the government make investments into individual startups
I sit firmly in the former camp, I think the government should support the ecosystem, not individual businesses. There were suggestions that the government make micro investments of a few thousand into lots of startups. I don’t like this idea: the money won’t go far, and if you can’t raise a few grand, perhaps entrepreneurship is not your career path. I think we would see a lot of waste for very little if any startup innovation and I hope the government doesn’t go down this path.
Support the ecosystem, not individuals
It’s true that if the government managed to pick some winners, the startups would grow, create jobs and pay taxes, the the government would see a return. I’d prefer to see a program like the UK Seed Enterprise Investment Scheme or SEIS. SEIS works by providing significant tax breaks to individual investors who invest in startup innovation. The idea is to encourage people who wouldn’t normally invest into a sector they wouldn’t normally invest into. It wouldn’t cost the government – sure it would forego taxes – but it’s tax on investment that wouldn’t have existed anyway. The investments could be administered by accountants or crowd funding platforms, providing investors with information they need to invest.
There is a fourfold benefit to a program such as this.
- The startup can get significant investment – up to $2M if Ed Husic has his way. This investment would be from multiple investors, meaning less dilution of power.
- Something many people don’t consider: it decentralises the wealth. Spreading the spoils of success with a broader base of investors. It means that everyday Australians can benefit from the tech boom, not just a small group of already wealthy investors.
- The successful startups create jobs and pay taxes.
- I’ll call this point 3.5 because it’s a hopeful outcome. With more people literally invested in the ecosystem, hopefully we’ll see more talk and encouragement of children/grandchildren of investors to enter the tech field and see a bottom up increase in the ICT skills we need.
I see this as a way to encourage and support startup innovation and growth while growing the ecosystem and also sharing the wealth through a market mechanism.
Conclusion
A program like the UK SEIS would help foster innovation, growth and the decentralisation of high growth wealth – allowing more people to share in the prosperity of successful startups. It would be nice to see the Victorian government lead the way and implement or pressure the federal government to implement a system like this. I’d like to see the $60M invested in creating the systems and providing resources for this to happen. I hope the government can resist the urge to throw money at a few high profile startups or at thousands of people with their hands out.
As many others have said recently, we are at a threshold where we can, as a society, grab hold of this tech boom and ride it to prosperity. There’ll be other booms in the future, but this is todays one, we can see it and know it is there to exploit. It would be a shame to miss the ride.
Action
If you want to see the government take action to improve the startup ecosystem, don’t just whinge to your startup friends. Contact you local MP and tell them. Look them up here: Lookup your MP. If you don’t know what to say, but like the sound of what I have outlined, tell them this:
Support the ecosystem, not individuals. Encourage investment, don’t make the investments yourself.
I’ve contacted mine, Danny Pearson, and am trying to organise a get together with other startups from our seat, with the view of having him represent us at the state level. If you’re based in the state electorate of Essendon, get in touch. If we all do this, we can help the government make a smart decision and not miss this opportunity.
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