Policy vacuum?

If a government has its heart set on becoming a technology hub, action can be taken. The Massachusetts Institute of Technology (MIT) even offers a regional entrepreneurship acceleration program through which representatives from government, corporations, academia, risk capital and the entrepreneurial community can draw up their own development frameworks.

Hong Kong and Singapore have turned words into action, although the latter has really grabbed people's attention. Incubation programs and research institutes have been reinvigorated, creating start-ups that not only address the local market but also reach into Southeast Asia. Efforts are underway to attract VC investors capable of taking these start-ups to the next level.

In this context, the Australian government's decision this week to scale back support for early-stage tech companies is truly disheartening.

The domestic venture capital industry has struggled ever since the global financial crisis when many superannuation funds began to back away from the asset class. Several new players have emerged in the last year or so, sourcing capital from US VC players and high net worth individuals and it is a movement worth encouraging. Rick Baker of Blackbird Ventures - one of these new firms - estimates there are 20 break-out companies in Australia that could eventually go public but they have yet to receive any capital from domestic VC investors.

Venture capital fundraising came to $267 million last year, the highest level since 2007, with nearly 90% of the capital going to the Medical Research Innovation Fund (MRIF), a vehicle to help convert Australia's medical research capabilities into commercial benefits. The government provides half the funding and the private sector comes up with the rest.

This program has survived the cull - and it has been joined by two other fund initiatives, targeting health and infrastructure, respectively - but the casualties are greater. Commercialisation Australia, a grants program for start-ups, will close and the government will no longer provide funding for National ICT Australia, an information and communications technology research institution. The Innovation Investment Fund (IIF), which sponsors VC funds, is also being axed.

The loss of the IFF is a great disappointment. It pioneered the government-private sector matching system used by the MRIF and only last year the previous administration said it would commit A$350 million to the program.

The logic behind Australia's austerity budget is well-documented, but it should not come at the expense of support for high-growth industries. At a time when other jurisdictions are seeking to leverage the globalization of technology in Asia and beyond, Australia appears to be taking a backward step that may be detrimental to its long-term competitiveness.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Australasia
• Venture
• Early-stage
• Australia
• Venture