Australia’s IT startups need more capital



blog Over the past several years the Australian IT startup ecosystem has seen a wealth of new funding opportunities arise. There’s Blackbird Ventures, which recently launched a $30 million fund, Mark Carnegie’s firm has thrown $120 million into the ring, and there’s a huge host of smaller support structures being put in place. However, according to Phil Morle, the co-founder of startup incubator and consultancy Pollenizer, the situation still isn’t where it needs to be. Morle has posted a significant thought piece on the issue on local startup publication From Little Things. A couple of key paragraphs:

“I think we have got better at making startups. We make better companies, faster, for less money. There is an emerging discipline of entrepreneurship and companion technical revolution that fuels this … Anecdotally though, there has been no great increase in companies making it through the lifecycle. And it just feels harder. My feeling is that we are not growing all properties of the ecosystem at an equal rate. Simply, we are making more, better companies at a rate that exceeds the country’s ability to support and fund their growth.”

I’ve been hugely enthusiastic about the amount of new capital pouring into Australia’s fast-growing IT startup ecosystem, and we are also growing some substantial companies at this point — groups like Atlassian, BigCommerce, DesignCrowd, and others who have built online businesses but retained their Australian roots. However, put simply, I trust and believe Morle when he says the IT startup sector is still constrained. The executive just has too much experience at the epicentre of Australia’s IT startup boom not to know what he’s talking about. So what can be done about this issue? I’m not sure, but I suspect further tax incentives for venture capitalists and angel investors in this area wouldn’t go astray ;)

Image credit: From Pollenizer’s 2010 Christmas Party


  1. Startups are meant to be firms creating value, not taking handouts. Matt Barrie and the others built their firms by being smart and working hard. There is nothing whatsoever stopping other people doing the same.

    If the government has spare cash, it should go to schools and hospitals, not failed startups that can’t develop a business model or attract commercial funding.

    • A rather simplistic view of the world. I’m not sure that tax incentives for early stage companies in fast-growing areas of the economy constitute “handouts”. Certainly I often wonder why there aren’t tax incentives for new media companies, to encourage the growth of competition in the media sector.

    • It’s not just about ‘giving them money’, it’s about providing opportunities for development and growth, incentives for innovation, giving new, tiny, creative experiments a break. Giving Startups a tax break is a huge step in the right direction to encourage innovation and support it – you can tax them once they’re successful, and you’ll make a hell of a lot more from taxing a few successful companies than all the tiny startups where every last dollar counts.

    • “spare cash” (from the earning of taxes) isn’t *quite* the same as “foregone cash” (from not collecting taxes on an entity that may or may not turn a great profit). In other words, you provide a short-term low tax situation that allows a company to easily reinvest its profits, then reap the rewards through a higher tax rate when the company can stand on its own two feet, so to speak.

      Governments don’t spend what they earn. Governments raise what they need to spend. So if you need to spend more on hospitals and schools, you have any number of options as to where you should raise the funds. I would suggest that the few, initially small start-ups are a poor place to raise those funds, while on the other hand there is a strong argument for letting them off the hook in the short-term; there are much better options for governments to raise the revenue they require.

  2. Problem is tech startups can reach a global audience so easily, and just as easily they can shop around for the best funding globally, the best tax system globally.

    Australia is too small to compete on those two factors.

    We should be encouraging startups to operate here though, even if we are never going to encourage them to incorporate or raise capital here.

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