"In Australia, the government is fine if you stick $10,000 on red at the casino but you can't put $10,000 on a start-up,” BlueChilli's Sebastien Eckersley-Maslin declared last week.
The chief executive of the software development and investment company was speaking at Vivid Sydney's Smart Money conference, which examined the funding problems facing Australian tech start-ups.
Further illustrating Eckersley-Maslin’s frustrations was a report handed down a few days earlier by the federal government’s Corporations and Markets Advisory Committee (CMAC), recommending that crowdfunding be subject to various bureaucratic requirements.
The red tape involved -- individuals limited to $2500 per company and $10,000 per 12-month period, with companies subject to a maximum of $2 million per crowdfunding round -- compares to the ordinary Australians' freedom to plonk as much money as they like on the pokies or, more relevantly, to gear aggressively into real estate.
How Australia’s real estate obsession hurts tech entrepreneurs was shown in yesterday’s Technology Spectator article by Steve Keen (Genius versus bricks-and-mortar in the head, June 9), which described the Dulmont Magnum -- an Australian portable computer designed in 1984 that failed because its inventor, Terry Crews, couldn’t raise capital from bricks and mortar obsessed banks and conservative local investors.
Australia’s banks are not alone in being reluctant lenders to small and start-up businesses; around the world governments are becoming increasingly frustrated by the finance sector’s failure to lend to SMEs, particularly after the 2008 financial crisis.
In an Australian context, frustrations have been further increased by the poor performance of institutional shareholders and the reluctance of Australian superannuation funds to invest in new industries and start-ups -- a topic Technology Spectator covered in 2012 (Super charging start-up investments, October 10, 2012).
Speaking to the Australian Financial Review after last week’s release of the CMAC review, prominent investor Mark Carnegie said: “The truth of the matter is, Australian venture capital as an industry has been an unmitigated disaster. A trained monkey could have done better than the professional venture capital industry in Australia.”
That poor performance has been reflected in the funds raised -- new venture capital funds more than halved from $356m in 2007 to $155m last financial year, according to the Australian Private Equity & Venture Capital Association Limited (AVCAL).
Part of the reason for that collapse in local funding is there have been no outstanding successes for investors in the sector. “It will take some really good success stories coming out of the industry,” Blackbird Ventures managing director said Rick Baker told Technology Spectator.
While the investment community waits for that blockbuster investment and Canberra sits on any meaningful reform -- particularly the treatment of employee share schemes (Is Australia open for start-up business?, 13 February 2014) -- the rest of the world moves on.
Last week the Irish Taoiseach, Enda Kenny, visited the United States to promote Ireland as a destination for US high-tech and start-up investors. While his online Q&A session at Facebook’s head office didn’t go so well, his punishing schedule in Silicon Valley was impressive.
Along with Sheryl Sandberg at Facebook, Kenny’s itinerary included meeting the chief executives of Cisco, LinkedIn, eBay and Yelp, along with senior management at HP, Tesla and Workday, and a discussion with Silicon Valley investors organised by the Irish Development Authority.
In Britain, even Her Majesty is getting into the act of promoting tech start-ups, on Monday hosting Tech At The Palace which showcased 350 British entrepreneurs. The Guardian quotes the Duke of York as saying he unashamedly pushes UK tech companies in the US.
To understand Australia’s priorities, it’s worthwhile contrasting the Irish and British initiatives against the Australian Prime Minister’s North American visit.
While in Ottawa yesterday, Tony Abbott begged Canadian fund managers to take stakes in resource companies, toll roads and government guaranteed infrastructure. The ABC reported the Prime Minister as saying: “The Canadian pension funds are already significant infrastructure investors in Australia -- the M7, the desalination plant -- and I see that as continuing. Pension funds typically want long-term secure investments with stable rates of return and infrastructure certainly offers that kind of potential.”
Tony Abbott’s view is the kind of strong vision that delivered the Cahill Expressway to Sydney and the West Gate Bridge to Melbourne. It’s a strong vision for a nation striding confidently towards the 1970s.
While the rest of the world offers tech friendly investments, Australia offers toll roads -- something that Jack Lang would have been comfortable doing in 1931.
The consequences of this deliberate neglect were seen with iconic Australian software vendor Atlassian choosing to domicile in London last year ahead of a stockmarket listing.
Atlassian’s decision was a cruel blow for the ASX’s ambition to become Asia’s high-tech securities exchange and the NSW government’s conceit that the Barangaroo property and casino development could make Sydney a global financial centre.
Business leaders are beginning to worry; Telstra chief executive David Thodey last week warned a CEDA lunch in Melbourne that Australia is facing a brain drain as entrepreneurs move to locations like Singapore, Israel and even New Zealand. Countries like these, Ireland and even Chile are competing in a global race that Australian politicians are barely aware exists.
The stakes for young and old Australians are high: locking the nation into price-taking commodity markets and inwardly-focused service industries results in falling living standards as Canadian fund managers look to maximise their returns to Vancouver pensioners, a process described by Alan Kohler yesterday (The paradox of productivity, June 9).
Along with the Smart Money panel that Sebastien Eckersley-Maslin appeared in, the Vivid Sydney Vivid festival featured speakers from around the world describing the changing world of 4D printing, designing smart materials and biological engineering -- fields Australia could compete in.
But for Australia to succeed in these industries, investment is needed. Whether it comes from local super funds, Canadian pension managers or through crowdfunding websites is moot; the question is whether the nation wants to be part of the 21st century economy.