Starting a company in Australia, especially one in the high tech sector, is fraught with challenges that are simply not present in other regions around the world. There are numerous other factors which have limited the growth of our startup ecosystem, many of which are centred around getting new ideas funded. For many the biggest challenge comes when they want to grow their business beyond the bootstrap phase, where they look to venture capitalists to help with their expansion. Australia’s regulatory framework, coupled with our traditionally risk adverse investor network means that the large amounts of capital we do have (thanks to the superannuation scheme) are often locked away from startups. This, combined with the numerous other challenges Australian startups face, have seen many great business go overseas in their pursuit of success. Today however Malcolm Turnbull has announced numerous initiatives totalling over $1 billion in new funding to kick start Australia’s startup ecosystem.
At a purely financial level the changes that are being made to investing in startups in Australia is significant, putting it on par with other investment vehicles. For starters any early stage investment in a startup company (which seems to be broadly defined as a company making less than $200K/year, with less than $1 million in expenses) attracts a 20% offset against the investor’s taxable income. That’s essentially a one off negative gearing payment, reducing the risk of the investment by up to 10% or so (for the highest marginal rate). Additionally that investment, if held for for more than 3 years, is exempt from capital gains for 10 years. This means early stage investors who happen upon the sacred unicorn aren’t going to be burdened with a large tax bill when they sell their stake. It might not sound like much for regular investors but for angels looking to invest in Australia startups the proposition just became a whole lot more tenable.
In addition to this there are several more initiatives designed to allow startups to depreciate intangible assets (like acquired patents), recoup losses and a better insolvency framework so that entrepreneurs aren’t unduly affected by failed businesses. Whilst your’e able to depreciate intangible assets now the actual useful life of them might not be in line with the legally required framework. Under the new legislation startups can self assess the effective life of such assets, allowing them to recoup the losses more quickly.
Additionally, under previous legislation, losses like this that incurred more funding (and hence a change in ownership) would prevent the startup from offsetting those losses against future income due to the “same business test“. The new legislation changes this test to a “predominately similar business test” which means changes in ownership like that, which are somewhat common with startups, won’t see those losses negated.
Finally the reforms to the insolvency framework allow entrepreneurs to tackle the kinds of risky ideas that these companies are known for without the spectre of bankruptcy looming over them. The default bankruptcy period has been reduced to one year from three, allowing them to return to the startup community much faster. There’s also a new safe harbour provision which allows company directors (typically the founders) to avoid personal liability for an insolvent company if they appoint a restructuring advisor to help bring the company back into the black. This eliminates some of the potential risk that’s inherent in reducing the bankruptcy period (as, hopefully, less companies should go bankrupt) whilst also opening up a secondary industry to veteran entrepreneurs to help right the ship of a failing startup.
There’s also a myriad of new funding for a bunch of programs that are intended to spur on research, inspire students to pursue STEM careers and initiatives to attract and retain talent both here in Australia and overseas. All of these programs are necessary pipelines that will feed the Australian startup ecosystem with the talent it will need to grow and sustain itself long term and it’s great to see the Turnbull government recognizing this.
All told there are over 20 new initiatives that have been discussed each of which is designed to build up momentum for the Australian startup economy. Whilst I’d be remiss if I didn’t mention that a lot of the ideas were lifted from a previous proposal from Labor it’s still great to see the Liberal party championing it. Hopefully this means that many of the initiatives will pass with both party’s support and soon we’ll start to see the benefits far in excess of the projected costs. Personally I hope this spurs on our superannuation industry to start looking at startup investing seriously as there’s vast amounts of capital, only a small fraction of which would be needed to see amazing returns, just waiting to be used. No matter what happens though the future is looking incredibly bright for startups in Australia and that makes this humble writer incredibly happy.
Starting a company in Australia, especially one that’s in the high tech industry, is much harder than it is in many other places in the world. This used to be due to a lack of supporting infrastructure, what with Australia’s remoteness precluding the required investment, however in more recent times that barrier has begun to melt away. The problem many startups face in Australia is that acquiring funding is extremely problematic as Australia’s risk averse investing style has meant that our large capital reserves aren’t used to invest in such ventures. Previous governments haven’t done much to change this, preferring to support already established businesses, however in his recent budget response Bill Shorten showed vision that few of his contemporaries have in the form of the Labor’s future technology policy.
At the core of this policy is the Smart Investment Fund, a $500 million allocation that will be used in partnership with venture capital firms and banks to facilitate more investment in early stage startups. I have spoken previously about how something of this nature would be required in order to kick start a Silicon Valley equivalent here in Australia and the policy that Bill Shorten has proposed lines up with that idea perfectly. Whilst startup investment can never be made risk free making them more attractive, through direct government investment and the partial loan guarantee with banks, will ensure that more of Australia’s capital makes its way into new businesses rather than the traditional investment vehicles.
Of course providing funding for such ideas is only one piece of the puzzle as we’ll need to encourage students to pursue careers in those industries. To this end Labor as put forward a policy to provide numerous scholarships to students who complete degrees in the fields of science, technology, engineering and mathematics (STEM) and then go on to become teachers in their fields. In addition to this Labor is proposing to forgive the HECS/HELP debts of almost 100,000 students studying in this field, something which could provide an incredible leg up for fresh graduates starting their career. Considering that 75% of the fastest growing new jobs are within these fields encouraging students to take up careers is an incredibly smart move and one that the current government should look at adopting.
You might be surprised to hear this but I’m on the fence about coding being added to the national curriculum, mostly because I’m not sure how it’d end up being implemented at the school level. Starting out in coding isn’t the most exciting of adventures and the rote learning approach which many schools use would, I feel, end up with them becoming bored and frustrated rather than energized and intrigued. Of course I’m not a teacher and I’m sure there are many who are more experienced in this field who could design programs that tackled this issue properly. In the end this is something that I’d have to see in action before I could form a solid opinion on it as whilst I’m all for kids being aware of how technology works I also know how quickly they can become bored with such things.
This is what the Australian public needs to see from a party in opposition: clear concise policies that show a valid course of action rather than mud slinging and point wining which have plagued Australian politics for the last 3 terms of government. Whilst these policies might not ever see the light of day it’s good to see that the Labor party is thinking along this direction and hopefully such policies will fuel their campaign come next election. I can only hope that the Liberals take note as whilst any incumbent would loathe to agree with their opposition it’s hard to deny just how solid some of these ideas are.
Again my alarm woke me today with its irritating buzzing. This time however I did not shun it into silence repeatedly, I did it once and promptly obeyed the order it gave me. I shot out of bed and started getting ready for the day that lie before me as this was to be the grandest of days in the short yet painful times I have spent absent of my wife. Today I would trade in my red training wheels for a sleek yellow dragon that I would ride for 4 hours down to the tropical location of Miami. Today was the day when I got back to my roots when 15 years earlier I took my first drive by myself in a Datsun 120Y.
Today, I would get me a Chevrolet Corvette.
But before I could get my hands on such untold fun I had to run an errand first. Although I hadn’t gone far in the little red Yaris the day previously I had done enough to use up a noticeable amount of fuel. Plotting the course on Google maps showed that I could do the round trip to the closest 7/11 in just under 15 mins. Guessing that it would take me about 15 mins to fuel up I then doubled my estimate to an hour, thinking that the amount of fail that I had attracted on this trip thus far ensured that should I cut it any closer I wouldn’t have the car back before I got slugged with another days rental. Good thing I did this too as I couldn’t for the life of me find the blasted car, roaming the parking lot aimlessly for a good 30 minutes before realising that I was on the wrong level. With the car fuelled up I returned it to its keepers and went about securing my quarry.
Now when I had first booked my training car the website told me I was getting a Toyota Corolla. The Yaris is roughly identical so there’s no big deal there, but it had me worrying about whether or not I’d get an actual Corvette or something similar (like a Mustang). Not that I would’ve knocked it back but I had been hyping this moment up in my head for quite some time, and not driving a the yellow beast I had imagined would’ve had me feeling like the whole deal was rather pointless. 30 tentative minutes later they radioed someone to bring around my new prize to where I was, and all my fears were laid to rest.
Thanks to my slightly nervous nature I had been bothering the poor Hertz attendants up until they brought the car around. They got their own back though, noting the almost giddy look I had on my face when the Corvette finally rolled around. It too was perfect, a beautiful yellow accented with a single black stripe down the middle, just as I had imagined it. There’s little room to spare in the vehicle though with my bag only just fitting in the boot and having to wind the seats almost all the way down and back to fit my 6 foot frame into it. Still the moment when I pushed the ignition button (yes, like a flippin’ RACE CAR) I forgot all about those worries and set about punching in my first destination on the GPS: the local Walmart. Whilst I can see the irony in taking a rather expensive car to one of the cheapest places on earth I needed to get some supplies before embarking on the 4 hour journey south to Miami and of course I wanted to see Walmart 😉
The GPS got me there without a hitch, proving that I should’ve just got one of the damn things earlier rather than trying to cheap out on something so valuable. Upon entering the Walmart I was struck by how similar it was to Big W we have back in Australia but the similarities were only skin deep. The fact that I could find almost anything that I needed there kind of shocked me, from pharmaceuticals to clothing to even jewellery left me awe struck as I walked slack jawed around this monstrous store. Then I saw the prices, almost unbelievable how they could make money on anything that they sell there. Still you don’t get to be the Fortune number 1 company for nothing so obviously their ability to shift massive volumes means they can get prices that no one else can.
No wonder people fight them whenever they try to set up in their little neighbourhoods.
After grabbing a few things I made my way out and programmed the GPS for my final destination, the Viceroy hotel in Miami. After a few short turns I was out onto the highway where the speed limit is a cool 70 miles an hour. Having only given the car a couple quick boots to see how it would go I wanted to do a standing 0-70 in it and the highway seemed to be the best place to do it. I pulled over to the side of the road and then waited for the traffic to break so I could really put my foot down. A couple minutes later I did and the thrill was nothing short of amazing. The car literally threw my head back into the seat as its 436 horses roared into action, propelling me to 60 in just over 4 seconds with 70 coming in not less than a second later. A quick bit of research shows that this particular breed Corvette, the ZHZ, was specifically built for Hertz themselves and had a few performance tweaks along the way. Having something like that must be a business boon for them, especially with nutjobs like me chomping at the bit to have a go in one of them.
The drive down to Miami was fairly uneventful, as most long drives are. The scenery was familiar yet different with shrubs being the dominant species rather than large eucalypts. I made a couple pit stops at the “Service Centres” which appear to be miniature shopping malls with their own food court and selected shops, mostly perfume and sun glasses. About 15 minutes away from my final destination and the traffic started getting wild, jolting me out of my semi jet-lagged state that had developed over the past 4 hours. Still I arrived at my location safely, and boy was I in for a surprise.
This was my first ever time having a car taken from me by a valet and the whole thing happened so quick that I was inside with all my things before I realised I was out of the car. The bell hop, who appeared to be more of a concierge, took me up to my room and showed me around it. He also gave me some tips on where to go whilst I was staying since I had no idea what I was going to do other than work out in the gym and blog about my mishaps online. I barely listened to him though as the room had me transfixed for the entire time he was there.
No one picture does this room justice, every piece of it just screams high class and opulence of the highest order. The bathroom and main entrance are lavished in marble with chrome accents everywhere. The wardrobe is two giant mirrors covered in wood that hide not only the closet but also a full sink, microwave, stove and coffee machine. It’s bordering on a self contained apartment but for the price I paid (about $500 for 4 nights) I wasn’t expecting this. Hotwire really does earn whatever money they made off me when I made all those bookings.
I had also decided that I didn’t want to dine in the hotel as my last experience with that hadn’t been too great. Hitting up Yelp on my iPhone I found a local restaurant called Zuma not more than 5 minutes walk from where I was. The reviews were quite spectacular and it was Japanese so I thought I had a slight inkling into what I was getting into. As it turns out this was quite the place to be with the place being packed on this quite Tuesday afternoon and I was only able to be seated at the sushi bar. Still I was going to make the most of it and order a full meal and a Hitachino White Ale to wash it down. I had read in one of the reviews that they were a bit antsy about taking pictures so I refrained but the bottle was a curious one with an anime owl adorning the front. The taste was a clean with a distinctly soapy mouthfeel too it with the trademark wheaty aftertaste. I haven’t had enough wheat beers to say if was any good but it was fitting with the rather eclectic food I had been served.
It was at this sushi bar I got talking with a woman who I only managed to catch the last name of: Mrs Swann. She’s a business development manager working to get companies interested in investing in minority businesses and since I happen to know a little bit about the venture capital market (thankyou start-up future) we hit it off quite well. It was a nice way to end what had started off as a rather awkward night, sitting beside someone for 30 minutes without saying a word to them.
Tomorrow is the first day when I don’t have anything pressing I need to do in the morning, and it feels great. I’ll probably head down to south beach as that’s apparently where everything happens around this place but if I spend a whole day on my ass watching Discovery channel I won’t be surprised. I haven’t not being doing something since I landed here 3 days ago so it might be nice to take a day to catch up on some things. With this blog post fast approaching 1700 words I think I’ll leave it there for tonight and indulge myself in some late night American TV 🙂
There’s been many times when I’ve caught myself with some kind of random idea for a product, service or whatever that I’ve quickly thrown on an ever growing pile of ideas. It doesn’t seem to take long for that one idea that I’ve had to turn from something I thought that I only thought of to someone else’s business venture upon which time I curse myself for not following through on it. Granted many of these ideas have been kicking around in my head for years without them coming to fruition and my recent attempts to develop one of them has been quite the eye opener, showing me that ideas are great and all but implementations are still king.
This is one of the biggest challenges that anyone will come up against when trying to develop a product or service: someone has already done it before. In this world that thrives on innovation being the first to market with a new widget is a powerful force and almost guarantees you the lion’s share of the early adopter market. The problem here is though that being first to market with something means one of two things: either you’re creating a market that didn’t exist before (see Apple and Nintendo as good examples of this) or you’ve seen an established market and noticed something sorely lacking, which pits you against established players in this space. In both these cases if you’re just starting out at being an entrepreneur your friends, family and potential business partners will more than likely shoot a skeptical eye your way telling you that there’s no way it could work.
For the most part they’re right, in a traditional business world starting from scratch is a pretty risky business and whilst the jury is still out on how you can judge failure rates of new companies it’s no secret that you’re more likely to fail than succeed. To an investor a business plan that builds on proven methods will look a lot more attractive as there’s a much better chance that they’ll get a return on their money even if it would be smaller than something that could be perceived as a higher risk. Consequently this has the effect of stifling innovation for certain high risk ventures, although that trend is starting to change.
In the tech industry at least this can be attributed to investors gaining back the confidence they lost in the tech industry back in the dot com bust. After the crash many investors sought more stable investments (and look how that turned out!) and shied away from funding what looked like high risk ventures. As a consequence many hungry start up founders started to make do with a lot less and this drove a phenomenal amount of innovation. Primarily this was to attract their once bitten investors back into the fray and the last couple years has seen the resurgence of the high tech start up craze that we lived through only a decade ago.
For those looking to lash out into the world of tech start ups this means that for any idea that you might have you’re going to be compared to those who’ve come before you. That doesn’t necessarily mean that you’re destined to fail, it just means that you’ve got your work cut out for you if you’re looking to make an impression in the tech world. Innovation in this fast paced tech world is the name of the game and whilst any market you may care to get into (hats off to you if you manage to create one) may appear to be completely saturated that doesn’t mean you can’t succeed in that space. It all comes down to how you differentiate yourself from the pack.
Maybe this blog post is more for my benefit than anyone else’s as I’m currently staring right down the barrel of trying to attempt such a feat myself. The location space is heating up like crazy and all the large players in other spaces are already integrating location based services into their current offerings. Initially this was a boon for me but I’ve come to realize it first as a hindrance to me progressing my core functionality (Oh another information feed with co-ordinates in it, better integrate that one too!) and secondly as another blow against a product I’m looking to deliver. Realistically though I know what I want to do is different enough from every one else to warrant at least an attempt to make it successful and should it fail I’ll be that much wiser about the whole process, ready to try over again with yet another idea.
Realistically I’d need a team of 100 people to try all the ideas I have, so I could be in this cycle for quite some time 😉