The Australian
May 5, 2014
INNOVATION and new business development are crucial for Australia’s economic health.
Government funding to put exciting new companies on their feet so they can compete in global markets is much the same as taxpayers funding the Australian Institute of Sport to train Olympic athletes. Just like with our investment in Olympic athletes, the community gets a huge return from government innovation programs.
Take, for example, just two of the businesses my firm has invested in, together with the government, through its Innovation Investment Fund. One Big Switch, a consumer campaign platform, has helped more than 535,000 Australian households drive competition and save hundreds of millions off their mortgages, electricity and insurance bills. Assetic, through its innovative analytics program, has enabled local councils to reduce the cost of their asset maintenance programs — saving ratepayers hundreds of millions.
The issue of government support for the Australian start-up ecosystem is topical, with the Commission of Audit recommendations to abolish a number of programs. I urge the government not to throw the baby out with the bathwater.
Australians are innovating rapidly. The quality of the 20 young companies I see each week has improved every month for the last three years. This is in large part due to the incredible work that incubators like Blue Chilli are doing, but it’s not enough.
America remains a great lure for every young company, as it is for every young basketballer. Who wouldn’t want to play in the NBA? We have to encourage them to play for us instead. Let’s not make entrepreneurship an outward migration program.
Money that goes into propping up Australia’s dying industries is dead money. By contrast, innovation funding gets great returns. Money goes out of the Treasury coffers as cents comes back as dollars and jobs.
Simon McKeon’s report last year on health and medical research makes a compelling case — detailing how our spending on world-leading medical research has generated fantastic returns. But they were not made overnight. They were built brick-by-brick over decades by thoughtful industry-wide private-public partnerships.
Our young companies are like our young athletes, the pride of Australia. They are supported by an incubator community that has grown into a thriving industry at a breakneck pace. We have a huge pool of super money that will invest in these start-ups if we let the regeneration after the dotcom boom and the GFC take its course.
However, there’s something we need to remember as we put Australia on a fiscal diet to shed the flab and remain competitive in an increasingly competitive world. In the area of research and innovation, we are an adolescent and being put on a diet when you are young and vulnerable can make you susceptible to anorexia. We don’t want that for our young companies any more than we want it for our children.
Mark Carnegie is the principal and managing director of venture capital firm M.H. Carnegie & Co.