Realities of local start-ups
By Kate Hill
Partner Deloitte Private
IF you’re considering setting up your own technology business then you should take a look at a new report which discusses the local start-up scene.
The report confirms something that continues to baffle me while working with start-ups in Western Sydney, that government grants and concessions are still being ignored by many Australian start-ups.
The results of ‘Silicon Beach: A study of the Australian start-up ecosystem’* provide great insights for existing or future entrepreneurs. The overall message I took from the report, was that we are doing ok but that we could be doing so much better, a solid B minus, if you like!
Currently, only 4.8% of start-ups in New South Wales and Victoria are successfully scaling to sustainable and profitable businesses. By comparison, 8% of Silicon Valley and 6.6% of New York companies achieve scale. On a more positive note, once Australian start-ups do reach scale, they do seem to have a lower risk of failure.
As a nation we are quite humble about our abilities and our achievements, there is no doubt that Australian entrepreneurs take a more conservative approach. Rather than searching for a truly disruptive product or service, we tend to create complimentary offerings which leverage or complement existing solutions.
The report showed that we only really push ahead with a business or idea that we believe will be successful and have solved a technical problem, found a real market and have the capacity to continue to grow.
The great news for entrepreneurs here in Western Sydney, is that New South Wales is the start-up hotspot of Australia. We have the most established network of start-up founders, investors, and accelerators and incubators.
This means you can more easily connect with a community of successful entrepreneurs for help and advice. It also translates into more locally available startup capital, angel investors and business partners, all of whom are essential in funding your ideas and helping turn them into scalable and hopefully profitable businesses!
New South Wales may be winning the local battle, but on a global scale it is still dwarfed by the tech startup super-hubs of Silicon Valley and New York which produce 6.7 and 2.6 times the number of startups respectively.
A serious concern highlighted in the report is the overall lack of capital available in Australia. By comparison, U.S. companies are raising 4.8 times more capital in the early stages and 100 times more when they are ready to scale their operations.
Considering this lack of capitalisation it is even more surprising that Australian start-ups are still leaving money on the table. Only 39% of companies surveyed had applied for some kind of grant. Programs like ‘Commercialisation Australia’ are still underutilised; only 21% of start-ups in the research that accessed grants have applied for ‘Commercialisation Australia’ support.
However, the R&D Tax Concession has been popular — 79% of start-ups that have applied for grants have accessed the R&D Tax Concession.
The research also found that Australian start-ups find it difficult to offer ESOPs (employee share option plans), due to a complex tax environment that disadvantages start-up employees by taxing them upfront, before their shares hold any demonstrable value. Only 57% of Australian start-ups in the research have a share option scheme.
A dearth of investment capital and not being able to attract and retain enough top talent are disadvantaging local start-ups in what is a highly competitive global tech market.
Those of you who can leverage the local start-up ecosystem to their advantage and fully utilize government grants and tax concessions will be the ones who will succeed and contribute to a stronger environment for innovation in Australia.
A final thought from the report, New South Wales entrepreneurs work 9.17 hours per day. That’s almost as many working hours as in Silicon Valley (9.95). The myth that Aussies spend their days on the beach instead of building their start-ups can now be considered as busted!
* The report co-authored by Deloitte Private, Pollenizer (pollenizer.com), Australian startup publication From Little Things (fromlittlethings.co) and the global Startup Genome Project (blog.startupcompass.co) compared more than 1,000 Australian tech start-up companies with more than 50,000 early-stage companies being tracked worldwide.
Kate Hill is a partner at Deloitte Private, Western Sydney. Contact her at 02 9840 7049 or email khill@deloitte.com.au
No gain without pain
By Red Dwyer
No gain without pain was the essence of an economist’s presentation to regional business people.
Positive credit reporting launched
By Joseph Trimarchi
AS Comprehensive Credit Reporting (Positive Credit Reporting) is set to be launched in Australia it would be useful to discover the impact this will have on your credit history.
REGIONAL ROUND-UP December 2012
Round-up of news and initiatives from Greater Western Sydney December 2012.
Forum well attended
SOME 120 people from the local and regional business community, representatives of business and training organisations and academics attended the highly successful forum on innovation organised by the Penrith Business Alliance (PBA) and its partners. The PBA is looking at the merits of holding a number of regular innovation forums in partnership with organisations such as TAFE, Penrith City Council, CSIRO and UWS.
Professor supports airport
PROFESSOR Peter Phibbs, form the UWS Urban Research Centre has called on the state and federal governments to end the squabbling over where to put Sydney's second airport and commit to Badgerys Creek. He said building an airport at Badgerys Creek would generate significant economic benefits for the region, which outweighed considerations of aircraft noise.
Fernhill bought for $50m
FORMER investment banker, Simon Tripp, has purchased the 654-hectare Penrith property, which includes Fernhill, a Georgian-era mansion, formerly owned by Warren Anderson, for more than $50 million.
New warehouse opened
SCHENKER AG has opened a logistical warehouse and operations facility, at Erskine Park, which will operate 24 hours, six days a week, delivering almost half a million items annually. It’s the company’s fifth distribution hub in NSW.
Federal funding for BEC
THE Greater Western Sydney BEC, based in Blacktown, has been successful in securing federal government funding under the Small Business Advisory Service program to deliver specialised advisory service that focuses on promoting innovation within the small business community in Western Sydney.
Founder buys back firm
PETER Campbell, founder of the Clarendon Group, in Norwest Business Park, has bought back into the business at a fraction of the $575 million for which he sold out in 2004, when Investa Property group bought the business. Morgan Stanley’s real estate funds took control with then purchase of Investa in 2007.
Time to get on board
PROJECT manager for the Moorebank Intermodal terminal, Robin Renwick, said the project would generate some 2,625 jobs during the construction phase, and a further 1,700 long-term jobs in the south-west. He told the Liverpool Chamber of Commerce now was the time for the business community to consider how their businesses could capitalise on the economic benefits the development was expected to bring.
Printing plants on the move
PRINTING and publishing business, PMP, will close its printing plant at Chullora, which was mainly used for Telstra’s declining White and Yellow Pages directories in June, while the remaining work from Telstra’s Sensis unit will be transferred to its printing plant at Moorebank. IPMG will relocate its printing plant at Alexandria to Warwick Farm to cut costs.
.Projects could save imports
AGL Energy says it could meet as much as half of NSW’s natural gas demand and help fill the state’s looming supply gap if it could secure approval for its coal gas seam expansion project at Camden, as well as projects at Gloucester and the Hunter Valley. NSW imports about 95 per cent of its gas from other states. The three projects would produce about 80 petajoules of gas a year, compared to NSW’s demand for about 160 petajoules a year.
$50 million plant opened
VISY Industries Australia has opened a $50 million recycling factory, in Smithfield. The facility, which has the capacity to take about 2 billion plastic bottles out of the waste system, is the only one of its kind in Australia. Visy is one of Australasia's largest recycling companies. In 2010-11, Visy recovered 1.4 million tonnes of paper and cardboard, 489,000 tonnes of glass, 67,000 tonnes of plastic and 30,000 tonnes of metals.
Funds for opposition
THE Intermodal Working Party has received $58,000 in funding from Liverpool City Council to boost its campaign against the Moorebank freight terminal. The group hopes to complete independent air quality tests before the release of the federal government's environmental impact statement on the project early next year.
Eclipse sold for $167.5m
REST industry Super has bought the recently completed 19-level Eclipse office tower in the Parramatta CBD for $167.5 million from Leighton Properties and Grosvenor Fund Management Australia. Tenants in the 25,660-square-metre A-grade property include QBE Insurance Group and Deloitte which will relocate in February.
QBE on the move
ALMOST 1,000 QBE Australia’s employees will be housed in the $170 million Eclipse office tower, on the corner of Station and Hassall streets, in the Parramatta CBD, by February next year. Over 150 employees have relocated to new offices in the 19-level building. Deloitte, which has the naming rights on the building, plans to relocate staff from The Barrington, nearby in Smith Street, in February.
UWS development proposal
PARRAMATTA City Council has on public exhibition a planning proposal lodged by the University of Western Sydney for a site on the corner of Hawkesbury and Darcy roads, opposite Westmead Hospital. The proposal seeks a change of zoning, maximum heights from nine storeys to 15 storeys, and provision of 30 per cent non-residential floor space on land, excluding St Vincent’s building.
Council seeks confirmation
PARRAMATTA City Council, in acknowledging the historical significance of the Female Factory and its promotion as an historical site, will seek state government confirmation that the site be included in an historical study.
Assessment of events
PARRAMATTA City Council will assess the impact of the recent Parramasala cultural event on businesses in the CBD. A similar assessment will be made on the impact of the Wanderers football club on a night when the team plays at Parramatta Stadium.
Property development body
PARRAMATTA City Council has approved the formation an advisory committee, to be known as the Major Projects Advisory Committee (MPAC), that will focused on property development activities, including Parramatta Square.
Why trademarks work
By Damon Henshaw
SEVERAL landmark intellectual property disputes have hit the press recently. The Apple Vs Samsung case is one that almost everyone heard of. Why?
Gloves off in retail VS online
By Tony Eades
THE 131-year-old film pioneer, Eastman Kodak recently filed for bankruptcy protection as the company struggled to adapt to an increasingly digital world.
NEWS in brief
News briefs for November, 2012.
