10 reasons why we need a Start-up Australia

We looked on in a mixture of wonder and envy last week as the UK Government launched StartUp Britain, a scheme aimed at propelling wannabe Richard Bransons into business.

Every new business in the UK will be able to claim a support package worth £1,500 (about $2,300) to help them get up and running. There will be a raft of other technical and educational help for start-ups.

The program comes hot on the heels of Startup America, a major private/public partnership kicked off by US president Barack Obama in February. More than $US2 billion will be pumped into boosting entrepreneurship in the country.

Anyone waiting for the imminent launch of Start-up Australia, however, will be disappointed. Apparently, two countries that have been decimated by the GFC can afford to invest in start-ups but the comparatively unscathed Australia cannot.

So why do we need a Start-up Australia? Here are 10 reasons.

Because now is the right time

The dollar is strong, interest rates are okay, unemployment is low compared to many western nations (a recent high of 10% in the US, for example) and Australia is buoyed by its proximity to China.

Of course, investors still naturally look to California rather than Canberra for the next big thing, but is there really going to be a better time to take advantage of Australia’s position than now? While other countries struggle with unemployment and crippling deficits, Australian innovation should be pushed front and centre.

Because big business needs to get its act together

Take a look at the private investment in Startup America – $150 million for start-ups from IBM. Further mentoring and funding from Google and Facebook, $2 billion in government funding to be matched by big business.

Then look at StartUp Britain. Microsoft, Virgin Media and banking giant Barclays are backing the venture. Blackberry maker RIM is providing free start-up guides, AXA is offering 10% off insurance and Google is offering free Adwords.

Now take a look at Australia. It ain’t pretty, is it? Whether it be milk price wars or the futile war waged by large retailers against online retail, the approach of big business is one of short-term protection of market share and conservatism.

The big boys give every impression that they would rather cut start-ups off at the knees than give them a hand up.

Granted, Australia doesn’t produce IBMs or Googles. But isn’t that a symptom of the problem rather than a cause?

Because banks are reluctant to lend to start-ups

As much as the banks protest that it is ‘business as usual’, start-ups would beg to differ. Getting a loan for an unproven concept without giving up everything bar your first born as security is virtually impossible.

As Peter Strong, executive director of the Council of Small Business of Australia, laments: “Even businesses that are looking for a very small loan are finding it difficult. They might simply be looking for a $10,000 loan to set up a website, which will grow their business, but the banks just won’t lend.”

It needn’t be this way. Canada has a publicly-owned bank that lends exclusively to small businesses while in the UK, a group of private backers set up a similar entity. Following a now familiar pattern, neither government nor big business is doing anything to follow suit in Australia.

Because the Government grant system is flawed

“(Government) money usually goes to businesses that need it the least,” says Ben Cusack, a grant specialist at CIS.

“The Government is risk-adverse and wants to see experience before it gives away money. They probably worry that there will be a consumer backlash if they back a lot of start-ups that then fall over.”

Risk aversion and an obsession with ROI dominates the Government’s grants system. This may please those who value restraint in the use of the public purse, but it has led to the farcical situation where financial help to assist with the writing of business plans is only given to companies making more than $500,000 in revenue. Needless to say, most businesses in this bracket will be well past the planning stage.

Because entrepreneurship isn’t promoted in schools

The start-up programs in both the UK and US have strong educational elements. In the UK, the higher education sector has been asked to help create ‘enterprise societies’, with a focus on problem solving and generating new business ideas.

Meanwhile, in the US, a mentorship scheme for 6,000 young entrepreneurs is to be rolled out.

As COSBOA’s Strong points out, Australian schools and colleges don’t view entrepreneurship as an academic concern and, therefore, steer well clear of the topic. It’s time for that to change.