When it comes to starting your own business, it can be a challenge working out what sectors have the best potential. Business evolves with changes in technology, global developments and the whims of customers. We spoke to Brad Callaughan, of business advisors Callaughan Partners, about which business sectors might fire in 2014 and provide lucrative opportunities. IT and technology Callaughan says apps and website development will be a lucrative area to start a business as internet use continues to grow. The latest figures from the Australian Bureau of Statistics in October showed broadband downloads in the three months to June 30 surged by nearly 60% on the same period last year. Mobile handset downloads have also surged as the number of people with smartphones increases. Businesses are also increasingly taking up technology. The Sensis e-Business Report for 2013 found that 98% of small to medium enterprises have a computer, up 3% from last year, 69% have a laptop, up 10% from 2011, and 41% own tablet computers. The report also found small business internet penetration has grown to 96% from 23% in 1997, with 60% using a website to promote themselves. “As there is more demand for apps with each business and the development of new apps to make life easier, there will be an increase in the demand for companies that can service this area,” Callaughan says. “Website and IT support will again be winners with the changing technology environment. “There will also be an increase in online activity, so business will need to be up-to-date with technology and have the best equipment to be able to support this infrastructure.” Baby boomers It’s well documented that Australia has an ageing population. A recent Productivity Commission report says that the number of people aged 75 years and more is expected to rise by 4 million from 2012 to 2060, increasing from about 6.4% of the population to 14.4%. Callaughan says our ageing population and Baby Boomers have “always provided numerous business opportunities”. But he suggests people think outside the box of just aged care housing and consider the numerous needs people have as they age and move into retirement, highlighting travel as a potential area ripe for growth. “There will be more opportunity for services like tours and travel agents that cater to travel for retirees,” he says. Fitness, health and beauty With Australia ranked as one of the fattest countries in the world, the fitness and healthy living industries are likely to remain popular, and lucrative, fields to start a business. Industry researcher IBISWorld estimates the gym and fitness industry makes $1 billion in annual revenue and is expected to grow by 4.8% a year over the next five years. IBISWorld also estimates the hairdressing and beauty services industry rakes in annual revenue of $4 billion, with the sector expected to grow by 1.3% a year for the next five years. “Healthy living is becoming more popular but there is still a lack of knowledge surrounding clean living,” Callaughan says. “There will be opportunities within this sector to create businesses that can educated and provide healthy living services, including gyms, health food providers, consultants and pre-packaged food.” He recommends looking to the US to see how they have approached the sector. Callaughan says fitness, health and beauty can also tie in with the ageing population. “There could be opportunities for gyms that cater to over 50s that have certain machines that help you work out but don’t cause injuries. You will also not have to compete with other young gym goers.” Freelancing Freelancing has become a popular buzz-word recently, as websites that link people to work on projects rise in popularity. The successful listing of Australian-based online site Freelancer.com this year has also sparked interest in this way of working. Freelancer’s shares surged to as high as $2.60 on the Australian Securities Exchange from their initial public offering price of 50 cents. The shares have since retreated to trade at around $1.05 at December 12. “I just feel that with the recent success of Freelancer there will be more businesses looking to enter this area,” Callaughan says. “There will also be more businesses that become freelancers and offer services to a larger range of businesses. “The range of services that will be offered will also be expanded to include everything and anything that can be outsourced for not only businesses but individuals as well.” Online retail Australians have embraced online retail and are spending billions of dollars through the internet. And it’s a trend that’s continuing to grow, albeit at a slower pace recently than seen previously. According to the National Australia Bank’s Online Retail Sales Index, Australians spent $14.4 billion online in the 12 months to October, equivalent to 6.4% of traditional retail spending. It says monthly online sales grew by just 0.3% in October, the same as September and only marginally better than August when sales fell 0.2%. Callaughan says online selling has taken off and will continue in 2014. “There will be many opportunities open up in this field with even the large department stores moving to online retail,” he says.
Australian entrepreneurs have been urged by Google’s vice president of engineering to tap into a major shift taking place if they’re going to propel their careers, Australia’s start-up sector and the world forward. “We’re in the age of the start-up. There has never been a better time in the history of the planet to launch a company,” Venkat Panchapakesan told a Google for Entrepreneurs Day in Sydney. Panchapakesan told hundreds of entrepreneurs at the event, which is also part of the Startup Spring Festival, that technology, data and culture were converging and changing in three key ways. “Entrepreneurs need to look for fundamental shifts like this, where as nimble businesses they can move in and capture the business of the entire world,” he said. “This is not a pipe dream. This is happening and there are companies trying to use these new problems.” Panchapakesan said the fact computing was going everywhere, transcending beyond digital systems and linking to real life and objects, and being used by everyone offered rich opportunities and new sets of problems for start-ups to explore and exploit. “The everywhere, anywhere, everyone trend means the data is going to explode,” he said. ‘The problems we’re focused on have become much bigger than what Google thought when we launched in 1998.” Panchapakesan outlined these three key changes for StartupSmart in the video below. He added these converging trends were complimented by the rise of crowdfunding and companies such as Google offering their infrastructure, which made launching a start-up cheaper and more manageable than ever. Citing the increasing uptake of mobile internet access, with 6.8 billion mobile phones in operation and 2.1 billion of those using mobile broadband, he said there was an increasingly massive opportunity for entrepreneurs focusing on this development and being ahead of the curve. “It’s also about wearable computing. Wearable computing is arriving, and it’s arriving very fast,” Panchapakesan said, adding that the opportunity in Australia alone was massive, as 80% of Australians are connected to the internet and the country has the fourth highest mobile and second highest tablet penetration rate in the world. He added that while globally scaling a business is never easy, entrepreneurs who are thinking ahead of the curve and paying attention to these emerging trends could launch major companies. “I run Gmail, so I know how many messages we process each day, and I know growth isn’t easy,” Panchapakesan said. “The last 10 years has been the biggest ramp up of start-ups to billion dollar valuations. You could be doing that too.”
The Coalition’s industry, innovation and science spokeswoman Sophie Mirabella has asked Prime Minister-elect Tony Abbott not to be considered for a position on his ministerial front bench as it remained uncertain whether she would win her seat following the federal election. Mirabella is behind independent candidate Cathy McGowan in the vote count for the northern Victorian seat of Indi. “The count in Indi continues to be close and it is now apparent that a clear result will not be known for many days,” Mirabella says in a statement. She says the momentum that Abbott had generated since his election win should continue and he should have the freedom to select his new front bench. “As my own future in parliament is not assured, I have asked that I not be considered for selection,” she says. Her decision opens up who Abbott will appoint to fill Mirabella’s portfolio responsibilities. Mick Liubinskas, co-founder of incubator Pollenizer, told StartupSmart he believed Coalition broadband spokesman Malcolm Turnbull would make a strong candidate to take over. “We’ve met with Malcolm and he’s shown interest in the digital entrepreneurship business,” he says, adding that Turnbull’s commercial background also made him a strong candidate. A spokesman for Abbott said the ministry would be announced “in coming days”, while a spokesman for Turnbull declined to comment.
Australia’s start-up community hopes a new Coalition government will deliver progress on key policies that will enable and strengthen the start-up ecosystem. The entrepreneur in residence at the University of the Sunshine Coast, Dean Alley, told StartupSmart he was disappointed that innovation wasn’t more of an issue this election. “I would’ve liked to have seen more innovation policy put forward,” Alley says. He adds that the start-up community includes a wide variety of people, who all prioritise different policies. “Academics will tend to vote Labor, as they do tend to give more money to university research. But both parties support Commercialisation Australia, which is key,” Alley says. He added that a key enabler of the start-up scene would be the roll out of the National Broadband Network, and hopes the Coalition’s plan will create adequate internet speeds. “The Coalition would be silly not to bring in some satisfactory broadband speed, but it won’t be the grandiose project Labor had,” Alley says. “There are a lot of start-ups, especially in regional areas like here, who need those speeds. We’ve had a lot of people come into take advantage of the broadband speeds here.” The Coalition’s fibre-to-the-node NBN plan has been criticised for offering slower internet access speeds than Labor’s fibre-to-the-premises plan. Catherine Eibner, lead start-up advisor at Sydney-based venture-technology accelerator Blue Chilli, told StartupSmart it was unclear what changes the new government would implement. “One benefit is we won’t have to build new relationships with the new government. Malcolm Turnbull is fairly well aware of the start-up sector and a fair amount work has been done to communicate our needs and situation to him,” Eibner says, adding that some of the Blue Chilli team had met with the Coalition a few months ago to discuss the needs of the start-up sector. “I am disappointed about the changes to the NBN, and I can’t deny that. In terms of our connectivity and speed from a global competitiveness position, it’s not the best result. Access to high speeds, and the cost of this access will be a prohibitor for a lot of start-ups,” Eibner says. Eibner adds the Australian government needs to move quickly to fix the issues that are driving start-ups to set up in other countries. “The employee share schemes issue is one of the reasons why start-ups leave Australia and go to the United States. Reviewing the policies around that, and also the research and development tax incentives will help us keep businesses here. This helps us keep working towards our goal of building an ecosystem of global businesses based here,” she says. Chief executive of the Enterprise Network for Young Australians, Jeremy Liddle, says the not-for-profit entrepreneurial support group hopes the new government will be more receptive to much-needed policies. “Traditionally a Coalition government has been better for start-ups. For example ENYA was founded under the Howard one, so I do think a Coalition government will be a bit more open to the policies we’ve been talking to them about for entrepreneurs and start-ups,” Liddle says. ENYA has been lobbying for five policies since May 2013, including creating a four-year, $20 million fund for low-interest loans to entrepreneurs, and a government dollar matching scheme for graduates of incubators and accelerators. Liddle adds the early traction around updating tax laws relating to employee share schemes is good news for start-ups, but education and support networks should be a priority. “The employee share scheme changes are going to happen. I don’t think it’s the major obstacle for start-ups, but it‘ll definitely be an enabler that will help a lot,” Liddle says. “The major obstacle for start-ups is enough funding going into education and access to finance, as there is very little funding going into support services.” Liddle describes the NBN as a key issue for start-ups, but adds that both policies aren’t ideal. “Faster internet is going to improve efficiencies and make it easier for the tech industry to grow,” Liddle says. “Both NBN solutions are less than ideal. The truly ideal solution would be universal wireless internet.”
The election is over. The Coalition has won. Now what does it mean for Australia’s start-up sector? Unfortunately, it’s not entirely obvious. It’s something that’s been picked up on by members of the start-up community who are wondering what attention their industry will attract now that Australia has a new government. Dean McEvoy, who launched Australian group buying website Spreets.com.au, published on his blog an open letter to Coalition broadband spokesman Malcolm Turnbull last week highlighting the opportunity around start-ups that “at the moment nobody appears to own”. “There is an opportunity with the right incentives to inspire a generation of technology entrepreneurs,” he wrote. His letter was supported by other leaders in the start-up community, with Pollenizer co-founder Mick Liubinskas commenting that “supporting start-ups shows real leadership”. Blue Chilli co-founder Sebastien Eckersley-Maslin added: “Thanks for the open letter Dean and I agree that we have a golden opportunity to support the emerging economy and again draw attention to the report by PwC on the impact this industry can have on the Australian economy if the sufficient support is done correctly now.” At the Coalition’s e-government and digital economy policy last week, the policy document recognised that “policies encouraging innovation, funding research and providing incentives for entrepreneurs are very important over the medium term in developing a more sophisticated economic base”. In April this year, a report by PricewaterhouseCoopers, commissioned by Google, said Australia’s tech start-up sector had the potential to contribute $109 billion, or 4% of gross domestic product, to the Australian economy and 540,000 jobs by 2033 “with a concerted effort from entrepreneurs, educators, the government and corporate Australia”. The Coalition’s policy said that while a vibrant start-up community would be very encouraging, “there are limits to the capacity of governments to will this into existence, and, even if they could, it would not be material to the broader economy for years”. When StartupSmart asked Coalition communications spokesman Malcolm Turnbull’s spokesman for its policies relating to start-ups, we were referred to speeches Turnbull had made earlier in the year. Turnbull told the Kickstarter conference in February: “What we really have to do is to make sure we create an environment and some judicious support whether it is by way of R&D (research and development) concessions or supporting venture capitalists; we’ve got to make sure that what we are doing is really supporting you and your counterparts around Australia because you are the future of the industry.” He also said the Coalition was committed to making it easier for businesses to get on without excessive regulation and has pledged to cut the cost of red tape by at least $1 billion for each year it is in office. McEvoy suggested fixing tax laws that don’t incentivise people to take risks and be entrepreneurs and inhibit experienced people from helping start-ups. “The second and most important thing is to take ownership of this opportunity. Let it be known that you are aware of this opportunity and will sit down and help work out policies that make it thrive, not let this massive opportunity slip through the cracks,” McEvoy wrote. The start-up sector’s wishlist for the election included action on employee share scheme arrangements by making them simpler and their tax treatment more start-up friendly, more early stage funding available for start-ups, and a focus on educating more computer engineers. A review is underway into employee share schemes, with incoming Treasurer Joe Hockey saying in July that the Coalition would consider making changes. StartupSmart also asked a spokesman for Coalition industry and innovation spokeswoman Sophie Mirabella for a list of policies relating to the start-up sector, but didn’t receive a response. The Coalition has also pledged to protect medical research funding and provide “long-term” policy stability and that there needs to be better links between government, business and research institutions. With the election now over, and the business of governing now in the Coalition’s hands, the start-up community will be watching closely to see what changes, if any, come to help their sector.
The Coalition has won the federal election and, with that, the landscape for business in Australia has changed. Traditionally considered friendly to business, the Coalition’s plans will now shape Australia’s economic future, as well as the future of around two million small businesses which are regularly lauded as the engine room of the country’s economy. Here are some of the Coalition’s policies likely to impact on business: Tax The Coalition’s big promise is the 1.5% cut to the company tax rate, which Prime Minister-elect Abbott has pledged. The promise also has a second effect – winning over small business. Under the Coalition’s paid parental leave plan, big businesses would suffer a 1.5% levy on profits. Now, the 1.5% reduction means those larger businesses won’t pay any more tax than they currently do. Abbott has also said while the Coalition won’t raise the GST, the tax will still be part of an overall review. Anything can happen. It’s also worth pointing out conservative states have started lobbying for reducing the low-value threshold – something which Labor has not moved to change. If the Coalition wins power, this is almost certainly an issue that will rear its head in the first six months of government. However, there are some caveats. The Coalition will scrap the increased asset write-off threshold to its original $5000 and get rid of the rapid depreciation rules as well. And the big one, scrapping the carbon tax, which is expected to flow through to a range of business expenses – if it gets through the Senate. Red tape The Coalition has made red tape a big part of its pledge to small business. Abbott has set a goal of saving $1 billion every year by eliminating unnecessary expenses, and has even said a Coalition government would set aside two sitting days for getting rid of regulation. The paymaster requirement for parental leave would be erased under a Coalition, while environmental regulations have also been targeted by erasing duplicated laws between the states and federal government. Public servants will have their bonuses tied to deregulation under the Coalition, each department will be required to create a unit for getting rid of red tape, while the Office of Prime Minister and Cabinet will oversee deregulation duties. Parental leave The Coalition’s parental leave system is more expensive, and ultimately more generous. Mothers will receive 26 weeks at their actual wage, along with superannuation. The scheme is set to start July 1, 2015. However, unlike Labor, the Coalition won’t make businesses of any size act as paymasters. Instead, every payment will be made through the government. Government The Coalition has said that small business will be a cabinet portfolio within the Treasury department in an Abbott government. It has also committed Commonwealth departments and agencies to paying small business suppliers on time or face paying interest on outstanding bills. “Small businesses work hard for their money and should not be bankrolling government,” Treasurer-elect Joe Hockey said earlier this year. Industrial relations The Coalition has said it will keep the Fair Work system in place, although there will be some changes. Unions will have fewer right-of-entry allowances, while the Australian Building and Construction Commission will be reinstated fully. Individual Flexibility Agreements will also receive some changes, with the Coalition set to widen conditions under which IFAs can be negotiated. There will be some other changes including creating an appeal division within Fair Work, allowing the Fair Work Ombudsman to consult small businesses as well as employees, and only allowing the Fair Work Commission to hear bullying claims after they have been investigated by other groups. Skills and education A huge part of the Coalition’s plan is a new HECS-style apprenticeship support scheme, which will cost $80 million. Apprentices can borrow $20,000 under the scheme for tools and equipment, to be distributed across four years. Finishing the training triggers a discount. Other education policies include creating an infrastructure fund for schools when the budget is back in surplus, along with commissioning the Productivity Commission to conduct a review of the childcare system. Manufacturing The Coalition hasn’t been interested in doing business with the car industry. Although it has promised to wind back Labor’s changes to the fringe benefits tax that has been blamed for a sharp fall in new car sales. Exporters will welcome $50 million in grants, and $50 million for transitional assistance for areas moving out of manufacturing. Broadband The Coalition changed its policy on the NBN earlier this year. Instead of simply stopping the project in its tracks, the NBN under the Coalition would continue – but with one major change. The Coalition NBN will no longer be fibre-to-the-home. Instead, it will be fibre-to-the-node, with copper connections to each home. Individuals can connect their homes to the node with fibre, but it will cost them – to the tune of several thousand dollars.
Learnable opens up $10 million in online coding education as fears mount Australia is falling behind8:37AM | Monday, 19 August
Ten thousand Australian school students will be able to receive free, online training in how to code, with online education start-up Learnable donating $10 million worth of courses as part of a new initiative. Learnable for Schools general manager Kyle Vermeulen told StartupSmart the initiative was an obvious and exciting step for the team. “The way the economy is moving, everything is going digital, business is online, sales are online and marketing is online. It’s another awesome tool to have and people who know how to code can add $10,000 to their earning potential straight away,” Vermeulen says. Learnable’s initiative comes as Australia’s Information and Communication Technology Woman of the Year, Yvette Adams, recently called for coding to become a top priority in education. Vermeulen says while the Learnable team is aware the curriculum is moving towards code, it’ll take a couple of years or longer to reach students and they wanted a way for kids to get involved now. “We’ve been throwing this idea around for a long time,” Vermeulen says. “It’s a huge passion of ours, and we’re excited to get to see other kids learn how to code.” He adds the benefit of code-savvy young people extends beyond their own earning capacity to the wider economy. “We’re already seeing Australia falling behind. There is massive competition for developers, and without those skills it’s going to be really hard to move Australian companies forward,” Vermeulen says. Students can sign up directly on Learnable with the first 10,000 receiving three years of access to a range of online coding, web design and app building courses for free valued at $1000 per student. SitePoint and Learnable co-founder and start-up investor Leni Mayo told StartupSmart it is increasingly urgent Australians seize the opportunity to learn to code or risk falling too far behind to catch up. “When SitePoint started in 2000, we had two employees,” he says. “Now across the companies we have well over 150 staff. We’re hiring at a great rate, and as a country we’re not producing people who are talented engineers of tomorrow,” Mayo says, adding the number of computer science graduates had dropped by almost 50% between 2001 and 2013. He says while Australian tech companies are staying afloat due to tech talent immigrating from overseas, Australia needs to do more to take advantage of the tech boom. “What we as a country are doing to plug that gap, we’re plugging that gap through immigration, and I’m a huge supporter of immigration. My concern is about the opportunity we’re presenting to Australian kids collectively. We want to empower Australian kids to take advantage of the opportunity that’s exploding around us,” Mayo says. The initiative has been welcomed by the wider community, including both sides of politics. Senator Kate Lundy, Minister Assisting for Innovation and Industry Minister Assisting for the Digital Economy, says in a statement it was increasingly essential for people to have coding literacy. “Coding skills, or at the very least an understanding of what can be done through coding, should be seen as core competencies. People who can create, enhance and use digital tools have the ability to participate fully and enhance the accessibility and equity of our digital environment,” Lundy says. Shadow Minister for Communications and Broadband Malcolm Turnbull added that Australians needed to be both digitally literate and creative. “It is not enough to be digitally literate, all of us need to become more digitally creative. And where better to start than schools. More computer science, more coding in schools is vitally important. This is a great initiative,” Turnbull says. Vicki Forbes, the principal of Brentwood Secondary College, a pilot school in the program, says in a statement secondary schools had to teach all the skills needed for future careers. "Our secondary schools are now home to students who were born in the 21st century and many of them intuitively act as creators of technology rather than just consumers,” Forbes said. “We are very excited to be the pilot school for such an innovative project.”
The Reserve Bank cut the official cash rate by 25 basis points to a record low of 2.5% yesterday, with Westpac cutting its advertised variable rate by 28 basis points to 5.98% in a bid to grab marketshare. The rate cut was also passed on in full by the National Australia Bank, Commonwealth Bank and the Bank of Queensland, while ANZ will announce whether it’s cutting rates on Friday. "The easing in monetary policy over the past 18 months has supported interest-sensitive spending and asset values, and further effects can be expected over time," Reserve Bank governor Glenn Stevens says. IBM joins NBN debate IBM Australia managing director Andrew Stevens has waded into the debate over the national broadband network, praising both parties while favouring the ALP’s fibre-to-the-premises proposal. "Both parties have come a long way (to develop policy) to deliver high-speed broadband. There's no doubt that the era of smart will be defined by this utility called high-speed broadband, so we just have to get there as fast as we can,” Stevens says. “I just find there is a leader and a laggard and, in this particular case, the Coalition is the laggard. Forty per cent of people by 2025 are going to be partially or fully working from home. And $40 billion is not that much money; it's less than the value of parks and gardens in Australia.” Department of Justice files lawsuits against Bank of America The US Department of Justice has filed two civil lawsuits against the Bank of America, alleging $US850 million in fraud on investors of residential mortgage-backed securities at the beginning of the Global Financial Crisis. However, Bank of America is denying any wrongdoing in its marketing of the loan pools, which date to January 2008. "These were prime mortgages sold to sophisticated investors who had ample access to the underlying data, and we will demonstrate that,” Bank of America says in a statement. "The loans in this pool performed better than loans with similar characteristics originated and securitised at the same time by other financial institutions. We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result." Overnight The Dow Jones Industrial Average is down to 15518.74. The Aussie dollar is down to US 89.83 cents.
Leaders from the Australian start-up community say while there will be little immediate impact from Kevin Rudd ousting Julia Gillard as Prime Minister, the new environment and leadership team has created a better opportunity for working with the government. Mick Liubinskas, co-founder of leading start-up incubator Pollenizer told StartupSmart the spill has generated a more risk-friendly leadership team, ripe for conversation and “aggressive action on innovation”. “The way the Labor Party is right now, they’ll be looking at ways to grow innovation. We’re looking at a new team with short space of time before an election, who may be more likely to take risks,” Liubinskas says. “Being an election year, we have the opportunity to get the ear of in power to see if they can put an election promise in.” Liubinskas says there have been ups and downs with Gillard and Senator Stephen Conroy, who had been the driver of the national broadband network but who has resigned as the minister for broadband, communications and the digital economy. “Conroy with the internet filter and Prime Minister Gillard with the 457-visas, those things have been looked on negatively by the technology industry,” he says. Liubinskas says the start-up community has big plans for working with government to build a strong entrepreneurial culture in Australia. “We have long term plans and we hope to do that with the government. But innovation can’t afford to be party-based because it’s too important,” says Liubinskas. “Australia has a big opportunity, but also a responsibility, to look at what will be the next industry after mining, and innovation should be the prime option,” says Liubinskas, who points out entrepreneurialism and innovation is a high value add, exportable option that’s good for the economy, education and health. Sebastian Eckersley-Maslin, the chief executive at investment group and tech start-up accelerator Blue Chilli, says the spill will have limited impact as two key policy changes the start-up community needed have both been already introduced. “I’m still digesting it myself,” Eckersley-Maslin told StartupSmart. “The biggest change we wanted has already been announced.” Eckersley-Maslin says this was the review of employee share schemes. He added the community is also keen to see progress on the idea of lowering the minimum required amount for government matching of early stage venture capital firms from $10 million to $5 million. Eckersley-Maslin adds he hopes the removal of Australia’s first female prime minister won’t have a negative impact on encouraging women to step into leadership roles and take risks. “A lot of the backlash she was facing was as a woman, from puppeteering by the media. Australia voted her in, and her party voted her out,” Eckersley-Maslin says. Blue Chilli has a 50-50 gender split across the company, and 42% of its founders are female. “That’s pretty rare in the IT tech investment space,” says Eckersley-Maslin. “We’ve still got the Governor-General and a female lord mayor of Sydney, so there are still women leaders out there, but I am looking forward to when we have another female prime minister.”
The government has today announced a review of the regulations around employee share schemes and crowd-sourced equity funding regulations. According to the National Digital Economy Strategy (NDES) update announced in Brisbane today, this decision was made in order to “boost support for Australian tech start-ups” and would be focused on helping address the barriers faced by start-up companies in attracting and retaining staff. In a release, Senator Stephen Conroy, the Minister for Broadband, Communications and the Digital Economy, said: “As the rollout of the NBN continues, the capacity for start-up companies, particularly in the tech and digital sectors, to create game-changing businesses and applications is unprecedented.” The decision to review and simplify the employee share scheme options will be welcomed by the start-up and venture capital industries, who have been calling for such an update. Phil Morle, founder and CEO of leading start-up incubator Pollenizer, told StartupSmart the announcement was good news for Australian start-ups. “We welcome the review of share option regulations and look forward to new recommendations playing a major role in stimulating the start-up economy,” says Morle. “To foster its swelling community of start-ups, Australia needs simple, fair and cost-effective ways for entrepreneurs to compensate each other with equity over cash. This recognises the risk taken when building new ventures which are strapped for cash and statistically likely to fail.” The move has also been welcomed by the Australian Industry Group. In a release, Innes Willox, the chief executive of the Australian Industry Group said: "We also welcome the Government’s commitment to review the tax treatment of employee share schemes and to develop a best practice framework for Crowd Sourced Equity Funding, which Ai Group advocated in our recent report Ready or Not? Technology Investment and Productivity in Australian Businesses. We need to improve the conditions for innovation and commercialisation in Australia as a priority, including better access to financing." Assistant Treasurer David Bradbury said in a release the feedback from the 2012 Digital Economy Forum pointed out the government could better support the development of start-ups, and it was therefore timely to re-examine the framework around the employee share schemes. “The government can’t create the next Twitter, Instagram or 99 Designs, but we can provide the infrastructure and regulatory environment to help Australians who will,” said Conroy. A consultation paper to guide the discussions will be released shortly. The employee share schemes review will be due by December 2013 and the crowd-sourced equity funding by April 2014. The NDES update also announced an expansion of the Digital Enterprise and Local Government programs to support small businesses to better engage with the digital economy and make use of emerging online opportunities.
Businesses keen to use the high speed national broadband network to develop their offerings are the target of the Digital Productivity Conference, hosted by the federal government in Brisbane and webcast online this week. The conference for business, government and community groups will cover a wide range of areas including cloud computing, teleworking and e-government. The conference will run on Wednesday, June 12, and Thursday, June 13, in Brisbane. Start-up operators unable to attend can watch session webcasts here, and follow the #digiconau hashtag on Twitter. For start-ups, the key session of interest will probably be the one targeted at getting Australian businesses online. New findings show only 43% of Australian businesses have a website, and only 28% sell online. Paul Simos of realestate.com.au, David Gurney of Blue-Rocket, Hugh Durrant-Whyte of NICTA and Kieran O’Hea, the chief digital officer at Brisbane City Council will discuss their experiences and insights, and reflect on how high-speed broadband will enable online sales. This panel will be chaired by Frank Farrall from Deloitte Digital. The government recently announced the creation of digital toolkits designed to help businesses start generating sales and profit online.
Investment opportunities for Australian web and tech start-ups appear to be brightening with new research showing the Asia-Pacific region is leading the way for deals, as North American investors search for global opportunities. Internet DealBook is a global database that tracks angel, venture capital and private equity investment, along with M&A activity, across internet and technology-related private companies. The database is collated by Sydney-based venture capital firm Right Click Capital, which collects all the information from public news sources. The latest report, which looks at the first quarter of 2013, shows Asia-Pacific leads the regions with an average deal value of US$22.8 million, up from $17 million in Q1 2012. The Asia-Pacific was the only region to experience growth in average deal values when comparing Q1 2013 to Q1 2012, the report reveals. Right Click Capital partner Benjamin Chong says the strength of the Asia-Pacific augurs well for Australia. “A lot more people want to invest in the Asia-Pacific region and that’s being driven by investors in the US, and a smattering of European investors as well, but in large part North American investors wanting to get into the fastest growing part of the world,” Chong told StartupSmart. “Australia is one of the more advanced users of technology in terms of broadband penetration, and in terms of quality of businesses and their maturity in various markets. “For me, Australia has to be up there with the other top five countries in the Asia-Pacific.” A total of 910 deals were tracked from public sources in Q1 2013, down from 925 in Q1 2012. According to the report, North America continues to account for the vast majority of the deals tracked, recording US$7.2 billion, or 75%, out of the US$9.6 billion recorded for all regions. Chong says an increasing number of North American investors are looking at Australia as a gateway to Asia. “Australia, in one sense, is a good place to establish a beachhead operation because they understand the rules of the law. They understand the language here too,” Chong says. “Australia is not a bad place to make your first entry in this region because it’s also in the same time zone [as Asia].” With regard to deals by sector, the report shows the average deal values have fallen in all sectors except in media and eCommerce, which recorded increases of 14.1% and 17.9% respectively when compared to Q1 2012. “What I’d say is that these days, to get involved in an eCommerce-type business, if you’re going to be moving boxes, it requires quite a lot of investment,” Chong says. While the eCommerce sector saw average deal values increase, the number of investments actually decreased. The number of investments also fell in hardware and infrastructure, and mobile and apps. “For me, it was surprising that the games market and eCommerce were down on last year. I think games still have a way to go. “I thought there would be a rush of gold digging not only in computer gaming but mobile gaming… I would say we need to have a look at Q2 data before we come to any conclusions. “Maybe it goes to show – this is speculation – but maybe it’s because there have been a bunch of these game developers that have come [up with other funding] sources.”
Prime Minister Julia Gillard has announced plans to boost school funding by $14.5 billion over the next five years, with the federal government to contribute $9.4 billion while the states contribute the remaining third. However, while New South Wales appears keen to support the plan, the federal government has met opposition from the state governments of Victoria, Queensland and Western Australia. “This model would see Western Australian students penalised because of this state's high level of investment in our schools. This investment in part recognises that some of our students are among the most vulnerable in the nation," WA Premier Colin Barnett said. Turnbull confident of Telstra deal Shadow communications minister Malcolm Turnbull says he is confident a Coalition government would be able to reach an agreement with Telstra over its alternative broadband policy. Announced last week, the Coalition’s policy would see fibre optic cables laid out to street cabinets, or nodes, with Telstra’s existing copper covering the final mile to subscribers’ homes. “Tension with government has never been good for Telstra shareholders. I am very confident that we'll achieve speedily the slight rearrangements to the agreements we're talking about,” Turnbull said. Private insurer attacks comparison sites over affordability Medibank Private managing director George Savvides has attacked health insurance comparison websites, claiming brokers drive up costs for consumers, ahead of a potential public listing. “[Comparison sites] haven't really changed the dynamics of affordability. In fact, I'd argue they're adding to costs because of the commission,” Savvides told Fairfax. The claim is disputed by iSelect chief executive Matt McCann, who believes the services also benefit insurance providers. “Those [funds] that don't participate in the comparison channel have found it hard to grow in this market. And for us, funds wouldn't use us if we weren't an efficient form of distribution for their products,” McCann said. Overnight The Dow Jones Industrial Average closed down 0.08 points to 14,865.06. The Aussie dollar is down to US105.05 cents
“The superfast broadband of the order of 100+ megabits per second (Mbps) and into the gigaspeed bracket is de rigueur for any nation purporting to be a developed and advancing economy.” – Phil Ruthven, “A Snapshot of Australia’s Digital Economy to 2050”, IbisWorld, June 2012. The Coalition should firstly be congratulated upon launching today a detailed, closely argued policy proposal on their alternative vision for the National Broadband Network and how it can be implemented “faster” and at less cost than the current NBN. Malcolm Turnbull has moved the Coalition light years – or at least several million fibre optic kilometres – from the Luddite criticisms thrown up by the Opposition during the 2010 federal election campaign. And today, with his party leader Tony Abbott, he has released a coherent policy five months in advance of the 2013 election, in contrast to the Opposition’s broadband policy release just three days ahead of the previous federal election, on 13 August 2010. That said, it was sad to see the number of debating tricks employed in launching his national broadband policy. There was the conflation of the government’s NBN policies mark I (2007) and mark II (2009), and the selective omission of the “externalities” in the rollout of the NBN — (particularly the long negotiations with Telstra and the business-model-changing interventions of the ACCC) — in order to trash the reputations of both NBN Co and the government, in failing to meet rollout targets announced in either 2007 or 2010. And there is the claim that the NBN, as a “government-owned telecom monopoly”, somehow inhibits retail competition. In contrast, the Australian telecommunications industry recognises that it has only been through part of the current government’s NBN policy — the structural separation of Telstra and the positioning of the NBN building blocks as wholesale resources available to all retailers on equal terms of usage — that will allow totally equitable retail competition in the supply of broadband. There was also Mr Turnbull’s claim that in choosing the cheaper FTTN (Fibre to the Node) option, rather than Fibre to the Home (FTTH), the Coalition is following world’s best practice. This political delusion – not shared widely within the telecommunications industry – was recently burst by independent journalist Stuart Corner’s article in the Telecommunications Journal of Australia, “The politics of speed”, where he found that “82% of investment in FTTX (FTTH or FTTN) in 2012-17 in the world’s developed countries is estimated to be in fibre-to-the-home (FTTH)” – i.e. only 18% of that investment is destined for Mr Turnbull’s preferred FTTN. These debating points must be debunked because they are part of a smokescreen that portrays the current NBN as being needlessly gold-plated, incompetently managed, and ridiculously tardy in meeting Australia’s real needs for broadband – none of which I believe to be true. The reality is that we now have the chance to compare two policies pitched at different timescales of infrastructure need and use – and there are arguments in favour of both approaches. But we need to remember that, under both policies, there will be a world of difference between the timelines set in politicans’ election promises and the hard engineering realities of managing any project of such massive scale. Let me briefly compare the essential differences between the two policies. First, timescale. The current NBN is based upon meeting bandwidth needs, in the case of the lucky 93% with FTTH, for perhaps three decades beyond the rollout completion in 2021. (Just as the copper access network rolled out by the PMG in the 1950s was intended to last – and generally did last – for a further 50 years.) The current NBN’s vision satisfies two key drivers. The first is the need for Australia to grow its digital economy, as the only likely growth sector that can complement, and ultimately overtake, the mining industry. The Ibisworld report, from which I have quoted above, lays out a well-argued scenario in which by 2050 some 20% of the national GDP will be generated by the digital economy – if it is underpinned by ubiquitous high-speed broadband. The digital economy is already a larger employer than the mining industry, and it has the advantages of providing a much greater diversity of highly paid, high-value jobs, which can be teleworked virtually across Australia – given enough access bandwidth. The second driver is the inexorable historical growth in telecommunications access rates, which has been exponential since the 1950s – see the attached graph from Rod Tucker’s 2010 article, “Broadband facts, fiction and urban myths”. Rod Tucker (2010) This exponential growth prediction, which is the telecommuncations industry’s equivalent to Moore’s Law for computing, continues to get empirical support – for instance, Google is currently trialling 1 gbps applications in Kansas City. Story continues on page 2. Please click below. The current NBN policy is predicated upon building the major infrastructure – the network infrastructure – only once, and its lasting for decades. For this reason, the current NBN policy must be seen as being far more future-proof than the alternative policy. Optical fibre, already capable of supporting bandwidths in terabytes per second, is considered to have a lifeteime of 40 to 60 years. (A caveat is that the new satellites to be launched in 2015 to support the 3% of homes in remote areas will probably need to be replaced in 15 to 20 years. The fixed radio technology supporting 4% of premises can be replaced or upgraded much more cheaply, but should last a good 20 years without upgrades.) If the current NBN policy is predicated upon providing international competitive advantage to Australia over several decades, the Coalition’s NBN policy can be fairly categorised as a more cost-effective catch-up across Australia of the bandwidth that most households need now, in two stages. Firstly, within the parliamentary term ending in 2016, their plan aims to universally match the 25 Mbps “bar” now set by NBN Co’s fixed radio technology, announced two months ago (an impressive doubling of the previously planned 12 Mbps download speed, due to improvements in radio technology). In a second stage, to be completed by 2019, they aim to provide 50 Mbps minimum access speed to all FTTN and FTTH premises. This is an excellent aim for a cost-effective short-term (six year) plan. However, in many cases, the proposed new FTTN technology intended for use in 71% of premises will not reach this speed in areas of low copper reticulation (British Telecom’s solution in the UK requires the use of two pairs of copper per house connected, which is not universally available here), or in areas of ageing or particularly water-prone copper cables (a frequent situation). The Coalition’s solution is to provide FTTH in these exceptional cases. Without access to their business plan, one cannot see if they have factored in enough cases to affect their budget. Four quick points in conclusion. Firstly, the Coalition has minimised the likelihood of any rural backlash by basically leaving the current NBN plan intact in rural areas. Secondly, it has not (at the time of writing) released its estimate of the cost of paying Telstra to maintain in working condition the copper network that will link its new FTTN cabinets to customer premises. There is reason to believe that the Coalition will have significantly underestimated this. Thirdly, the Coalition has behaved extraordinarily like the Gillard government did in 2010 in building an investment case for the NBN that fails to factor in the real benefits to the nation’s GDP, such as to the digital economy – let alone attempting to “capitalise” the benefits of social inclusion through facilitating universal broadband access. Instead, the Coalition’s proposal reads like an engineering investment case alone – an impression reinforced by Mr Abbott’s statement today that his NBN, unlike the current one, will provide “a real commercial return”. Given all the cherry-picking that their NBN policy will allow to private developers, free at last to directly compete with the NBN’s access infrastructure wherever they can make a profit, there is good reason to think that the Coalition’s NBN will, as a result, inevitably operate at a loss. Lastly, the Coalition makes much ado about saving taxpayers' money through reducing the scope and scale of the NBN. In fact, the only taxpayers' money saved would seem to lie in lower interest payments made by Treasury in the period before the NBN breaks even – in a period of historically low interest rates. These savings need to be offset by the loss to the economy of all the construction jobs associated with FTTH – the most labour-intensive part of the current rollout. Peter Gerrand is an Honorary Professorial Fellow in telecommunications at the University of Melbourne. This article first appeared on The Conversation.
Above: Shadow communications spokesman Malcolm Turnbull. After months of general barbs aimed at the National Broadband Network, the federal Coalition has finally unveiled its alternative broadband vision for Australia. Opposition Leader Tony Abbott and shadow communications spokesman Malcolm Turnbull (pictured above) said that the Coalition would provide “very fast broadband, sooner, cheaper” to the Australian public. Turnbull said that the plan – which would provide 25 megabits per second, much slower than Labor’s alternative – was “consistent with the best practice around the world”. However, Communications Minister Stephen Conroy said the Coalition plan “fails miserably” and only the NBN would provide the high-speed broadband Australian business and consumers need. Despite the fact many Australian small businesses are lagging behind with their own web presence, economists have consistently pointed to the benefits of fast broadband. Figures released today by the Australian Bureau of Statistics show that consumers aren’t hanging around – there were 12.2 million internet subscribers in Australia at the end of December 2012, a 5% annual increase. There were a further mobile six million wireless broadband connections. So how do the two plans stack up? StartupSmart explains all. Labor’s plan What is it? The National Broadband Network How will it work? Expected to roll out over the next 10 years, the NBN aims to hook up more than 3.5 million homes and businesses by the end of 2015, with the eventual goal of 100% coverage of high-speed broadband. For 93% of Australians, the current copper network is to be completely replaced with optical fibre all the way from the exchange to the premises, a configuration called fibre-to-the-premises (FTTP). The next 4% get fixed wireless connections, and the most remote 3% get satellite links. All this is being run by NBN Co, a wholly government-owned company, which will be sold after completion. Last month, NBN Co admitted it was running three months behind schedule. How fast will it be? Up to 100 Mbps download and 40 Mbps upload. What will it cost? The government says $44 billion. The Coalition says more than $90 billion. Conroy says the Coalition figure is a “false claim”. What they say about it Nick Ross, ABC Technology: “Based on all the existing evidence, the Coalition's claims regarding the technology simply don't stand up to scrutiny. If for some reason it turns out they do, then they need to explain why just about every expert on the matter has got it so wrong.” Conroy: "The only way NBN Co won't make a return is if the Coalition is elected." Turnbull: “The NBN will continue to roll out but we will do so in a cost-effective manner, in particular in built-up areas." The Coalition’s plan What is it? Essentially, it is the same as the National Broadband Network, with a few significant tweaks. How will it work? The NBN rollout will essentially continue, but for most Australians, it will mean fibre-to-the-node (FTTN) – fibre from the exchange to kerbside cabinets no more than about 800 metres from customer premises, and using the existing copper for the last segment. Telstra’s copper network will be purchased for this purpose. The Coalition policy document states: "Suburbs, regions, towns and business districts with the poorest services and greatest need for upgrades will receive first priority." How fast will it be? Slower than the NBN. There will be a download data rate of between 25 and 100 megabits per second by late 2016 and between 50 and 100 megabits per second by 2019. What will it cost? The Coalition has the plan costed at $29 billion including $20 billion of capital expenditure. What they say about it Stilgherrian, technology writer: “The Coalition's core point is that while FTTP can certainly deliver faster broadband, and is the technology for the long-term, they can deliver a clear improvement for more Australians sooner and cheaper by being more flexible.” Turnbull: "[25 megabits per second] will enable anybody in residential situations to do everything they want to do or need to do in terms of applications and services, and is six times faster than the average speed people are getting right now.” Conroy: "If you understand broadband, if you understand that it is being used for more applications that require more bandwidth every single day, then you know that Malcolm Turnbull's network is a fail. "Malcolm Turnbull is going to build a one-lane Sydney Harbour Bridge because he says he can do it cheaper and faster."
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