The next federal parliament needs to act quickly to bridge the “second Valley of Death” and keep fast-growing startups in the country, according to a policy blueprint released by Australia’s peak body for the private equity and venture capital industry.
With less than two weeks left in the election campaign, AVCAL has released a set of policies that it wants the incoming federal government to implement in its first month of office in order to fix the venture capital industry in Australia.
The blueprint focuses on encouraging further foreign investment in Australian startups as well as ensuring capital is available to companies in a “scale-up” phase.
Following last year’s innovation statement, which focused on early-stage startup investment, AVCAL chief executive Yasser El-Ansary says this needs to be the next big priority.
“The National Innovation and Science Agenda will be transformative for Australia’s startup ecosystem, providing investors and entrepreneurs with the right risk-return incentives,” El-Ansary says.
“Now we have to turn our attention to the next phase of that work, NISA 2.0, which must be focused on boosting the availability of later-stage capital for fast-growing Australian businesses.”
Increasing the availability of large funding rounds of between $5-20 million for startups that are looking to rapidly scale, hire staff, drive sales and invest in R&D would ensure that more of these potentially lucrative companies remain in Australia rather than relocating abroad, El-Ansary says.
“It is essential that Australia has a competitive environment for those companies at the heart of the economy,” the AVCAL blueprint reads.
The first policy recommendation from the group is to relax foreign investment rules in order to encourage foreign investment into Australian tech companies, including a review into the current framework to remove things that may “unintentionally deter routine passive investments” into Australia.
AVCAL is also calling for the accelerated introduction of a “new, collective investment vehicle for limited partnerships” and says Australia’s current policies are “out of step with international practice”.
The blueprint outlines a new “streamlined, simplified limited partnership vehicle” that could be implemented by July next year.
It is also focusing on unlocking superannuation funds for venture capital and the various roadblocks that are currently preventing this, recommending the government “recalibrates” existing policy to put a focus on net returns and removing regulatory hurdles.
Other polices AVCAL is campaign for include government funding for commercialisation and business skills course for STEM students, quarterly R&D tax credits for “innovative, cash-poor businesses”, a Biomedical Translation Fund and investigations for further opportunities for long-term private-public co-investment strategies.
StartupAUS CEO Alex McCauley says the group has worked closely with AVCAL to develop the blueprint and it is a “sensible, helpful addition to the innovation policy debate”.
“This is a period of unprecedented opportunity for Australian startups and we must be careful not to squander it,” McCauley says.
“A record $1 billion has been raised or is being raised in private equity and venture capital funds since this time last year. That investment is an enormous boost to our early-stage startups and a great indication of the powerhouse of high-growth startup brands emerging around the country.”
But he says that while the focus on early-stage startups is positive, more emphasis needs to be placed on longer-term growth by both major parties.
“StartupAUS shares AVCAL’s concern that unless we take a long-term approach to supporting these startups we may lose many of them to offshore competition or local funding challenges,” McCauley says.
He says a crucial aspect to this is increasing the R&D tax incentive for innovative startups.
“We want to see an increase to research and development in this country because it’s the best way governments can support innovative young companies in Australia,” he says.
“This isn’t about fixing something that’s broken. This is about taking a government initiative that is working fantastically for startups and making it even better.”
The other polices that StartupAUS is lobbying for include improvements to employee visas and their availability to startups and further funding for incubators and accelerators.