Australia’s quest to be an innovative nation

As Innovation Minister Christopher Pyne develops a science and innovation statement, leading CEO’s argue that R&D Tax Incentives are the “lifeblood” of early stage and mid-sized companies and are urging the government not to “nip and tuck” it.

Australia is currently on a quest to develop into a strong innovative nation. Specifically, fostering innovative thinking and creating an ecosystem suitable for start-ups to grow and develop into global markets.

Many argue that tax incentives wont work based of the fact that countrie, such as the US and Israel, did not need them to build global tech empires (e.g silicon valley). However, Australia is somewhat different to these countries. Compared to the US, Australia has a much smaller domestic market, which means Australian startups will need to export much earlier in their life-cycle to compete internationally.

Australia is building from a completely different baseline, in a different ecosystem with different market conditions. To further grow and commercialise research and innovation, Australia needs to be clever about how to drive capital towards such differing conditions.

A key challenge is the lack of later-stage venture capital available to Australian start-ups. It’s estimated over 1,500 startups are created each year in Australia. Each start-up is generally looking to access between $2m and $20m, yet the amount of new capital raised during the last financial year was less than $85m. Therefore, we have to expand the pool of later-stage venture funding available.

The government’s innovation strategy needs to address this issue, which is consequently blocking the path of Australia’s entrepreneurs. Many have called for new incentives for angel investing at seed stage, fixing issues with the employee share scheme, and pushing the R&D Tax Incentive into the future. Next month the government’s innovation strategy is set to be released with expectations set extremely high from the Australian business sector.