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The NSW start-up sector has reacted with horror after the NSW government abruptly closed various funding programs for early-stage companies following a spending review by the new Labor government.
Popular programs such as the Small Viable Product (MVP) grant have been retained “as part of a comprehensive sector-wide spending review coordinated by the NSW Treasury”, Investment NSW announced this week.
That includes timely applications for matching funding for startups to bring their technology solutions to first sales. The previous government increased it from $25,000 to $200,000 per startup at the end of last year.
Investment NSW is unable to process existing applications while this review is ongoing. The funding is one of those on hold until the government makes a decision on the 2023-24 budget,” Investment NSW said on its grant programs homepage.
Hundreds of NSW startups have used the program to achieve their initial product development goals and the sudden closure of the program has disappointed the sector, with concerns that it could result in the loss of many early-stage startups at a time when the sector is booming. When venture funding dries up, it collapses.
UNSW director of entrepreneurship, David Burt, said the change under the new government comes six months after the MVP reform was announced with the promise of greater funding and streamlined application processes, sparking optimism among the NSW startup ecosystem.
David Burt, Head of Entrepreneurship at UNSW
“This indefinite shutdown by the NSW Government is a devastating outcome for NSW-based startups, particularly those who have recently applied in limbo,” he said.
Programs offered through the NSW Office of the Chief Scientist and Engineer have also hit the pause button. Other previous Coalition Government initiatives through Invest NSW are the NSW Future Industries Investment Program, the Infrastructure Building Program, the National Collaborative Research Infrastructure Strategy (NCRIS) Support Program and the $40 million Biosciences Fund.
“The Department of Enterprise, Investment and Trade is working with the NSW Treasury to coordinate a comprehensive spending review to help the NSW Government deliver on its priorities and manage budget pressures,” a department spokesman said.
“As part of this sector-wide review, a number of Investment NSW programs have been put on hold and will be reviewed as part of the 2023-24 budget process.”
Updates on other aid programs will be provided during the review process, he said.
The combined value of the programs is more than $225 million. Most of the funding is aligned with the private sector, providing added value to taxpayers. The MVP grant was around $10 million over four years.
David Burt, who oversees the founders of UNSW, said the Government must move quickly to restore the MVP support program, describing it as “one of the most effective and important start-up support programs” for NSW-based start-ups.
“The last data I saw on Impact shows that since 2020, 830 jobs have been created from 181 grantees (307 FTE and 523 contractors, an average of 8.9 FTE/startup) 54 have raised a total of $231m. Equity, 22 export earnings ($7.7 m) reported, and the group had an 89% survival rate,” he said.
“Stopping this program for months until the next budget comes out in September will either hurt promising NSW early-stage startups or move them to states like Victoria that have more startup-friendly policies. Research shows that all net new jobs are created by companies under five years old, so this decision is It hurts the NSW economy.
An important role
Burt said the MVP grant had played a vital role in nurturing hundreds of NSW early stage startups by providing the first external sources of funding.
Tash Jamieson, founder of Lockpick Games, which helps prepare kids for standardized tests, is one of them, earning $25,000 last year.
“NSW Government support is important to many of our local startups – beyond the financial support, getting support from a government program like MVP is a great sign for a start-up business,” she said.
“Thankfully, I still have a good runway so it will be fine, but for other upcoming launches, I hope the program will come back.”
Burt said the indefinite shutdown was “another example of Australia’s innovation policy suffering from a revolving door of ministers who underestimate the importance of providing stability in the government’s economic development programs” and would put both the country and the country “at a serious disadvantage”. ” Compared to countries with similar grants – for example, the US’s Small Business Innovation Research (SBIR) program has not changed much since its inception in 1982.
William Buck director Jack Qi
Jack Chee of start-up consulting firm William Buck believes the MVP support program is important to the sector.
“The NSW Government’s need to tighten its belt is surprising and surprising in light of the money raids that are happening in Victoria as we speak, but we call on the Government to leave the MVP Ventures grant intact at the conclusion of the review. It was introduced only in the improved state by the end of 2022 and has created a lot of interest among startups,” he said.
“Ultimately, a long-term view must be taken to determine whether helping startups get new products and services off the ground. will do Creating economic activity, jobs and, crucially, revenue for the government.
Staying behind.
Kathy Lyall from the early-stage VC seed space agrees that government support is critical.
Cathy Lyall, partner in the race gap
“Australia outperforms our peers globally in terms of levels of government support across a range of financial measures, including investment, tax credits and grants. The sudden stop of all existing NSW programs has a direct impact on the ecosystem,” she said.
“NSW is outperforming our counterparts in other states as far as support for start-ups and as companies become more mobile we’re starting to see founder-friendly states like Victoria again where companies have initiatives like StartupVic. The impact is incredible.
“I urge the Government to consult quickly and give certainty to founders who choose to establish their businesses in NSW. I also urge the new state government to engage directly with those in the ecosystem, both at home and overseas, to create a meaningful set of programs that have been successful in England and elsewhere.
Cut pincer movement
Federal Treasurer Jim Chalmers mentioned ‘technology’ just seven times in his budget speech earlier this month, which Jessie Wu of Postwork Ventures said was pulling funding between state and federal governments to support innovation and entrepreneurship.
After Work Ventures Investment CEO Jesse Wu
She criticized federal programs such as Boosting Women Founders, which provide $250,000 to $500,000 to female-founded startups, that stopped applications.
Other programs have been shut down, although the federal Labor government appears to have backed the Business and Entrepreneurs Program with $390 million in funding over four years as part of an industrial growth program, but this is not due to be released until later this year. Existing programs.
“Startups don’t have time to wait for governments to get their sh*t in order. Many were in the middle of the (incredibly challenging) application process, only to be told anonymously that the entire program was closed, Wu said.
In a sector where uncertainty is constant, governments can help a lot when they can provide stability – through policies, financial resources and tax incentives to invest in entrepreneurship.
“A new programme, a new executive, a new independent committee and new eligibility criteria are great for new governments’ desire to make their mark and cut the ribbon, but ultimately leave startups and SMEs in the lurch.”
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