The federal Government’s R&D Tax Incentive largesse should go exclusively to startups and not big business, says one of Australia’s foremost software entrepreneurs.
Big companies can survive without RDTI, while startups are the future of the Australian economy and need all the nurture they can get, according to Adrian Di Marco, executive chairman of Australian software company TechnologyOne.
“We have big, strong companies in Australia that are not going to die. If they do die, it’s going to be because of their own incompetency,” Mr Di Marco told the InnovationAus Commercial Disco podcast.
“Allocating R&D funds to these organisations is just crazy and I put Technology One in there as well.”
Instead, Mr Di Marco believes startups should be the beneficiaries of government-controlled R&D aid. As big outfits are evicted from the R&D gravy train, the process of getting access to RDTI incentives should be trimmed down and made simple and inexpensive for small companies rather than being fodder for consultants and tax lawyers.
“We need to get rid of all the paperwork and the bureaucracy, because startups cannot cope with the paperwork and the clawback provisions as well,” Mr Di Marco told the Commercial Disco podcast.
“It’s just horrendous. The big companies are just being greedy. That’s the bottom line. As far as I’m concerned, the money needs to be redirected to where it has the biggest impact, which is the startups.”
Mr Di Marco has been there and done that in the tech business world. He founded the company 30 years ago and since then TechnologyOne has grown to 1600 employees and a $2.5 billion market cap on the Australian Stock Exchange where it first listed in 1999.
The company was one of the first true Australian software startups in that it was always about developing software products to be sold over and over, rather than custom software for particular customers or projects.
TechnologyOne did its funding rounds the hard way. Back in 1999 pitch fests, angel investors, technology hubs and small cap VCs were few on the ground in Australia.
“Our idea was to actually do very deep research and development and to build true products that were meant to be sold over and over again, with no change to the source code,” said Mr DiMarco in the Commercial Disco podcast.
“A pretty revolutionary idea back then. But there was no venture capital, no VCs, so we had to go and knock on doors. I was very lucky to be able to find a past client of mine who was prepared to provide the seed capital.”
Startups need government fiscal love and nurture far more than the big boys and girls so they can become the big companies and employers of tomorrow, he says and early stage RDTI relief can be the difference between commercial life and death.
“We just need to give them as much love and nurture as we can. They are the future. We’re going to get the biggest results in this country from a startup, going from nothing to 3 billion and doing that 10 years. And that’s possible in this new world.”
A keen investor, Mr Di Marco is very bullish about the future of Australia’s technology investment scene.
In the Commercial Disco podcast he describes the local startup ecosystem as “wonderful” compared to the hard yards he and TechnologyOne had to run in 1999. But we need to get our government policy settings right and better align our linkages between university research efforts and startups.
“We need to listen to startups, we don’t listen to them enough,” he said in the podcast.
Do you know more? Contact James Riley via Email.
Overall I agree with Mr Di Marco’s position – I think the government will likely get more bang for their R&D Tax Incentive ‘buck’ from smaller organisations than with very large and established companies. I would say though that it is SME’s (rather than just start up’s) who can do the most with this assistance. There are a lot of SME’s out there with great ideas who can really use this kind of assistance to get they projects from ‘maybes’ to success.
I also agree that if the government wanted to target SME’s with this incentive then making the process simpler for them would be a big help.
Adam, I believe you are absolutely right. I think clear criteria to assess the viability of the R&D would be needed to avoid unproductive handouts. Startups would benefit if they could harness the RTDI with less paperwork, totally agree. SMEs have done the hard yards to get established and generally need to do further R&D to stay competitive, making this possible will allow them to grow and create more jobs. The larger companies should not necessarily be disadvantaged, but the hurdle to qualify may need to be adjusted.