How the new NSW government kicked up the start-up sector over MVP grants

Last week, we were among many startups and small businesses that were hit in the gut by the sudden (and silent) shutdown of Investment NSW’s MVP Ventures grant program.

In one short e-mail our plans for the year were turned upside down.

Just last month, we publicly praised the NSW government for its industry-leading program as something that should have been emulated in the federal budget.

Far from benefiting our economy through cost cutting, this is a knee-jerk response that is clearly a political chess move. Ensuring that the NSW Treasury and the government more broadly can balance their books and avoid short-term bricks thrown by the opposition over reckless spending is a cowardly game. What it has done is cause businesses to hit a wall at a critical time. The consequences will be felt by the local startup community for years to come.

Crippling planning ahead

As it is, Australia is losing our future rising stars due to rising costs and difficulties in obtaining funding.

Our recent seed raising surprised many people in Australia as it is notoriously difficult to raise money from a local VC. Startups also face overhead costs. The ‘hubs’ that have sprung up in our cities are great incubator spaces, but they are very expensive. There is also the huge cost of overcoming regulatory hurdles.

We may be one of the lucky few with private funding, but the grant has nevertheless been allocated to execute a recruitment plan to help us scale faster. For others, entire oeuvres are based on these grants – it will be crippling.

Money and time down the drain

The most disturbing thing is that the break applies not only to new applicants, but also to existing applicants. It has left many companies completely out of pocket that were literally waiting for the money. Even worse, the application process is so cumbersome that some companies have deposited tens of thousands of dollars with accounting firms to support them in a successful grant application. It’s a huge amount of time and money down the drain.

Future unicorns will not cross the ‘valley of death’

In a conversation with one of our advisors, they describe the road to commercialization for startups as a ‘valley of death’. You have to remember that MVP Ventures was for ‘high potential’ NSW based startups so they could cross that valley and make millions (or billions). I have no doubt that among the cohort impact from this loss are a few possible “unicorns” who may never make it to the Valley.

And it’s not just MVP Ventures. Other subsidies, including manufacturing and regional job creation, have also been shelved – pretty important areas, you might think.

The overarching feeling among the startup community is that Investment NSW, a body that we thought was well aware of the commercial industry’s needs and timing, is completely out of line with it.

We cannot put our work on hold for six months while a ‘review’ takes place. The government’s disdain for vital, emerging companies is short-sighted and deeply disappointing.

  • Ben Zyl is co-CEO and co-founder of payments startup Waave