One of the biggest challenges faced by rapidly growing businesses is determining how to focus their efforts and limited resources.
Any point of unnecessary friction adds cost to the business or distracts the leadership team from focusing on more fundamental business questions and growth opportunities.
So how can we help our growing businesses to maximise their chances of success? We believe that there are three critical areas that policymakers should focus on: funding, talent and taxes. On these fronts, there is a lot to learn from overseas tech hubs – particularly Silicon Valley and Tel Aviv – where the startup landscape is more mature.
Founders will follow the money. For early stage companies in Australia, there is now a robust venture capital sector to provide funding.
However, businesses that find product-market fit and reach the ‘scale-up’ phase, when significant additional capital is often required to invest in core business infrastructure, can have trouble finding sufficient capital in Australia to support their needs.
While the Australian Government and our venture capital firms are working hard to stimulate growth in this area, including tapping into the superannuation sector, there are opportunities to accelerate this such that successful Australian founded businesses aren’t forced to look offshore for funding.
For example, the Israeli government demonstrated financial creativity in providing guarantees on start up bank loans to encourage businesses to remain in Israel in 2018.
If we can learn anything from the success of Silicon Valley or Tel Aviv, it’s that attracting skilled talent is critical to business success. We need to keep pace with other labour markets to allow our technology companies in particular to succeed.
Culture Amp currently operates in three main markets – Australia, the US and the UK. The points of difference across these markets can be stark – and the hurdles to hiring the best talent in Australia are highest of all.
While Israel has opened up pilot visa programs for entrepreneurs, attracting new businesses and talent to the region, Australian visa schemes are relatively complex and administratively expensive to navigate. While the Temporary Skills Shortage Visa can be accessed for certain roles, for many there is still no clear pathway to permanent residency, and so organisations cannot compete for talent globally, or risk losing key employees after 4 years.
The introduction of the Global Talent Employer Sponsored program creates new opportunities to attract overseas workers for highly-skilled niche positions, and critically, to retain them over the longer term.
We welcome initiatives that make it easier for Australian businesses to recruit from a global talent pool and which also provide Australians exposure to valuable experience from overseas. Both of these initiatives facilitate the critical transfer of global best practices into local Australian tech businesses, and have a multiplicative effect as they help businesses grow and expose young Australian professionals to new skills.
Limitations imposed on Employee Share Options Schemes present another unnecessary aspect of friction. The regulations relating to employee share schemes in Australia are highly complex and in many cases, means companies are limited in the size and number of grants available to employees.
Additionally, the cost of compliance with the complex employee share scheme rules in Australia is very high. Given the primary purpose of option schemes is to provide a benefit to employees, we are presented with a lose-lose scenario in which the organisation finds it harder to attract top talent and young people miss out on key wealth creation opportunities.
In Silicon Valley, setting up and running an employee share options scheme is relatively much easier to do and consequently much more available to employees.
Tel Aviv has led the way when it comes to favourable tax incentives.
To kick start the tech industry, the Israeli government provided tax incentives to entrepreneurs and investors, reduced the corporate tax rate for tech companies, and removed some of the bureaucratic barriers to M&A.
In Australia, the tech industry has benefited from the R&D tax incentive program but the cost of compliance is quite high. The Australian Government has started running audits on claims which inflates the administration costs of the program relative to the benefit offered to businesses.
But what can we learn from Silicon Valley or Tel Aviv? Australian businesses operate in a global world with a relatively fluid movement of people. When we think about attracting the best talent, leading companies will automatically think globally to recruit for key roles.
We want the best of the best to create growth opportunities for Australian-based companies, and we also want to bring not just the talent, but also the businesses they come from to set up on our shores.
If we can lessen the overhead on critical compliance-type activities, our business leaders will be able to apply a single-minded focus on growth. They can redirect their energy towards things like building and selling the product and better serving customers.
From a management perspective, reducing friction frees up mental bandwidth that can be better spent on strategy, customer insight, employee development and building great culture.