Everything Australian startups think about grants is wrong (but that's a good thing)

Key points at a glance

  • A comprehensive survey of Australian startup founders has revealed key insights into the government’s grant schemes.
  • Government grants rank poorly in the sources of funding for startups, lagging behind credit cards, friends and family, and private equity.
  • In the startup ecosystem, the grant application process is seen as time consuming, specialised, and resource-intensive.
  • Australian startups are export-focused, however a majority of them should develop their export opportunities further.
  • Most startups that apply for government grants receive them.

In the mid-2000s, a very short pop science video poking holes in the way we pay attention took the world by storm. Produced by cognitive psychologists Daniel Simons and Christopher Chabris, the widely watched and recreated clip features six people passing several basketballs amongst themselves:

The audience is asked to count how many times the three people wearing white t-shirts pass one of these balls.

But did you see the gorilla?

About halfway through the video, a person in a gorilla suit enters from the right. They move between the ball passers, pausing briefly to thump their chest before exiting stage left. According to Simons and Chabris, only half of all viewers notice the gorilla when they see the footage for the first time; their minds almost totally focused on counting flying basketballs.

The startup scene’s invisible gorillas

I was reminded of one of the ‘Invisible Gorilla’ video’s underlying messages - that obvious events might be occurring right in front of us when we’re too distracted to see them - when reading the results from the 2016 Startup Muster annual report. Surveying nearly 1,400 startup founders, potential founders, and supporters, the report reveals some telling info about the inner workings of Australia’s startup scene.

Looking through the report, it’s clear that some of the Australian government’s grant schemes are underutilised by many startups that could benefit significantly from them - despite them being right in front of their noses wearing a gorilla costume.

1. Not many startups are using government grants

Ranking the funding sources Australian startups have used reveals a poor showing for government grants. Nearest to the top is the R&D Tax Incentive, coming in at fourth behind traditional bootstrapping efforts such as ‘My own cash’, ‘family and friends’, and domestic private equity. State, federal, and local government grants fared much worse, accounting for 8th, 9th, and dead last respectively.

2. The grant application process is seen as resource-heavy

Why are grants so underutilised? One of the reasons could be how they’re viewed by the startup community. According to the survey, one of the strongest sentiments towards grants and the grant application process was that it was ‘time consuming’. In the skills section of the survey, meanwhile, a significant 15% wished they had grant writing skills, suggesting that grants are also seen as complex and specialised endeavours.

3. Fortune for Australian startups lies overseas (so use the Export Market Development Grant)

Almost half of the startups surveyed (45.5%) had made no revenue in the past twelve months. Among the startups that did generate income, an astonishing 92% of them did so through exports. This suggests Australian startups are well aware of the need to play on the global stage.

Delving further into these figures, however, suggests there’s room for improvement. Of these exporting startups, only about half generated the vast majority of their revenue (70% or more) through exports. For the minnows in the group, they could investigate ways to better build their export empire - perhaps through the Export Market Development Grant.

4. A minority of startups applied for government grants, but a majority were successful

The soft grant figures are reflected elsewhere in the survey, with only a third of startups applying for government grants such as the Export Market Development Grant, or the R&D Tax Incentive. Yet a majority of those applicants, about 66%, were successful.

Putting the pieces together, this high strike rate should encourage other startup founders - particularly those wary of allocating time or resources into the application process - to give it a go, especially when we here at Nifty can do all the hard work for you (just sayin’).

Learn more about how Nifty can streamline the grant application process.

Brendan White

Brendan works directly with clients to claim government incentives, such as the R&D Tax Incentive, through Nifty Forms. He has a keen interest in startups and innovative companies.