Start-ups tipped to suffer as government flags grants freeze

There are fears that the Federal Government is to axe grants used to support Australian start-up innovation as the Treasury searches for billions of dollars in budgetary savings.

According to a report in The Australian, Treasurer Wayne Swan announced a freeze on federal grants on Monday in a bid to increase budget savings following a sharp downturn in revenue.

While the government hasn’t specified which grants are under threat, it’s believed all ministers have been asked to search for savings.

The reported $2 billion in grant savings is likely to include cuts to innovation support, such as Commercialisation Australia, which has been instrumental in commercialising a range of ideas developed by Australian start-ups.

The latest CA funding round saw more than 20 organisations share in $9 million.

And just last month, CA struck a partnership deal with not-for-profit entrepreneur network TiE Sydney, with the aim of backing innovative Australian start-ups.

StartupSmart contacted CA chief executive Doron Ben-Meir, but he declined to comment.

However, Adrian Spencer, chief executive of grant consultancy firm GrantReady, told SmartCompany businesses will be disadvantaged as a result of the cost-cutting exercise.

“My concern in this current climate is where the government would stop heavily funding key initiatives,” he said.

“By ripping up a few grant programs or key funds is just robbing Peter to pay Paul, and I think it will have a detrimental effect where critical funding is needed – especially at a time when small business is really under-supported.”

Small businesses wouldn’t be the only ones to suffer – universities, non-profits and community groups would also be targeted for savings.

Spencer admits there is room for improvement within the existing grant structure. But shutting down funding isn’t the answer, he says.

“If you look in the overlap that exists in grant programs already, it’s quite unfortunate that money isn’t being used to fill the gaps,” he said.

“The big thing everyone talks about is the valley of death between R&D and Commercialisation Australia, and a lot of the state governments are already trying to fill that gap.”

Spencer says any drop in funding should be done in a way that identifies overlaps between federal and state grants, and not just as a cost-cutting initiative.