The government has thrown a lifeline to Australian startups with changes to the JobKeeper scheme, but the industry says it’s ready and able to do more to help the country through the crisis than just keep it afloat.
When the government announced financial support for businesses and workers struggling in the current COVID-19 crisis last month, they seemed to overlook one very important part of the Australian workforce: startups.
Under the temporary JobKeeper scheme, which passed Parliament on Wednesday, eligible companies were required to show they suffered a 30 percent loss in revenue compared to the previous year.
This was simply not possible for the many startups across Australia which launched their businesses within the last 12 months, forcing the industry to launch a desperate plea to the government to reconsider.
Within a number of days, policymakers relaxed the laws around eligibility and granted some reprieve to startups, by giving the Tax Commissioner discretion to approve companies who had been operating for less than a year.
The Treasury said this discretion could also apply for companies whose turnover from the previous year was not representative of their usual turnover, because of factors like large acquisitions or highly variable turnovers.
Alex McCauley, CEO of StartupAUS said this discretion would also give pre-revenue companies eligibility for the subsidy where they could show their business has been “significantly curtailed” by COVID-19 through other measures, such as by letting people go or easing back of operations.
McCauley told 10 daily he is confident the changes will mean a large part of the startup sector will now be able to get access to the subsidy, which could save many businesses.
“The intention is not to scrimp and save by excluding businesses on technicalities, the intention is to get this money into the hands of as many businesses as possible,” McCauley said.
‘We Don’t Just Want People On Life Support’
University of Technology Sydney’s Director of Entrepreneurship Murray Hurps said the change is a step in the right direction and has the potential to allow the thousands of startups across Australia to not only “weather the storm” but contribute to the nation’s recovery.
But he insists more could’ve been done by the government to not just keep startups afloat but encourage the creation of new companies that could provide help for key sectors that would be involved in the crisis recovery stage.
“I would love to see the government saying that we don’t just want to keep people on life support, we want people starting new companies,” the former CEO of coworking company Fishburners told 10 daily.
“Being supported to start new companies so they’re not just kept going, they’re being allowed to actually work and create jobs and create exports.”
McCauley also said high-growth startups were always looking for new opportunities which is what Australia would need at the end of the crisis.
“Every winter has a spring that follows and the most likely green shoots in the post-virus spring are going to come from high-growth young companies that can move quickly,” he said.
“The businesses that survive in the downturn will be the businesses that will be on the front of the recovery.”
He said in Australia, companies involved in food delivery, cleaning, labour markets, and job space platforms have joined the likes of international companies providing video conferencing and cloud hosting software that are seeing a rise in demand stemming from the coronavirus crisis.
One such Australian company is ShiftCare which creates software solutions for disability and aged care providers to do a number of vital tasks from scheduling services, organising shifts and provide important health information to clients at home.
Founder Gaurav Cheema who started the company in 2016 has seen it grow to more than 5,000 monthly users, with about 4000 care workers serving up to 20,000 patients on the platform.
Cheema said inquiries about their service have risen since the COVID-19 outbreak and while there hasn’t been a significant rise in signups, in a climate where so many in the sector have been left with next to no clients, having zero dip in demand was a positive.
He said like many startups, ShiftCare is looking at how it can make even more changes to its platform to help more clients when Australia moves to the recovery stage.
“It’s early days at the moment because there is a bigger beast that has to be tamed,” he said.
“But once the whole COVID pandemic settles down a bit, we are hoping to come up with solutions which will help a lot of the healthcare providers who use our platform to provide their service in a more distributed manner than they are doing at the moment.”
Cheema believes there is definitely a need to provide more support for startups in the current climate who could provide new solutions to help the health sector recover from the crisis.
“There’s not a lot of focus being put on trying to deliver health care services direct to people’s homes and that’s one avenue which we definitely think is going to have a significant impact going forward,” he said.
He said investment in those services will help cater for how the current climate is being managed and how the spread of the disease can be controlled in the future.
“I think there will be a massive change and opportunity for new businesses to pop up in that space.”
‘It’s getting a bit cutthroat’
But many startups are nevertheless struggling by the unprecedented impact of COVID-19.
Hurps said UTS has a total of 367 student-launched startups on campus and many of them have been hit by the pandemic.
He said the UTS Startups team is now supporting these new businesses online, after the university’s campus shut down.
“There’s a wonderful thing that happens when you have a lot of entrepreneurs working together … they share their skills, they share their networks, they share emotional and mental support,” he said.
“I think they’ll do a lot better than people that don’t have that kind of support.”
Ben Kennedy is a young Australian whose online rental marketplace business has been hit hard by the crisis, just six months after it launched.
His company, Gecko helps people make extra cash by allowing them to rent out anything from speakers to chairs and drones for short or long term periods.
“About 80 percent of our sales are in events, which as you can imagine, hasn’t been great,” Kennedy told 10 daily.
Despite being only six months into business, Kennedy said the company with a seven-person team, was seeing a 472 percent growth rate, week on week before the pandemic.
But after the coronavirus began hitting the company in mid-March, it’s now struggling to get even two or three sales a week.
Speaking to 10 daily after the JobKeeper changes were announced, Kennedy said it was a huge relief and would mean his company would hopefully receive some financial support by May.
Kennedy believes he would otherwise have only been able to afford to keep Gecko running for another two months and had been close to considering letting some of his team go.
“We were sort of getting to that point, it was getting a bit cutthroat,” he said.
What’s the risk?
Running a start-up has been Kennedy’s dream since he was a teenager, he told 10 daily, but he believes the impact the COVID-19 crisis has had on businesses and the economy will “100 percent” be enough to put many people off from taking the risk of jumping into the industry.
The really gut-wrenching part about this is just people that really have worked so hard, will not be rewarded for their hard work.
Hurps also said uncertain environments are enough to discourage people from taking a risk.
“They’ll cling onto whatever job they’re able to cling onto or do what they need to do to feed their families,” he said.
“If the government is paying people to keep them afloat, that’s great… but it doesn’t just have to be about retaining the jobs that we have, it can be about creating the jobs we don’t have.
“I think people are initially discouraged from being entrepreneurs and the obvious problem with that is that it’s exactly that time that we need new companies created that can contribute to the rebound.”
But McCauley disagreed and believes a crisis situation makes “safety look less safe”.
“I think it’s not anymore risky to be in startups now than it was before, but I think it is more risky to be in the safe stuff,” he said.
“If anything I think people will do a risk calculation with a different lens on it in the post-COVID era and taking a risk on something that might have a big impact will hopefully look more appealing.”
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