ICT businesses love government funding to BITS

The Australian Government's Building on IT Strengths (BITS) programs have successfully boosted Australian jobs, revenue and exports, according to an independent evaluation conducted last November.The Department of Communication Information Technology (DCITA) released the findings of the report carried out by the Allen Consulting Group today, stating that the programs had "performed well by international standards.

The Australian Government's Building on IT Strengths (BITS) programs have successfully boosted Australian jobs, revenue and exports, according to an independent evaluation conducted last November.

The Department of Communication Information Technology (DCITA) released the findings of the report carried out by the Allen Consulting Group today, stating that the programs had "performed well by international standards."

The Incubator and Intelligent Island programs were created in 2000 on a government initiative to provide fledgling ICT companies with seed capital and mentoring support; initially they were allocated AU$86 million in funding.

The Incubator program was allocated AU$78 million of funding for fours year of operation to help budding ICT entrepreneurs fund their business ventures, with the Intelligent Island program allocated AU$8 million to promote ICT wealth in Tasmania.

Allen Consulting Group said the purpose of its research was to provide advice to DCITA on the success of the programs in meeting their objectives.

The research found that although the programs had generally been successful and had been rated well by participants, international study had shown it takes 8 years for a business to establish sustainability, whereas the BITS programs supported Incubatees for a maximum of 3 years.

The study also indicated that the business models adopted for the Incubator projects may need revising, as they were conceived during a prosperous time in the technology share market and now it may be harder for a newly established ICT company to recognise its investment.

In its first three years of operation the programs received 3,658 applications for assistance, according to Allen's research, with 267 companies receiving assistance.

The research found that up til the 30th of June 2003, participants in the program had received monetary funding of AU$26.55 million and AU$9.83 million on a charge back basis for services from the BITS funding.

Support attracted by Incubators for the programs from outside sources has totalled AU$84 million, according to the report; with Incubatees receiving AU$26 million in equity, loans and grants, AU$26 million in business angel investment and AU$46 million in venture capital investments from non-BITS sources. Also, in-kind support over this period was valued at US$10.5 million.

The research found that the average time period of support for participants in the program was around 13.5 months; a significantly less period than the US and European incubation programs that averaged a support period of 3 to 4 years.

The research states that in the Australian circumstances "the growth in employment, revenues and exports to date understate the potential of Incubatees to make significant contributions to Australia's economic growth."

The study also presented findings that claim "there is a case for raising the present cap on investment in individual Incubatees"; that the overall results for the two programs are "good"; and that the programs have "enabled Incubatees to start and develop new businesses as well as create additional ICT jobs, revenues and exports".

However, the report also warned that without further governmental funding assistance it was "probable that most of the Incubators will not be viable, and a number of promising Incubatees currently receiving assistance will fail."

The report recommended that the programs receive further funding; that they should be funded for the next four years; and that funding should be distributed on a "competitive basis" to Incubators that can demonstrate the best use of the money.

DCITAs said today in its statement that says the government has responded to the findings by adding a further AU$36 million to the programs' budget last month, adding four years to the life of the investment and taking its total funding package to AU$122 million.

According to the department, a competitive funding selection process for Incubators is currently underway, with successful applicants expected to be announced in July.

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