NSW startups in the lurch as government pauses grant applications halfway through

Leaders in the NSW startup sector are urging the state government to reconsider its decision to pause new grant funding, as entrepreneurs fear losing investor support.

NSW Treasurer Daniel Mookhey announced a “line-by-line” government spending review last month, as the new Labor government adjusts to some $7.1 billion in costs discovered since taking office in March.

The NSW government will update the state on its spending decisions when it hands down the delayed 2023-2024 budget, which is scheduled for September.

It has pulled the handbrake on a number of industry grant schemes as a result, not only barring new applicants but halting applications already underway.

Those programs include the MVP (Minimum Viable Product) Venture program, which offers early-stage startup founders matched funding of up to $200,000 to support the commercialisation of their products or services.

Introduced by the former Coalition government, the MVP Ventures program was slated to deliver $10 million yearly over four years from December 2022.

As recently as this month, figures in the startup incubator scene had urged the federal government to adopt a similar scheme nationally.

“Applications for the MVP Ventures program are currently on hold as part of the sector-wide Comprehensive Expenditure Review being coordinated by NSW Treasury,” the government website now says.

“Investment NSW is unable to progress existing applications or accept new ones while this review continues. The fund is one of several that will remain on hold until the government makes decisions for the 2023-24 Budget.”

Similarly, the $30 million NSW Future Industries Investment Program, which provides rebates to employing businesses in growth sectors, is also in limbo.

Founders say the pause has caused significant disruption to their growth plans.

Meead Saberi, an associate professor at the UNSW School of Civil and Environmental Engineering, is also the co-founder and CEO of footpath.ai, a startup promising advanced map routing and wayfinding tools.

Saberi said he was drawn to the MVP Ventures scheme as it assured founders they would receive a decision within 40 days of application.

He says he contacted Investment NSW in early May, 45 days after footpath.ai first applied, and was told staff were working through a backlog of applications.

The new decision to formally pause the scheme is disappointing, Saberi said, as he believed footpath.ai had a solid chance of earning grant funding.

“We were really hopeful to see the outcomes for us,” Saberi told SmartCompany.

“Of course, there’s a chance of not getting the grant as well.

“But we’re hoping if we get the grant, we would be able to build the platform that we were thinking to build.

“And now, what we’re going to do instead, is we’re just going to rely on some of the small revenue that we may have, and try to just build something on that rather than relying on the grant.”

Bootstrapping will require the startup to change plans and undertake a “financial stretch”, he added.

While footpath.ai is able to draw on its existing resources, there are fears other startups, whose outside investment was contingent on the matched grant funding, will face greater struggles.

“I’m just hoping the program doesn’t stop entirely and maybe after a bit of a pause, maybe hopefully a short pause, they restart it even stronger,” Saberi said.

David Burt, head of entrepreneurship at the UNSW Founders Program, said the organisation has helped “scores” of UNSW startups access the program, and has introduced early-stage startups to angel investors eager to take advantage of the matched funding.

He described the MVP Ventures program pause as a “sad” outcome for early-stage startups in the state.

“Don’t let this one die quietly,” he wrote on social media Wednesday.

“This decision came as a massive surprise,” Burt told SmartCompany.

The scheme “was one of the most effective and important startup support programs available to NSW-based startups and this pause comes barely six months since the announcement of a $40 million expansion of the program.

“This promised a revamped structure, including increased maximum funding which had generated significant optimism among the NSW startup ecosystem.”

Maintaining the pause until September will “maim NSW’s promising early-stage startups,” he added.