In the months following the onset of COVID-19, startup incubators are being asked to prove their worth to funders, or risk being discontinued.
With the Australian economy continuing to contract and greater financial pressure being put on both the private and public sector, funding to entrepreneurs seems to have taken a back seat. James Alexander, the Co-founder and Partner of Galileo Ventures and former Program Manager at the INCUBATE Startup Program within the University of Sydney, has explained how this is affecting incubators.
“They’re being asked to prove what they do is valuable,” he says. “Universities in particular are tightening their purse strings and telling incubators to either prove their worth and fight for more funding, or risk being axed.”
After the Queensland University of Technology closed their Creative Enterprise program in early June, Mr Alexander is aware that this is a difficult time for incubators within universities.
“In Australia more than 60% of accelerators and incubators are affiliated with universities. If the universities don’t give the funding, then what does that mean for startups?”
Murray Hurps, the Director of Entrepreneurship from the University of Technology Sydney agrees, claiming that “2020 has set innovation back massively.” However, he also highlights the larger impact that stopping funding to incubators would have on the Australian economy.
“With hundreds of thousands of companies suffering, and millions of Australians in danger of losing their employment, now is the time to be growing these companies to create new jobs,” Mr Hurps says. “The more new companies we have, the faster we will recover.”
There has also been a significant decline in the creation of startups since the COVID-19 pandemic began. April 2020 saw a 20% decrease in business registrations compared to the year prior.
Mr Alexander says that this trend will continue to progress unless funding is continued to be given to incubators and accelerators.
“I want to tell those who fund entrepreneurial organisations and programs that it is short sighted to be not seeing the long-term potential that start ups have for the Australian economy,” he says. “This is the worst time to be pulling the funding, because A) history tells us that some of the best businesses are created during crisis and B) we need job creators now more than ever.”