Jobs for NSW seeks to help early-stage companies ‘left out in the cold’ by traditional lenders, including those crossing ‘the valley of death’, but there’s one thing it won’t do, according to CEO Karen Borg, and that’s give handouts to businesses that don’t have compelling job growth plans.
Borg spoke to Dynamic Business about how and why the government-backed agency supports fast-growth SMEs (aka gazelles) and start-ups, why it says ‘no’ to certain applicants, the ‘high-value’ proposition of funding incubators and accelerators, a ‘disaggregated’ start-up ecosystem and a ‘forward-thinking’ approach to defining quality jobs.
Different stages of growth
Established in 2016, Jobs for NSW is delivering $190 million worth of job creation initiatives over a four-year period on behalf of the state government. To support the premier’s goal of generating one million ‘rewarding’ jobs by 2036, the private sector-led agency offers gazelles and start-ups, as well as incubators and accelerators, a suite of financial products designed to accelerate business growth and generate new jobs across the state. These include: Minimum Viable Product (MVP) grants of up to $25,000 for pre-revenue start-ups, Building Partnerships (BP) grants of up to $100,000 for start-ups ready to scale; an Accelerating Growth Loan (AGL) and a Gazelle Loan Guarantee (GLG) for SMEs; bespoke grants and loans for incubators and accelerators; and the Regional Jobs Now (RJN) package to fuel job creation across regional NSW.
“We’re looking to make a large job creation impact, which is why our products are targeted at different stages of business growth and helping companies cross ‘the valley of death’ many encounter early on,” Borg said. “They’re also designed to disburse public funds efficiently – our loans, for instance, enable us to recoup funds from a business and recycle them to grow others.
“Job growth in NSW is driven by the 6% of businesses that scale, meaning its crucial to support Gazelles. Also, by supporting the startup ecosystem, we can help more startups to become gazelles, and therefore create more jobs for the people of NSW.”
Actions leading to jobs
Borg said Jobs for NSW tries, where possible, to ‘embrace’ businesses that have been ‘left out in the cold’ by traditional lenders for reasons that include a lack of assets to secure a loan. That said, she warned people not to mistake the agency’s suite of financial products for government handouts. It does, she stressed, exercise due diligence when assessing a business for funding: “We require our potential clients to speak to their bank to see if a loan is possible before they approach us. If the bank isn’t willing to support them, we might ‘step up’ but we also might concur with the bank’s assessment. We want to ensure all our actions lead to jobs, so we will say ‘no’ if a return is not guaranteed. That said, we do seek to connect businesses to the right place, which includes encouraging unsuccessful applicants to recognise they may be able to provide a more compelling application at a later time.”
For a business to attract support from Jobs for NSW, Borg said the operators must present a competitive job creation proposal and prove their ability to grow headcount accordingly. Endeavour Vintage Beer and Gundagai Meat Processors are doing just that – the former is using a $300,000 loan to create 43 jobs over 5 years, while the latter has utilised a $4m Gazelle Loan Guarantee to expand and create 76 regional jobs.
Borg said businesses that have received funding from Jobs for NSW but then fail to meet agreed-upon job creation targets will have support withdrawn. That said, the agency tries to be forward-thinking, rather than overly prescriptive, when assessing the number of jobs a business has created. Borg explained, “with the rise of the gig economy, the quality of a job isn’t necessarily dictated by whether its 38 hours a week or not. We want people to find jobs that they consider rewarding and that meets their needs. As an organisation, we look to encourage jobs that are sustainable, in industries with good growth prospects, and located in both regional and metropolitan NSW.”
While Jobs for NSW is industry-agnostic, Borg said the agency is focused on supporting highly-scalable businesses that will need to expand their workforce as they grow.
“Our research shows that where start-ups have a digital component, it is easier for them to scale and expand overseas,” she said. “Take Atlassian, which is fully technically-enabled: it can go anywhere, anytime because it’s not tethered to a bricks-and-mortar. That said, being digital is not a prerequisite for scaling. One of our Building Partnership grant recipients, PumpFree Energy, has innovated a way to turn waste water products into energy. It’s a scalable business model that doesn’t rely solely on digital platforms to operate; instead, it utilises specially designed pump truck technology to clean and recycle water from fast food restaurants for biofuel. Our grant allowed the company to build the truck prototype, partner with environmental organisations and create a product which has the potential to scale quickly and export globally.
A disaggregated ecosystem
Borg said that while NSW has a healthy start-up ecosystem, especially when it comes to EduTech and FinTech ventures, it remains – to some extent, by its very nature – ‘disaggregated’. Part of the reason is that start-ups hail from a range of unrelated industries (“you have everything from an abattoir right through to a FinTech”), meaning there will always be ‘different voices’ for the ecosystem. Further, those belonging to an emerging industry or pioneering a new one may not even have a voice.
“Numerous start-ups belong to industries that need their profile raised to attract talent,” Borg said. “For this reason, while we remain very focused on direct job creation, we’re also looking to move further into the area of advocacy. We’ve realised that many of the businesses we help require more than just financial support. Through our position within government, we seek to help our clients progress. This might mean helping them engage with key industry stakeholders, participate in events where they can share experiences, or navigate regulatory and legislative requirements.”
For the good of the many
Borg said funding start-up incubators and accelerators is a ‘high-value’ proposition for the agency because multiple ventures benefit from the support.
“Funding incubators and accelerators is cost-effective because it means we’re investing in a strong pipeline of start-ups,” she said. “Also, if a start-up doesn’t survive while it’s inside an incubator, which is not unprecedented, some of the more successful ventures can draw in that talent, meaning job losses can be minimised or prevented. For this reason, we want to support the creation of more incubators, because it can lead to collisions between start-ups that fuel mutual success.”
In January, Jobs for NSW provided FinTech accelerator H2 Ventures with a $2 million loan guarantee to help it secure funding necessary to support the growth of up to 40 new companies. While Borg admitted $2 million is not an inconsequential sum, she said loan guarantees of this nature enable Jobs for NSW to more efficiently use its funding pool.
“In the case of H2 ventures, for instance, when the loan guarantee is returned to us in a couple of years’ time, we’ll be able to allocate it to another job creation initiative,” she explained. “In effect, we’re recycling funding with this financial product. In the past, the government wouldn’t have engaged with the business community this way.”