Startup Year entrepreneur loan program

Recently the Federal Government announced planning for a “Startup Year entrepreneur loan program” to kickstart startups.

Under this program they are planning to provide up to 2000 HECS-style loans each year to university students to participate in a higher education-based incubator or accelerator program.

I personally feel that this program misses the mark as it is

focused on a narrow startup cohort, being university students who don’t get accepted into other accelerator programs; and,
does not actually provide any funding to the startup entrepreneur.

Read my submission on this program below.

Introduction

My response is directed at the overall way the Startup Year entrepreneur loan program is planned to operate.

Why just university students?

My first concern is that this program is only targeting university students. Why when most new businesses are started by older people.

Harvard research in has indicated that the average age of US entrepreneurs at the time of starting their business is 42. I have seen other Australian data that suggest similar ages. This means these people have had around 20 years of work experience before launching their venture.

Look at the data to the right and you see people 29 and younger make up less than 10% of the highest growth startups. People under 23 would make up an even smaller portion of this.

So why is this program just focused on final year undergraduate university students and current post-graduate university students when there is a much bigger cohort of people who also use some assistance? Why are you ignoring the other much larger cohort of startup entrepreneurs

Why just universities?

The Startup Year entrepreneur loan program defines an accelerator program “as any higher education provider-based program that provides wraparound advice and services to support prospective and new entrepreneurs build their innovative startup ideas and create new firms”

There are lots of other accelerator programs out their targeting non university students. Why are these excluded from this program and it is just focusing on those who “have missed out on a place in an accelerator”.

If this is the case, will the success rate for these business ideas be substantially lower than the outcomes from these other accelerators and will this mean that the program is not in a position to meet its objectives?

Loans vs Funding

Cash is always very important for a startup. By placing even more debt on a young adult that they have to somehow cover as they build their startup may place pressure on them. This may actually force them into the workforce and the startup becomes a side hustle. Making it harder to have a successful outcome.

I think most startups would prefer the funding direct and they make the choice as to whether to invest in a capstone year, or to use that money for actual development of their business idea. This will be the ultimate test of whether there is a real demand for this offering.

Either way it needs to made very clear that any offering is funded by a loan, the cost of such loan clearly outlined, and that it is expected to be paid back. Even to the extent that there is a separate loan agreement for this.

Summary

Any support for startups is positive move. But, I am concerned that this will be another program that it sounds good on paper but the end result falls way short of what could be achieved. Extreme care will need to be taken that this does not turn into a funding outcome for universities with minimal long term outcomes.

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