The start-up industry is a fraud.
It sells hope to founders while really selling them snake oil: the promise of funding, if you just nail the pitch deck or sit through one more start-up course. The few founders who follow the industry’s scriptures and actually get funded end up with little equity and no control of their own idea.
I have proven it doesn’t need to be that way. Be nimble, test the idea cheaply, and fail fast and cleanly. Between 2017 and 2025 I helped build and run an innovation hub that did exactly that — and the results are proof that founders can keep control, keep most of their equity, and still get funded. 35X is the bottom line.
The idea
Two problems are killing Australian ideas, or sending them overseas. The first is cost and friction: founders burning too much of their capital on company set-up, governance and compliance instead of on the business. The second is timid capital — start-up equity locked away for wealthy and professional investors, while ordinary taxpayers who might happily have backed a founder had no sensible way in. My co-founder, an actuary who had run structured finance and a portfolio north of $20 billion, and I set out to fix both.
The incentive
In 2016 the Commonwealth introduced a genuinely good policy that almost nobody was using. Invest in a qualifying Early Stage Innovation Company and you receive a non-refundable, carry-forward tax offset of 20% of what you put in, with no capital gains tax on shares held between one and ten years. It changed the arithmetic of backing a new idea. But most people had never heard of it, and those who had did not know how a company qualified. We made that qualification routine: incorporating each company, guiding the ESIC self-assessment, and partnering with founders so their time went into the business, not the paperwork.
The discipline
An incentive looks after part of the risk; it does nothing about the rest. When the ESIC rules came in, the Government cited a failure rate of about 95% for early-stage start-ups — most dying in the “valley of death” between first funding and first revenue, for want of cash. So we built a staged five-year budget. Money was released in tranches against an agreed budget: enough to prove the idea, then more as the company gained traction. Every company was evaluated continuously. If an idea gained traction, further funds flowed. If it did not, the company was wound up quickly and cleanly, with minimal loss and no mess, and the founder moved on to the next idea, wiser for it.
That is the Y Combinator principle — fail fast — made practical and paired with incentives. The offset softened the cost of testing an idea; the discipline stopped money following ideas that had not earned it. Separating a failed idea from a ruinous loss is exactly what lets you try more ideas, and try them more boldly.
Founders spend too much time on pitch decks and presentations instead of their business. We set out to cut through, so founders could do what they do best while we took care of the admin.
What happened
Across those years, 28 companies launched and raised capital through the hub — $53.7 million in all, from biomedical research to engineered timber, tiny homes and modular van kits. Thirteen did not prove their idea and were wound up, as the model intended: a failure rate of 46%, against the roughly 95% norm the policy was written for. The fifteen still operating are, on their directors’ valuations as at 30 June 2025, worth about $372.9 million.
Set those numbers against the public support that helped create them. The ESIC offset available on the capital invested was about $10.7 million. Measure the current value of the companies against that offset and you get roughly $35 of company value for every $1 of Commonwealth tax support; measured against the capital investors actually put in, the companies are worth close to seven times it. Both figures rest on unaudited directors’ valuations, and the wound-up companies are counted at nil — there are no hidden failures, because the failures are the point.
Why it matters
Four lessons stand out.
First, the much-maligned idea of failing fast is not an excuse for carelessness; done with staged money and honest evaluation, it is the most capital-efficient way there is to find the few ideas that work.
Second, good policy and private discipline are complements, not substitutes: the incentive brought capital to the table, but it was the discipline that turned that capital into value rather than into write-offs.
Third, you do not need to be wealthy to back an Australian founder. Open the door properly, with sensible protections, and ordinary taxpayers will fund the ideas a resource economy too often lets stall.
Fourth, we have demonstrated a better way for a dynamic start-up culture to grow — one driven by and for the founders.
The model is not magic, and the results are not a promise. But they are evidence, over eight years and real money, that backing many founders cheaply, failing the weak ideas fast, and standing behind the strong ones is a model that works.
This article describes the results of a program I co-founded and is general in nature only. It is not an offer or invitation to acquire any financial product, and it is not financial, tax or legal advice. The figures are unaudited directors’ valuations as at 30/06/2025; companies that have been wound up are shown at nil. Past results are not a reliable indicator of future performance. Whether any investor qualified for the ESIC tax offset depended on that investor’s own circumstances. Seek independent advice before making any investment or tax decision.
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