Small Business

Should start-ups be paid to move location?

Here's an idea for an ambitious young entrepreneur: launch an online platform that allows start-ups to signal their interest to relocate to another city and enables state and local governments to bid to attract them.

The start-up says it will consider establishing its head office in another place – for the right price. That might be a government grant, free or subsidised office space in a council co-working space, a reduction in rates or other fees, or specialised council support.

The start-up weighs up the location, innovation ecosystem, industry base, peer network, workforce, market access, transport, housing affordability and lifestyle. Then actively shops the venture around to state and local governments that are keen to attract start-ups.

Crazy idea? You bet. Never work? Probably. I'm sure critics will find flaws in the idea, not the least of which is too much council indifference in attracting start-ups and the low probability of governments bidding against each other, at least publicly, to attract them.

But the idea turns the traditional model of venture location on its head. Instead of promising start-ups going cap-in-hand to governments, looking for grants or other assistance (and often finding none of use), governments must sell themselves to start-ups and compete against each other to attract the best ones.

Instead of the best start-ups automatically forming in their home city, they recognise that their head office location increasingly has value in the New Economy and they should investigate what's on offer.

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Competition for the best start-ups will heat up in the next five to 10 years. Satellite cities, especially those within an hour or so of a capital, will recognise the potential of large innovation and entrepreneurship clusters to drive employment.

It's already happening: look at the work of Queensland's Sunshine Coast and other satellite cities in encouraging start-ups.

Regional cities are also driving entrepreneurship initiatives. I've lost count of councils launching co-working spaces as hubs within larger entrepreneurship ecosystems. They know that new industries and ventures are needed to create jobs and encourage more people to move from the capitals to their city – and for younger residents to remain there.

But building a larger entrepreneurship ecosystem organically, by encouraging younger residents to form ventures, will take too long in many areas. Councils must think harder about attracting new ventures from elsewhere.

Consider an entrepreneur who has a great idea and desperately needs a funding injection for the venture. They struggle with their capital city's high living costs and worry they will never be able to buy a house. The prospect of moving to a lower-cost satellite city – and receiving a small grant to do so – has real appeal in terms of venture survival and growth. And lifestyle.

State governments have a history of providing incentives to attract multinationals and some provide financial incentives to encourage people to move from a capital city to a regional town. Why shouldn't they incentivise start-ups to move?

State governments have a history of providing incentives to attract multinationals and some provide financial incentives to encourage people to move from a capital city to a regional town. Why shouldn't they incentivise startups to move?

The Queensland Government, through its excellent Advance Queensland Hot DesQ initiative, clearly sees value in aggressively targeting the best interstate and international start-ups, with financial incentives of up to $100,000 for some ventures to move. Other states and local governments should follow Queensland's lead.

Many conditions are needed with this idea. I do not suggest taxpayer funds should be ploughed into privately owned start-ups or that every new venture should expect or receive a handout. This idea suits start-ups with proof-of-concept, capacity to scale their venture in the Asia Pacific and scope for rapid hiring.

Governments would have to decide which start-ups to bid for – a problem (or opportunity) given the lack a rating system for such ventures. Checks and balances would be needed to ensure the start-up commits to the location for a certain period, at least with its head office. Is that any different to other grants that have lots of rules?

Most of all, governments would have to think differently with start-ups. Instead of trying to facilitate innovation ecosystems, they would focus first on luring the best ventures and letting them drive innovation ecosystems in unexpected ways. Or put another way, governments attract the best start-ups to their area and get out of the way.

It's a problem worth solving: start-ups wanting to maximise the rising value of their location choice to government; and capital cities and regional towns eager for larger, vibrant entrepreneurship ecosystems that create jobs. Somebody should connect the two.

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