This week has revolved around two major talking points. The Reserve Bank cutting interest rates…and the government announcing its budget for the 2016–17 financial year.
Neither was particularly fun. For a start, the fact that the RBA cut rates typically suggests the economy is battling. Not a great start.
Their reasoning was deflationary pressures. But it’s far more than that. It’s an entire economy searching for industry to spark it into action again.
That’s where the government is supposed to step in. That’s where strategy and sound economic leadership should lead the country forward. Is that happening? Nah, not really.
They’re talking about it. There’s plenty of rhetoric about innovation, science and technology. But is there any meaningful action yet? Well no, there’s not. Nothing at least that hasn’t been done in prior years. The spin on it is great though, and it’s got lots of people excited.
The reality, however, isn’t as grand as you might think. Let me give you an example or two…
42-times the annual spend of the Aussie government
The government is spending $200,000 on a marketing campaign. This campaign is to promote Australia as a financial technology (Fintech) destination. It’s supposed to help attract new Fintech companies to our lucky shores.
By comparison, in 2015, Apple Inc. [NASDAQ:AAPL] spent $1.8 billion on global advertising. Of course, Apple is trying to sell their products all over the world. Australia’s just trying to sell the country as a ‘Fintech’ destination…
That’s not all folks. This week, the government announced a $1.1 billion package for the ‘National Innovation and Science Agenda’ as part of the budget.
Seems like a fairly big chunk of cash.
However, Ford Motor Company [NYSE:F] is looking to have more electric cars by 2020. To do this they need to research and develop better electric cars. Thus, they need to spend some cash on it. How much you might ask? Try US$4.5 billion on for size.
That’s just on electric cars, mind you —over the space of just four years. But what about their overall R&D spend? Well, Ford spent US$6.9 billion on R&D in 2015. And they weren’t even the biggest R&D spenders.
If you total up the R&D spend of the top five carmakers in the world, you get a crazy figure. It’s US$46.4 billion. That’s just five carmakers, on just research and development. On just cars.
That’s also just 42-times more than the Aussie government wants to chip in for the whole country.
I don’t expect the government to wallop $46 billion into R&D. After all, they also have to figure out how to pay for healthcare, social security, government officials’ lifetime pensions, and so forth.
All this while running a multi-billion dollar deficit. A deficit that’s adding more and more debt every year.
What’s a country to do? How do you fix a leaky ship? I guess you just have to plug one hole at a time, pumping enough water overboard to stay afloat. Good luck with that.
But as dreary as the Aussie economy looks right now, it’s not all doom and gloom. There are some things to look forward to. You see, while the economy might be having a rough trot, that’s not the case for many Aussie companies.
Innovation is on the government’s agenda now. But it’s been on the agenda for thousands of Aussie companies for years. In fact, if you want to look somewhere for leadership in innovation, science and technology, look to private industry.
Even with an overregulated country like Australia, companies can still succeed and flourish — particularly those aligned with technology and innovation.
Five unknown stars that you need to know about
Here are five company names you need to know about. These are all companies that are bringing in millions in funding. Why? Because the smart money sees their true potential.
The companies? Bigcommerce, Canva, Envato, SocietyOne and Nano-Nouvelle.
Bigcommerce, for instance, has gone through a few rounds of equity funding. Some investors include American Express [NYSE:AXP] and Softbank Captial.
Canva has some big name investors too. Not corporate though. Two (of the many) investors in Canva include Hollywood A-listers, Woody Harrelson and Owen Wilson.
SocietyOne’s roll call of investors includes News Corp [NASDAQ:NWS] and Consolidated Press Holdings and Reinventure (Westpac’s investment arm).
Envato and Nano-nouvelle don’t have the same glamorous investors, but both, like the others, are technology companies. Nano-nouvelle, for instance, has created an ‘electrically conductive 3D nano-pourous structure’. This structure helps to create ‘conductive membrane technology’.
What that really means is the company is developing a new kind of high-power, high-capacity battery. Which, in a future of alternative green technologies, is set to become incredibly important.
Envato is a new kind of digital marketplace. Here, over 1.5 million people actively buy from their markets. Everything from websites to graphic designs, audio, video, code and apps. If it’s digital, Envato has it.
All of these companies are new, young, exciting tech companies. Also, they’re all Australian. But there is a downside to all this. For now, they’re all private.
Don’t get sidelined get informed
They have all been around for a few years now. All of them have seen multiple Aussie Prime Ministers. Budgets have come and gone — most promising much and delivering little. Yet has it slowed these innovative, exciting companies at all? Not a bit.
And therein lies the trick to all this. Federal politics might sweep you up in its wake. The action or inaction of the RBA might get you down. The stock reports on the nightly news at 4:00pm, 5:00pm, 6:00pm, and 7:00pm might even confuse and worry you.
But the real action is happening in small corners of the country. Little companies are growing up, becoming big companies. Going through rounds of seed funding, venture capital funding, equity and debt funding. Eventually they go public and put out a stock offering. And that’s when you need to pounce.
Get to know the names of these private companies. Follow their stories, follow their progress. Use their products and services and sites. That way, when the prospectus goes out, and the IPO comes around, you’ll already know what action you want to take.
Innovation happens in Australia all the time. You don’t need the government to prove it. Sure, they should direct more money to it. But in the off chance they will never allocate enough, it’ll be OK.
Well, it might not be OK for the overall economy. But it will be OK for the right companies — and the right investors in those companies. All you need is to know which ones. You just need a nudge in the right direction. And that’s exactly what I’ve done for you with these five companies.