Nassim Khadem Reporter

Nassim covers the accounting and tax rounds for BRW, as well as general business news. She previously worked for The Age newspaper covering general news, state politics and economics.

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Give the rich tax breaks for investing in start-ups, not property: 99designs’ Patrick Llewellyn

Published 18 October 2013 08:06, Updated 26 November 2013 12:10

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Give the rich tax breaks for investing in start-ups, not property: 99designs’ Patrick Llewellyn

Australia’s tax laws skew potential investment toward property at the expense of investment in new businesses, say 99designs’ Patrick Llewellyn. Photo: Josh Robenstone

The chief executive of online graphic design marketplace 99designs, Patrick Llewellyn, has called on the government to encourage the wealthy to invest in the start-up sectors by providing the sort of tax breaks property investment gets.

Llewellyn says he agrees with Communications Minister Malcolm Turnbull, who has talked about how hard it is to create a successful start-up ecosystem in Australia like the ones created in Silicon Valley and Israel. “I don’t think anywhere is likely to equal Silicon Valley,” Turnbull told BRW. “I don’t know that anyone can replicate the secret chicken soup of Israel.”

Llewellyn says the Israelis also have the benefit of getting funding from their government and the military for innovation. The only way Australia can compete with these countries is to give rich people tax breaks to invest in start-ups, he says.

“The government can do more to encourage high net-worth people to invest in start-ups,” Llewellyn says. “Why is it that they get a tax break for investing in property, but not in start-ups? We have created a residential property market that’s pretty frothy due to various capital gains tax exemptions and negative gearing. There are almost these artificial incentives for property.”

Llewellyn says tax incentives would be far more beneficial for overall economic growth if geared towards creating start-ups.

“Start-ups are very risky, so if we want people to take greater risks, and invest in them, and have a local venture capital community, then that’s what’s needed.”

28 million designs to date

99designs is one of Australia’s best start-up success stories, with about 250,000 registered designers in more than 190 countries.

Founded in 2008 by Australian Mark Harbottle and Canadian Matt Mickiewicz, 99deisgns in 2011 secured its first, and so far only, round of funding of $35 million from Accel Partners and angel investors.

With a total number of 28 million designs uploaded on the site to date – currently about one every four seconds – Llewellyn says revenue growth is exceeding expectations, although he won’t disclose the numbers.

In most countries it partners with local players – except for Berlin, where it snapped up 12designer in August last year, and in Rio de Janeiro, with the purchase of LogoChef in August this year.

The company has launched a new site called Swiftly for customers who want small design jobs done for a flat fee of $US15.

Currently the US is 99designs’ biggest market, followed by Australia, Canada, Germany and the UK.

Llewellyn says the company is expanding globally, seeking countries with a large population and significant online penetration and broadband usage.

The business is targeting Asia next year and first on the list is Japan – although culturally it will be a lot harder to break in to than Europe and the US, says Llewellyn, who was this week visiting his home town of Melbourne, from San Francisco where he now lives.

But Japan has one benefit. “There’s not a great deal of established players in Japan,” he says. “We’ve employed our first Japanese-speaking staff member in Melbourne and she’s just spent the past four weeks in Japan looking for new opportunities.”

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