Australia has no shortage of innovative deep tech startups. But historically, it has lacked a clear path from a promising prototype to large-scale commercial success.
For decades, too many Australian breakthroughs in areas like space, quantum and advanced manufacturing have followed the same trajectory: developed locally, commercialised elsewhere, and ultimately scaled offshore where larger pools of capital, talent and industrial support exist.
This year’s federal budget suggests the government increasingly understands that dynamic — and the economic risk that comes with it.
Several measures aimed at strengthening R&D investment and venture capital settings signal a more nuanced understanding of what it takes to build globally competitive deep tech businesses. More importantly, they reflect a growing recognition that Australia’s future economic resilience will depend not only on software and services, but on sovereign capability in the hard technologies that underpin them.
The transition from prototype to operational infrastructure is where many otherwise promising companies fail, not because the technology lacks merit, but because the investment ecosystem is not structured to support development cycles measured in decades rather than quarters.
That is why policy settings matter.
The broader uplift in R&D support is welcome. However, the proposed 10-year limitation on access to the refundable (cash) R&D Tax Incentive (RDTI) risks creating unintended consequences for sectors operating on fundamentally longer commercialisation horizons.
In deep tech, many companies are still transitioning from technical validation to meaningful scale well beyond their first decade. In deep tech, cash returned to the business through RDTI is ploughed straight back into further jobs, further research and vitally the transition from research to real world impact.
Similarly, from an investment perspective, raising the Venture Capital Limited Partnership ceiling to $480 million is an important acknowledgement that deep tech capital intensity operates at a different order of magnitude.
Businesses building satellites, advanced communications infrastructure or sovereign industrial capability can consume significant capital long before they resemble conventional “growth-stage” companies. Indeed, each step forward generally demands a 5-10x increase in capital investment, so it doesn’t take many positive steps forward before traditionally the only viable solution was to seek capital offshore.
For investors, those settings matter because they shape fund capital efficiency and risk adjusted returns. Meanwhile for startup leaders, better alignment between policy support and the true cost of technical development can improve runway, lower financing pressure and make it easier for companies to stay focused on long-term value creation rather than short-term funding gaps.
Talent competitiveness is equally critical.
Australia is competing globally for highly specialised engineers, scientists and technical operators. In many cases, local companies cannot compete with the cash compensation offered by major US, Indian and Chinese technology firms. Equity therefore becomes one of the few mechanisms available to align long-term incentives and retain capability domestically.
That makes reforms to Employee Share Ownership Plans particularly important. Startup employees frequently accept below-market salaries in exchange for long-term participation in the value they help create. Tax and regulatory settings should recognise that contribution rather than inadvertently penalise it.
A broader challenge for Australia is that global competition in deep tech is accelerating quickly. Comparable economies including Germany, the United Kingdom and the United States have spent the past decade investing aggressively in sovereign industrial capability across sectors including space, AI, semiconductors and advanced manufacturing.
These countries increasingly view deep tech not simply as a startup-scaleup ecosystem issue, but as a strategic economic and national capability priority.
This week’s budget was a clear statement of intent. Australia needs this, the government wants this, Australian investors have both the means and the motivation, and we have passionate entrepreneurs that want to build the future right here. The challenge now is ensuring those parts move forward in accelerating lockstep — with policy, capital, industry and innovation advancing together quickly enough to compete globally.
Perhaps the biggest lesson for founders is that great technology is only half the challenge. Deep tech does not follow the traditional Silicon Valley playbook of subsidising customers heavily and scaling quickly on the back of short adoption cycles. In industrial, enterprise and space markets, customers move cautiously, procurement takes longer and companies must often prove not only that a technology works, but that a new operating model is viable.
That reality has important implications for how deep tech companies structure themselves commercially. In sectors like space and industrial IoT, value is often created across an entire technology stack – from core infrastructure and connectivity through to hardware, enablement tools and vertically specialised applications. Companies that retain strategic control across more of that stack are often better positioned to optimise performance, manage unit economics and shorten the path from technological capability to commercial deployment.
At the same time, no single company can solve every end-market problem alone. The strongest models tend to combine core platform ownership with an ecosystem of integrators and solution partners who adapt underlying technologies to specific industry use cases. That creates multiple pathways into the market while allowing the underlying platform to scale across a broader range of industries and operational environments.
This creates a very different commercial dynamic from consumer and general enterprise software. Deep tech companies are often building markets at the same time they are building products, which requires patience, long-term investment and business models designed for industrial scale rather than purely rapid user growth.
It also requires recognising that the value of deep tech extends beyond individual company outcomes. These businesses create sovereign capability, develop highly specialised workforces, strengthen supply chains and establish strategic infrastructure that compounds over decades.
This year’s budget is a meaningful step forward. The next test is whether Australia can translate that intent into settings that reflect how deep tech businesses are actually built. If policymakers and investors get this right, Australia can become not just a source of strong ideas, but a place where globally competitive deep tech companies scale, stay and strengthen national capability over decades.
Having built my career across multiple markets before calling Australia home, I’m going nowhere. Myriota’s mission is deeply tied to building long-term Australian capability and resilience. Many other homegrown Aussie businesses will take the same view, but at the same time, the reality is that policy helps shape the overall environment — and that is a tailwind that will benefit Australia today, tomorrow and for the generations yet to enter the workforce.
Ben Cade is the chief executive of South Australian IoT and satellite startup Myriota
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