It illustrates a big problem we have in this country. Our fear of failure is holding us back.
At universities and in government research organisations Australian scientists are producing world-leading discoveries and inventions. In fact, the country ranks near the top of the OECD league tables for quality of research.
Yet we rank 29th out of 30 in terms of collaboration between industry and academia and as a result, Australia isn't commercialising its breakthrough research. Much of our intellectual property drifts offshore to benefit other countries and foreign companies. If it didn't it would die a slow death. We are now in a position where we risk squandering our research infrastructure.
The problem is that we're not having a go.
To have started a business in Australia then see it go under is a cause of shame in this country and as a result many opportunities go wasted. Why would you what to take a risk and have that sort of blot on your CV when you front up to a job?
Contrast that with the US, where there is no shame in trying to build a business and failing. Americans pick themselves up again and try again.
There's a lot to be said for failure. It's the best way to teach an entrepreneur about what makes a business a success or a failure. An intelligent businessperson who is willing to learn should come back smarter and wiser next time they have a go at starting a business. The question is how many come back for another go or even give it a burl in the first place?
Venture capitalists recognise the value of failure. Many are quite happy to back a person who has had an honest business failure or two, in the expectation that the lessons learned will give them a chance of success next time around.
Fortunately, it looks like there is a cultural shift starting to get underway as Australians debate what will make us more innovative and start to recognise that success is often accompanied by earlier failed attempts.
But there is another factor holding back entrepreneurship in Australia.
It's our punitive insolvency laws. Here, if a director of a company allows it to incur debts or expenses when it is insolvent or likely to be insolvent then they are personally liable.
The thinking behind the law is to stop directors recklessly raking up debt they knowingly have no chance of repaying.
But its effect on entrepreneurship in Australia has made company directors overly cautious. Rather than trying to trade out of financial difficulties, directors are far more likely to call in the administrators to wind up the company. On many occasions the company might have been saved, but directors don't want to be personally liable for its debt or even face prosecution from the corporate regulator for insolvent trading.
At that point, the administrators are most likely to call in the receivers and the company founders can only stand by and watch as its assets (and its potential) are auctioned off in a fire sale.
And directors don't want the blot of a corporate failure on their CVs either.
Insolvency legislation impacts disproportionately on small and medium companies, in other words, start-ups.
It's a problem the government has recognised and is moving to fix.
After several years of work and consultation, the government has proposed 'safe harbour' legislation.
Under the draft law, directors will not be committing an offence if, after they become concerned about a company's solvency, they take "a course of action that is reasonably likely to lead to a better outcome for the company and the company's creditors".
This action can include trading on, with a chance that employees will keep their jobs and the creditors will eventually be paid in full rather than receiving a few cents in the dollar.
Many factors go into creating a vibrant innovative economy. The reform of corporate insolvency laws is a step in the right direction.
