When the Victorian government announced plans to disband LaunchVic, and distribute some of its roles to other agencies, like Breakthrough Victoria, there’s a temptation to treat it as an administrative change: a reshuffle of functions, a rebadging of programs, a matter for insiders.
That temptation is comforting – and profoundly wrong.
I don’t want to relitigate the arguments already made. The policy mechanics, institutional history, and performance record of LaunchVic have been set out in detail in my earlier essay, and I would strongly encourage readers to begin there to understand the immediate decision and why it matters on its own terms.
This is about something broader, and more consequential.
What has occurred in Victoria is not simply the dismantling of an agency, nor even a debate about the appropriate mix of grants, equity, or administrative structures. It is a signal event in the slow redefinition of how Australia understands risk, ambition, and responsibility in the innovation economy – to what and whom it owes its future.
It raises uncomfortable questions about who is expected to carry uncertainty, how founders are culturally selected or filtered out, and what happens to a national startup system when shared risk is quietly re-privatised, and how founders—already operating at the margins of economic and psychological tolerance—interpret the state’s willingness to stand alongside them.
Innovation ecosystems are not machinery; they are social systems, shaped as much by psychology and culture as by capital and policy.
A national lens
What is at stake here is not whether one investment vehicle performs well, or whether another program survives a budget cycle. It is whether Australia still believes in the idea of a Commonwealth in any meaningful sense: a shared commitment to underwriting uncertainty so that future industries, capabilities, and options can exist at all.
Seen through that lens, the dismantling of LaunchVic is not a local administrative matter. It is a national signal that founders, investors, and future builders are already interpreting.
This is not a Victorian story. It is a national one. It speaks directly to the meaning of the “Commonwealth”: the shared stock of capability, trust, institutions, and future-facing assets that a society builds together because no individual actor—no founder, no investor, no firm—can rationally shoulder the full risk alone.
Innovation economies emerge not where risk is eliminated, but where it is collectively underwritten.
I have seen this pattern before. It does not announce itself with headlines or cliff-edge collapses. It emerges quietly, over a few years, as the composition of the founder population shifts.
Programs are cut or diluted, early-stage support becomes episodic, and suddenly the room changes.
The founders who show up are older, safer, more credentialed, more capitalised. The unconventional, the first-timers, the ones without a safety net stop appearing — not because they lack ideas or talent, but because the cost of failure has become personally catastrophic.
When shared risk recedes, experimentation becomes a luxury good.
I am likely to witness this again. Where I live, in the United States, federal budget pressures are already threatening to slow or reduce SBIR (Small Business Innovation Research) and related translational programs. If that contraction continues, it will not eliminate American innovation, but it will subtly reselect for founders who can self-finance regulatory timelines, bridge capital gaps, and absorb multi-year uncertainty without institutional support.
The system will appear to function, even to thrive, while quietly narrowing the funnel of who is allowed to try.
That is how innovation ecosystems hollow out without ever formally “failing.” The statistics lag. The damage accumulates upstream, in the people who never form companies at all.
However, in a system like the United States, with deep capital pools, dense talent markets, and multiple overlapping innovation institutions, some of this contraction can be absorbed. The system degrades, but it does not collapse.
Alternative pathways remain. Private capital steps in unevenly. Geographic density and market scale provide a degree of redundancy.
Australia does not have that luxury. We are geographically isolated, operate with thin capital markets, and lack the venture capital mass required to self-correct when public risk-sharing is withdrawn. There are fewer second chances, fewer adjacent ecosystems to fall into, and far less tolerance for long periods without institutional support.
When early-stage programs are cut here, the effects are not marginal, they are structural. Entire cohorts disappear. Founder pipelines thin. Capability gaps persist for decades rather than years.
In that context, removing ecosystem institutions is not neutral reform; it is a systemic shock. What a large economy can treat as cyclical tightening becomes, in a small and peripheral one, a generational break in continuity.
Press Play Ventures, the LaunchVic-backed accelerator program for women to move from corporate to founder life, won the 2025 Startup Daily Best in Tech GSD award, after helping helped 120 women to launch 104 startups in just 18 months.
Bootstrapping not the solution
Australia already operates under a stressed bootstrapping culture. Founders are routinely expected to self-finance long periods of uncertainty, bridge capital gaps with personal debt, and treat precarity as a badge of seriousness rather than a market failure.
In moderation, bootstrapping can sharpen discipline. Under persistent capital thinness, it becomes a tax on ambition. Extending this culture further does not produce leaner or more resilient startups; it produces narrower ones—constrained in who can participate, what risks can be taken, and how long experimentation can last before personal exhaustion or financial collapse intervenes.
In a system with abundant downstream capital, bootstrapping can be a choice. In Australia, it is increasingly a condition.
Removing public risk-sharing mechanisms hardens that condition into expectation, shifting even more systemic uncertainty onto individual founders. The result is not resilience, but attrition – quiet, cumulative, and largely invisible until the pipeline has already thinned.
LaunchVic CEO Dr Kate Cornick
LaunchVic was one of the few Australian institutions explicitly designed to perform that function to protect early-stage startups from deeper economic uncertainty, and gave innovation a change to get-off-the-ground. Its removal therefore does something deeper than rearranging the funding flow deck chairs. It alters the socio-psychological contract between the state and those who attempt to build new things.
Founders are not simply economic agents. They are, as a group, a psychologically distinct population: disproportionately tolerant of uncertainty, unusually persistent in the face of repeated failure, and deeply sensitive to institutional signals about legitimacy.
Whether a society sustains a startup culture is not determined only by capital availability, but by whether founders believe the system will still exist tomorrow if they fail today.
That belief has now been weakened.
A ‘don’t bother’ signal
In ecosystems like Silicon Valley, London, or Stockholm, the presence of long-lived, specialist institutions communicates something essential: that experimentation is expected, that failure is survivable, and that the system will outlast individual attempts. This reduces existential risk at the margin, which is precisely where early-stage innovation lives.
LaunchVic functioned, often invisibly, as such a psychological stabiliser. Not by guaranteeing success, but by signalling continuity. By saying: there is a place for you here, even if this attempt does not work.
When that signal is withdrawn – especially abruptly, and despite demonstrable performance – the selection pressure changes.
Founders adapt quickly to signals. They always have. If the message is that innovation support is politically fragile, contingent, and easily repurposed for short-term fiscal repair, then the rational response is not protest. It is exit. Or more subtly: non-entry.
Potential founders self-select out before they ever incorporate. Deep-tech teams choose to form elsewhere. Risk-averse talent opts for incumbents. Ambition narrows.
This is how ecosystems decay, not dramatically, but quietly, through altered expectations.
Much has been made of Breakthrough Victoria’s investment record, and rightly so. A sovereign-style investment vehicle deploying capital into deep tech is an essential part of any serious innovation economy. But the current discourse confuses capital deployment with system formation.
They are not the same thing.
Breakthrough Victoria operates downstream. It invests when ventures are sufficiently legible, structured, and investable. Its success depends on the existence of a diverse, continually renewing upstream pipeline and dealflow: founders who have been trained, encouraged, connected, and psychologically supported long before term sheets appear.
LaunchVic’s work lived in that upstream space. It dealt in human capital, not just financial capital. In confidence, not just returns. In trust networks, not just portfolios.
Removing that layer while celebrating investment volumes is akin to praising harvest yields while dismantling irrigation.
The risk is not merely that fewer startups will form. It is that the type of startups that form will change.
Cultural selection will favour those already insulated from failure: founders with personal wealth, institutional backing, or offshore pathways. Those without such buffers – often younger, more diverse, more experimental – will be filtered out.
This is not conjecture. It is how systems behave when undiluted risk is re-privatised.
Public innovation institutions exist precisely to counteract this selection bias. By absorbing early uncertainty, they allow a broader range of actors to participate. They democratise ambition. They convert private fragility into collective resilience.
When that function is removed, the system does not become more efficient. It becomes more brittle.
Compounded brittleness
At the national level, this brittleness is compounded by parallel signals from the Commonwealth. Cuts to programs such as the Industry Growth Program, reductions in translational funding, and an increasingly transactional approach to innovation policy all point in the same direction: a retreat from shared risk at the most precarious stages.
The irony is stark. Governments speak endlessly about productivity, sovereignty, and future industries, yet systematically erode the institutional conditions required for any of those things to emerge.
Innovation is not a linear pipeline from research to revenue. It is a probabilistic system. Most attempts fail. The point is not to avoid failure, but to ensure that failure is survivable, learnable, and recyclable.
This is where the concept of the Commonwealth matters.
A common wealth is built when society agrees to pool risk across time. We fund schools not knowing which student will succeed. We fund roads not knowing which firm will use them. We fund research not knowing which idea will work.
Early-stage innovation support sits squarely in this tradition. It is infrastructure for possibility.
By dismantling LaunchVic and narrowing Commonwealth-level instruments, Australia is doing something conceptually dangerous: it is treating innovation as if it were a discretionary service, rather than a foundational public good. This reframing has consequences.
It shifts the moral burden of risk entirely onto individuals. It implies that if founders fail, they simply misjudged the market, rather than operated within a system that withdrew its share of responsibility. It turns entrepreneurship from a socially valued act of exploration into a private gamble.
Once that shift occurs, the language changes too. Founders become “grantees.” Programs become “handouts.” Risk becomes a moral failing rather than an economic necessity. Cultures simply do not sustain innovation under those conditions.
Federal industry and innovation minister Tim Ayres.
There is also a temporal problem that policy discussions consistently avoid. Innovation ecosystems operate on decade-long cycles.
Political and budget cycles operate on one to four years. Institutions like LaunchVic existed to bridge that gap—to hold memory, relationships, and strategy across electoral churn.
When such institutions are dismantled, continuity collapses. Each new program must rediscover first principles. Each cohort of founders must rebuild trust from scratch. Each attempt to coordinate across states becomes harder.
Nationally, this fragmentation is already acute. Australia’s startup ecosystem is balkanised by jurisdiction, funding instruments, and policy fashion. LaunchVic was one of the few nodes capable of acting as a stable interlocutor across states, universities, investors, and federal agencies.
Its removal increases entropy at precisely the wrong moment—when global competition for talent, capital, and attention, is intensifying.
The deeper danger, however, is psychological. When founders observe that even high-performing institutions are not safe, they infer something about their own prospects.
If an agency with evidence, impact, and international credibility can be dissolved, what chance does a first-time founder have when conditions tighten?
This inference shapes behaviour long before it appears in data. It shows up as hesitation. As side projects that never become companies. As promising teams that relocate quietly. As ambition deferred. I am no doubt sure that, in the coming years, the data will show up in Murray Hurps’ Startup Muster report to support my claim.
By the time job numbers or investment volumes reflect the damage, the causal moment has long passed.
This is why the debate cannot be reduced to whether Breakthrough Victoria invests well, or whether budgets are constrained. Those are secondary questions.
A shared future
The primary question is whether Australia still believes in the idea of a shared future—one in which the state accepts that underwriting uncertainty is not indulgence, but a duty.
The Commonwealth, at its best, is an expression of intergenerational solidarity. We invest now so that future Australians inherit not just assets, but options. Startup ecosystems are option-generating machines. They create pathways that do not yet have names. Dismantling the institutions that support them is not prudence. It is foreclosure.
If this trajectory continues—if ecosystem stewardship is consistently stripped away in favour of narrow capital deployment and short-term fiscal optics—Australia will not suddenly “fail” at innovation. It will do something worse.
It will become modest: Modest in ambition. Modest in risk tolerance. Modest in who is allowed to try.
That is not a country that builds common wealth. It is one that consumes what previous generations constructed, mistaking maintenance for progress.
The question now is not whether LaunchVic can be reconstituted in name. It is whether Australia can still articulate, and defend, the principle that some risks are too important to be left to individuals alone.
If we cannot, then no amount of venture capital statistics will compensate for what is quietly being lost.
- US-based Jim Cooper is an NSF I-Corps instructor across multiple US hubs, and advises and mentors widely across the US, Canada and Australia.
