$20 million to incubate 250 startups

An incubator jointly set up by the federal government and the private sector is committing $20 million to assisting 250 IT startups over five years.

Of the $20 million, $7 million will be funded by the government as part of its BITS (Building on IT Strengths) Incubator Centre program. The remaining investment will come from the private sector.

Australian Distributed Incubator (ADI) is one of 10 incubators launched under the federal government's $78 million BITS program. It is jointly set up by Emerge, a federal government-sponsored cooperative multimedia centre; Ernst and Young; Babcock and Brown, an investment specialist; and Greyhair.com, a relationship management consultant for startups and investors.

ADI plans to use $10 million to provide seed funding for the startups and $11 million for services including mentoring, consulting and online support services.

Besides providing physical facilities, ADI is also a "virtual" incubator, particularly for startups in regional and rural Australia. Access to services will be enabled by specialist online services, through Emerge's multimedia internet network and other online services designed for the incubator.

"Importantly, not all good technology business ideas originate in the major cities, and it's great to see that the ADI team have purposely built a model which can also service regional and rural Australia," said Senator Richard Alston, minister for communications, IT and the arts, who was in Melbourne to launch ADI.

ADI will deliver a six-month structured business program customised for each startup that includes mentoring, consulting, and online support services including an online business centre with workflow and messaging tools.

"Of the projected 250 startups that will enter this incubator over the next five years, we estimate that some 30 per cent will be star performers who will go on to obtain later stage funding totalling in the order of $300 million. It is envisaged that 10 of these stars will achieve capitalisation averaging $50 million," said Lex McArthur, CEO of ADI.

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