Allow migrant investors easier access to early-stage startups

08 April 2020 Consultancy.com.au

Atlas Advisors Australia has submitted its feedback to the Australian Government’s evaluation of the Business Innovation and Investment Programme. Guy Hedley, Executive Chairman at Atlas Advisors, sheds light on the recommendations, which are aimed at increasing migrant investment levels.

Hedley is concerned about the dipping numbers in Australia when it comes to early-stage and seed investments, a category where funding has dwindled over the last two years. Australia’s vibrant startup environment is in need of funding, and Hedley suggests a pivot to migrant investors to meet this gap.

Australia hosts a Significant Investor Visa (SIV) programme, which allows migrants with significant venture capital funds to reside in Australia and make substantial investments. The SIV runs on a compliance investment framework, which currently appears to be channeling funds into more mature enterprises.

While $1 billion has been flowing in through the Significant Investor Visa on an annual basis, the number of deals in the early-stage and seed investment category has halved over the last two years, dropping from 320 deals in 2017 to 138 deals in 2019. According to Hedley, this is a worrying trend for Australia’s economy.

Allow migrant investors easier access to early-stage startups

“Of concern, is that it is this critical investment stage that generates the main economic benefits to Australia of job creation, industry growth and the patenting of next generation innovations,” he said. For him, the solution lies in changing the compliance investment framework around the SIV.

“Enabling migrant investors to allocate up to 50% of investment to venture capital with a reduced visa period of three years or prioritised application processing, would bring greater economic benefits than focusing allocations towards secondary public market equities,” he explained.

“Venture capital is typically a 10-year illiquid investment while emerging companies’ equities are liquid. Revising the policy settings to increase the allocation to venture capital would materially add to the Australian economic benefits by increasing the committed term of each investment,” added Hedley.

Overall, Australia’s startup environment is found to be thriving, with no shortage of capital. Earlier this, Big Four accounting and advisory firm KPMG reported that venture capital spending in Australia reached a record-breaking $2 billion last year. However, early reports on the impact of Covid-19 on the startup scene suggest that the market has slowed considerably since the start of the outbreak.


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