Of all the budget measures aimed at helping the local start-up and innovation sector in Australia, the low-profile changes to the Significant Investor Visa (SIV) program hold the promise of the delivering the most positive long term impact.
The revised rules ear-mark a significant portion of SIV funds to Venture Capital (VC) funds and start-up innovators. This alone is very good news for the tech-enabled start-up sector, which still struggles to find the right funding at the right time in this country, James Riley wrote for Technology Spectator.
The additional investment dollars should deliver more opportunity to our entrepreneurs, and give them a reasonable alternative to simply following the well-worn path to the US in search of backers.
The changes do more than deliver money. In the longer term they will provide massive opportunities for the home grown Australian technology and innovation sectors to engage and integrate with sectoral interests in China.
And that is incredibly exciting. In mid-2013, I was calling this scheme a potential game changer for the Australian technology – that the promise of mainly Chinese investment in the local sector be the overdue start to long-term, China-Australia industry integration.
It has taken some time to eventuate. The SIV program (and its more recent Premium Investor Visa stablemate) took time to calibrate early issues, and for the government to get a better grip on harnessing its real value to the nation.
Permanent Residency
A SIV provides an expedited pathway to permanent residency in Australia. In return for $5 million in complying investments in Australia over four years, the PR applicant has reduced residency requirements, and lower language benchmarks to meet.
Until now, the $5 million investments could be simply dropped into ultra-safe government bonds. The changes introduced on budget might direct the SIV money into pockets of the economy where it can make a positive impact.
Ultimately the SIV and PIV programs are trade and investment issues. Sure, it’s Immigration, but these visas are an instrument of industry development.
The increased cost to potential SIV migrants is in the high-risk profile of the complying investment requirements. But with just $500,000 – or 10 percent of the required $5 million minimum investment – required to be placed with a VC fund, or directly with a start-up, this cost is unlikely to impact demand.
A Major Player
China, of course, is central to this program. Of the more than 800 SIVs so far granted, for a total investment of more than $4 billion, more than 90 percent are mainland Chinese recipients.
“Over time, China will be a major player in the global VC space. This program will give Australian VCs an early start in building links (to Chinese VC counterparts),” David Chin said. “China is very focused on building its VC sector and very focused on start-ups.
“The fact is that the SIV program will draw some Chinese VC firms to the Australia market. Over time it will foster much closer links between the VC sectors from both countries.”
The run-rate of visa approvals is now significantly higher (there are a further 800 applicants that have been invited to formally apply) and 800 to 1,000 visas being issued annually is a reasonable expectation.
That’s a $4 billion to $5 billion annual pipeline as far as the eye can see. That equates to an initial $400 million to $500 million in additional VC funding in Australia for StartupLand and its innovation brethren.
The Chinese VC interests drawn to the Australian market will be investing these funds into Australian start-ups. It is not unreasonable to assume that investments will be made with one eye on the China market.
