Startups and small to medium-sized enterprises stand to be the big winners from an expected increase in the pool of much-needed investment capital, according to the Australian Private Equity and Venture Capital Association (AVCAL).
The Minister for Trade and Investment, the Hon Andrew Robb MP, earlier today released details of changes to Australia’s AUD5m Significant Investor Visa Program, which will introduce from 1 July 2015 a mandated allocation of at least AUD500,000 per investor into a registered venture capital or growth private equity fund.
“These changes have the potential to fundamentally transform the landscape for investment capital available for thousands of startups and tens of thousands of SME businesses,” says AVCAL’s Chief Executive, Yasser El-Ansary. “For some time, AVCAL has advocated for these changes to the SIV program in order to help better align the flow of capital from high net worth individuals offshore into those parts of our economy that can really drive our nation’s innovative potential.
“The mandating of investments into venture capital and growth private equity funds under the new program will enable SIV applicants to invest across the risk spectrum, from early stage ventures through to more established businesses needing capital to fund their next growth phase.
“Starting the minimum allocation at AUD500,000 and mapping out a plan to work towards a higher minimum threshold of AUD1m over the next two years is a sensible way to transition this new policy in a way that moves in lock-step with the growth of the venture market.”
In FY2014, AUD120 million was raised by venture capital funds in Australia, with over half of that amount sourced from high net worth individuals. During the same period, both domestic and foreign venture funds invested a total of AUD516 million into 93 businesses.
“In the hands of experienced fund managers, there is no question that a deeper pool of capital will lead to more high growth potential businesses being backed here in Australia. Over time, that will mean we can start to arrest the slow but steady ‘brain drain’ of our best entrepreneurs moving abroad simply to gain access to capital from a larger market,” says El-Ansary.
