It only takes 600 Significant Investor Visa recipients to fund the entire medical and health tech startup sector for a year
Dismantling the Significant Investor Visa (SIV) will remove billions of dollars for Australian startups at a time when they most need funding. Applicants for the SIV are required to put a proportion of their funds ‘at risk’ and of that a minimum of $1 million in venture capital. That means for every 1,000 SIV visa holders is $1 billion guaranteed for investment in the Australian venture capital industry.
Data shows that 2021 was a record year for startup funding. Of the $10bn raised, $574mn was for medtech/healthtech[1]. However, startups across the world are now in survival mode as they face a ‘funding winter’. Capital raising in Australia has flatlined since mid-year, and was only $225mn in August, compared with $443mn in the same month last year.
Economic dark clouds mean a mainstream investment ‘risk off’ flight to ‘quality’. Soaring cost of living and resultant monetary policy normalisation has markets jittery, run offs of central bank balance sheets is crimping liquidity, and higher interest rates makes returns easier to get in ‘safer’ places and puts business valuations under pressure.
Now is the time to be thinking about how to support the Australian startup ecosystem to support our economic and societal outcomes of the future. Governments are cash strapped post-pandemic. Superannuation funds are risk averse behemoths that are facing into lower fee, lower risk activities, such as Exchange Traded Funds and index trading; they would take time and political direction to turn, if they would. Private money is the only realistic source of funds for venture capital right now.
If political posturing and xenophobia leads to a dismantling of the SIV category, we impede economic growth, productivity, innovation, and the trajectory of our health and standard of living.
Venture capital provides the funding for a broad range of startups. Startups support economic activity and are responsible for a significant proportion of innovation. Startups are the route from research to customers – not just software geeks and fintech-preneurs, but innovation in healthcare, health outcomes, agriculture, climate science, and the science that will protect our biodiversity and save our endangered species. The upstream impact of successful startups is more research. This is on top of providing jobs and developing skills for Australians, and in particular regional Australians. The SIV is a way to ‘force’ new money in venture capital.
The Venture Capital Effect: At a Glance (source: AVCAL 2017)
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Venture capital is central to building a highly skilled, knowledge-driven economy with 75% of Australians believing the benefits of technology outweigh the risks.
Venture capital provides startups with capital and expertise not available anywhere else.
Venture capital funds startups, encourages the creation of firms, and leads to valuable knowledge spill-overs throughout the economy.
Startups are the largest contributor to job creation in Australia, representing 90% of net positive job creation over recent years.
Venture capital transforms old industries, and creates new ones.
23% of Australian startups are outside capital cities.
Venture capital-backed global giants include Apple, Microsoft, and Alphabet (Google) and in Australia, Atlassian, Cochlear, and SEEK.
Despite rapid growth, Australia’s venture capital sector remains less than half the OECD average.
Venture-capital is vital to commercialising cutting-edge research. |
Deeptech is non-software orientated venture capital. It is investing in fixing the problems of the world (such as climate change, health, longevity, hardware tech, space) rather than simply automating present labour-intensive manual activities as software does. Money in this part of the venture capital space gets good returns over the long term, and supports good outcomes for Australia.
Stoic Venture Capital invests in deeptech university spinouts. Stoic’s university partner research organisations have spent nearly $4 billion on research, making up over 40 per cent of the total research spend at 67 research organisations in Australia. Together, these organisations accounted for nearly 500 invention disclosures (34 per cent of total) and 500 new registered IP rights filed (45 per cent of total) over the same period.
Australia needs to support its startup and venture capital culture. The Significant Investor Visa is an important source of funds for an industry that produces good economic and social outcomes. Reform it, yes. But, dismantling it risks real economic loss for a misguided attempt at political gain.
[1] https://australianstartupfunding.com/
