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Does Australia need foreign investment?
Australia’s low venture capital investment is costing jobs and hurting the economy, with foreign investment a way forward, suggests an industry expert.
Does Australia need foreign investment?
Australia’s low venture capital investment is costing jobs and hurting the economy, with foreign investment a way forward, suggests an industry expert.
According to Atlas Advisors Australia executive chairman Guy Hedley, Australia has a very low venture capital per capita rate of $15 to $30 amounting for less than half the OECD average and four times lower than Sweden at $122, United Kingdom at $114, and France and Germany at $60.
AusIndustry data shows that 40 per cent of the 84 registered venture capital funds didn’t make a single investment in fiscal 2019 and only 14 per cent made 10 or more investments.
“It was important to consider that the economic benefits, including employment and patents, were driven much higher by allocating to venture capital than to secondary public market equities,” Mr Hedley said.
The fund manager noted while investment in venture capital has increased to $1 billion in annual commitments, investment in early-stage venture capital seed funding declined by as much as 46 per cent in the past four years.
“It is estimated that investment in early stages has been about $75 million spread across 138 deals in fiscal 2019. This is down significantly from $180 million across 270 deals in 2016,” Mr Hedley said.
He believes the way forward is through government intervention through SIV programs which offer a four-year pathway to permanent residency for individuals willing to make investments that will drive innovation and commercialisation of Australian ideas.
“This could be significantly increased by boosting the asset allocation towards early-stage investments under the SIV’s complying investment framework,” he said.
“Even with a strong proportion of new SIV approvals, we are unable to meet the growing demand for seed and early-stage venture capital.
“Where an investor elects to allocate 50 per cent of the investment framework into venture capital and growth private equity funds, there should be a reduced visa period of three years or a prioritisation of the application for processing.”
nestegg has previously reported on where venture capitalists are investing over the next decade.
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