AVCAL workshops, hosted by Deloitte Immigration in Sydney and the Victorian government in Melbourne, provided an update to the SIV industry on the new investment framework, with $500,00 mandated into Venture capital from 1 July, 2015.
Following are highlights from the speakers including Austrade, AVCAL, VC managers and importantly AusIndustry who register the eligible ESVCLPs and VCLPs.
Austrade – Michaela Browning
At the May quarterly update to migration agents in Hong Kong, Austrade advised the allocation to venture capital can be held in cash for up to 12 months whilst seeking a suitable venture fund.
Applicants are required to set aside the total capital of $500,000 in a bank guarantee or cash management account upfront to meet the capital calls. Note the 4 year term for eligibility for permanent residency will not start until the fund makes an investment.
In relation to the Premium Investor Visa, this is a distinctly separate category that requires a personal invitation from Austrade. It is not interchangeable with SIV.
AVCAL – Kar Mei Tang
The Venture Capital market in Australia is quite small. There are potentially 30,000 companies seeking investment who are not necessarily ready for bank financing.
In FY14, VC investment was $516M taking the total to $2.2B under management with 26 active managers and 269 portfolio companies. Expansion capital is a much larger sector at $11B with 41 active managers and 379 underlying companies but again only $562M invested in FY14.
The presentation also covered fund lifecycles or the “J-curve” of acquiring companies over the first 5 years then realising investments over the following 5 years, as well as who is investing globally in Australia’s VC and growth PE funds.
There are three main sectors: ICT, Life Sciences, and energy including clean tech. It was highlighted that private equity is more diversified than listed markets with healthcare, energy, IT and retail verses the ASX which is dominated by financials and materials.
The majority of exits are via trade sale, although there has been some IPO activity. Returns from PE/VC according to Cambridge Association are substantially higher than listed markets, however figures are consolidated with individual fund performance understandably “private”. Investors are predominately institutional or HNW self-directed individuals.
GBS Venture Partners – Brigitte Smith
An extremely interesting presentation on the Life Sciences sector, with potential medical solutions for most problems! Good overview of how the managers look at deal flow, while there is a lot of innovation coming out of universities globally, including a strong pipeline in Australia.
An interesting insight was the very low level of VC capital available in Australia verses the level of innovation, compared to markets such as the US and Israel.
AusIndustry – Graydon Smith
For those interested in registering a fund, Graydon provided a good overview of the structure, compliance, reporting requirements and tax regime. To be granted registration by Innovation Australia, there must be a plan to raise at least $10M within 2 years or the conditional registration lapses. Investee companies must be Australian businesses in early stage of development, and at least 50% of the employees and assets must be in Australia.
It is still early days and there is considerable discussion on how best to provide access to SIV applicants. The government is largely leaving it up to the industry to work through the various issues and come up with solutions to meet the governments innovation agenda.
Many of the existing funds are closed to new investors, however a number of them, plus new entrants are looking to register funds to take advantage of this opportunity.
There is currently no independent research to assist applicants and advisers with the selection process. As noted by Austrade during the submission process: “caveat emptor”!
If you are interested in finding out more about the Significant Investor Visa program and how NAB and Expat Advisors Community can assist migration agents and their advisers Contact Us.