How to get a better deal for Australia under Business Innovation and Investment Program

Atlas Advisors Australia

Investment manager Atlas Advisors Australia is calling for better use of migrant investment to fill critical gaps in Australian venture capital and industry.

The proposal is part of a submission to the Department of Home Affairs Discussion Paper on the Complying Investment Framework (CIF) for the Business Innovation and Investment Program (BIIP).

Executive Chairman of Atlas Advisors Australia Guy Hedley said early/seed-stage venture capital had taken a heavy and serious hit in recent years.

Statistics (below) reveal a 45 per cent decline in the number of early-stage deals in Australia.

“This has dire ramifications for the medium and longer-term health of Australia’s economy, future jobs and industry growth,” Mr Hedley said.

“It also affects our global competitiveness when it comes to patents and intellectual property.”

Mr Hedley said the Significant Investor Visa program should be used to plug holes in critically needed venture capital funds.

The Significant Investor Visa currently directs more funds towards well-developed markets such as emerging listed companies, property and bonds, than it does to venture capital. This is despite venture capital funding better stimulating the growth of the economy because of the shortages in seed-stage venture capital start-up funding.

Mr Hedley said the allocation towards venture capital should be increased from 10 per cent to 20 per cent, while the mandatory investment period should be extended from four years to five years.

“Increasing the allocation to venture capital would provide more for early-stage and seed investment deals,” Mr Hedley said.

“This would materially increase jobs, wealth, industry and patent creation – making it a far better deal for Australia.”

Chief Executive Officer of Uniseed, Australia’s longest running university venture fund, Dr Peter Devine said the Business Innovation and Investment Program was integral to supporting the commercialisation and translation of university research in recent years.

Dr Devine said since starting in late 2000, Uniseed had seeded and supported 57 start-ups borne out of Australian research organisations. These now employed well over 600 people.

Uniseed first partnered with Atlas Advisors Australia in 2018, and later through Stoic Venture Capital. They co-invested in 17 early-stage companies originating from Australian research organisations in drug development, medical devices, agricultural robotics and other technologies, and these companies have gone on to raise more than $300 million in investment and grant funding.

Dr Devine said funds allocated to venture capital from the Business Innovation and Investment Program had a huge impact, providing early-seed funding for university spin-off companies, and with funds participating in subsequent funding rounds, this had assisted in raising funds from other investors in later rounds.

Increasing the allocation towards venture capital under the Business Innovation and Investment Program could fill gaps in desperately needed funding for universities to commercialise more vital research.

It also accords with the Australian Government’s objective to increase the commercialisation of university research using a new model to be introduced by the end of the year.

“Despite record venture capital raisings in 2020, nearly all venture capital funds operating in Australia do not invest in technologies at seed-stage in research organisations,” Dr Devine said.

“At the time of invention and subsequent patenting, nearly all technologies are too early to interest external companies or most investors.

“These technologies require additional seed funding to get to a stage where “they become investible” so other investors are interested, colloquially known as getting across the ‘valley of death’.”

Statistics

These statistics show that the number of early-stage funding deals in Australia has declined significantly from around:

· $320 million in 2016-17

· $270 million 2017-18

· $120 million in 2018-19

About Atlas Advisors Australia

Atlas Advisors Australia is a leading funds manager and investment advisory business, operating between China and Australia offering a wide range of financial services and wealth management solutions. With operations in Sydney, Melbourne in Australia and Hong Kong SAR and Shanghai in China, we are able to support investors in all China and Australia locations. Atlas Advisors Australia AFOF is the major limited partner in Stoic Venture Capital.

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