A data black hole for start-ups

There's a river of cash flooding into Australia through the Significant Investor Visa program. The problem is that we don’t know where it's going and whether our tech start-ups are getting a look in.

There is a problem developing in relation to the Significant Investor Visa (SIV) program. The problem isn’t about a lack of cash pouring into the Immigration department’s gigantic SIV funnel (because there is a ton of it). The problem is that we don’t have a clear picture of where that money is going.

We have a data problem, there’s simply not enough of it. The Immigration department can tell us that there are buckets of money being poured through the program into ‘complying investments’, but can’t tell you where it ends up.

There is no granularity, as we used to say in the nineties. And without better visibility of where these investments are going, it’s impossible to know whether we are missing out on a genuine opportunity.

The Significant Investor Program gives access to permanent residency visas, and ultimately citizenship, to potential migrants who have at least $5 million to invest locally (and applies less onerous residency and language requirements to these people.)

Set up by Rudd-Gillard Labor, the scheme was supported by the Coalition while it was in opposition and has been accelerated since the Abbott government was elected.

Its aim was to attract successful business migrants who would bring investment dollars with them. For the tech start-up sector, the inflow of entrepreneur’s investment dollars looked like an exciting prospect. But 18 months into the program, it is impossible to see where the money is landing, and the Immigration department is not in a hurry to find out.

A fat pipe that keeps getting fatter

The headline numbers of this program continue to paint an exciting picture. At last count (to the end of May 2014), a total of 255 primary visas have been granted and $1.275 billion in complying investments made.

A further 1446 Expressions of Interest have been received by Immigration and 1145 official invitations have been issued, creating further proposed complying investments of $2.82 billion.

The pipeline stretches as far as the eye can see, and the pipe itself is getting fatter. It’s sort of a nice problem to have, except where it distorts markets, or in the case of the Australian start-up scene, where the money never seems to arrive.

I have written often about the potential of the SIV program as a source of capital for Australian tech start-ups. I have written about this in conjunction with the argument that China - and the increased presence in the market of Chinese investors and partners - will be the game-changer for the Australian sector.

More than 90 per cent of approved SIV applicants are from China. Right now, based on the paucity of Immigration department data, it’s impossible to say whether any money is yet landing in the start-up sector (or indeed into the higher-risk investments of agri-tech business, environmental technologies or biotech and biomedical devices.)

Will tech start-ups get a look in?

Better transparency of how these SIV investment dollars are being used would be welcome, according to market intelligence firm Basis Point’s managing director David Chin. But he argues that it is too early in the life of the program to make judgements.

Chin says most applicants will drop their investments into government bonds or complying cash vehicles for the six to nine months it takes for the approvals process to be completed. It’s only once an application has been approved that the investor starts to do more serious due diligence on the other investment options.

As the scheme is only 18 months old, Basis Point says it is too soon to get a real understanding of the SIV applicant’s appetite for higher-risk investments. But Chin argues that because the Chinese investors are from first or second generation money, they have a very wide appetite for risk and for investment choices.

And at least some of these investors will be looking at the Australian tech sector - whether it’s in internet-enabled tech start-ups, or in broader innovation in agriculture, the environment (particularly waste management), or in medical and pharmaceutical innovation.

It might be too early to appreciate where the SIV dollars are landing, but that doesn’t mean Immigration shouldn’t be developing better systems and processes for creating better visibility of the program’s outcomes. We need better data.

James Riley has covered technology and innovation issues in Australia and Asia as a writer and commentator for 25 years.

Follow James Riley on Twitter @888riley