Government urged to reform Entrepreneur Visa after receiving only one applicant in over 12 months

average founder age

Source: That Startup Show.

A startup-focused visa class established by the government over a year ago and spruiked as a way to attract the “best and brightest entrepreneurial talent” has had precisely one applicant since its introduction.

The Entrepreneur Visa was introduced in September 2016 as a way to encourage entrepreneurs with innovative ideas to build their startups on Australian shores.

But the restrictive funding requirements for the visa has drawn criticism from startup leaders and immigration lawyers, who are calling on the federal government to overhaul the visa and stop “dragging their feet”.

One of the main recommendations of the StartupAus Crossroads report, released yesterday, was for the government to alter and simplify the qualification criteria for the Entrepreneur Visa. In the report, the authors state as far as they are aware, the visa class has not attracted “any legitimate applications”.

This is backed up by a document obtained from the Department of Immigration and Border Protection through Freedom of Information laws, which shows one lodgement request for the Entrepreneur Visa was made on August 18, 2017. It is unknown if the application was successful.

Speaking to StartupSmart, Glenn Pereira, immigration lawyer at Dagama Pereira & Associates, says the lack of applications for the visa class is indicative of the difficulty of application, and restrictions imposed on hopeful international startup founders.

Pereira has issued a submission to the federal government outlining his issues with the Entrepreneur Visa and has also been in discussion with state and territory governments around the country, hoping to change the visa’s structure and requirements. The government closed submissions on July 31, and is yet to release a report.

Currently, applicants for the government’s Entrepreneur Visa are required to have a minimum of $200,000 in funding from a specified Australian third party. These include Commonwealth government agencies, state or territory governments, publicly funded research organisations, investors registered with the Australian Venture Capital and Private Equity Association, and certain specified higher education providers.

According to Pereira, who currently resides in Santa Clara and works with startups looking to gain visas in places such as Australia and the UK, the $200,000 investment mark is problematic when considering the equity typically leveraged by VCs, and the level of investment undertaken by state governments.

“State governments aren’t going to fund someone for an amount like $200,000 because they can’t claim equity. Queensland is currently offering $100,000 to overseas startups, but that’s the maximum. No state government is going to put forward $200,000,” he says.

“And the problem with VC investment is they require too many requirements for an investment of $200,000 — it’s almost like a Series A requirement rather than a seed or pre-seed. And so many startups have no idea where to start when looking for Australian venture capital.”

VC equity leverage “untenable” for international startups

Pereira says the amount Australian VC firms leverage for equity is “untenable” for many startups coming out of places like the US, saying many international entrepreneurs were “not going to give away 15% of their business for just $200,000”.

With the abolition of the US entrepreneur visa by President Donald Trump, Pereira says Australia is primed to take on all the startups left stranded by the change, but says it’s currently impossible to get them into Australia.

The main fix for this would be to let startups bring their own funding on the visa, says Pereira, who claims that getting $200,000 in funding in the US is “nothing”. He believes allowing companies to put up their own funding would solve many of the visa’s problems.

This would be associated with a number of checks and balances to stop companies exploiting the visa, says Pereira, but adds it’s imperative to let overseas companies invest in startups wanting to launch in Australia.

“I’m currently talking with two US companies who won $150,000 in Y Combinator’s pitch competition. They’ve been left stranded by Trump’s visa changes, and I want to bring them to Australia but I can’t,” he says.

The Crossroads report recommendations echo Pereira’s suggestions. The report calls on the government to add angel investors to the list of applicable funding sources, noting that “most Australian seed rounds are angel-led”.

The report also details the financial and time costs associated with applying for the visa under the current system.

“An Entrepreneur Visa candidate, then, needs to raise $200,000 from a very limited pool of approved Australian investors, apply for acceptance by a state or territory government, pay a minimum $3670 filing fee, and then wait an unknown period of time that might look something like nine months (or more) before finding out whether they have been approved,” the report reads.

“In the fast-moving, bootstrapping environment of entrepreneurship, this is unlikely to be an enticing prospect for high-quality candidates (or their investors, making the start of the process even more difficult).”

For Pereira, the difficulty of getting entrepreneurs into Australia on the current visa is disheartening, as he considers Australia’s visa to be one of the best available, in terms of the opportunity for permanent residence provided to applicants. He believes the Entrepreneurs Visa could be a viable alternative to the 457 visa, if reworked.

“We need to push these changes, and startups need to push them too,” he says.

Job classifications also in need of change

Speaking to StartupSmart, StartupAus chief executive Alex McCauley labelled the current Entrepreneur Visa as having “many shortcomings”, and says a lot of the criteria for the visa were not appropriate for entrepreneurs.

“It doesn’t make much sense,” he says.

But both McCauley and Pereira believe an investigation into visas should also focus on another overhaul, this time of the Australian and New Zealand Standard Classification of Occupations (ANSCO), which they say isn’t currently representing the rapidly changing jobs landscape.

“One of the problems with a lot of jobs we’re talking about on these visas is that as far as the Australian Bureau of Statistics is concerned, they’re not classically jobs. These are things like digital growth consultants, UX/UI designers and the like,” he says.

Pereira labelled the classifications as “stone age” and “archaic” and claims those working as software engineers must hold a degree in computer science to be considered software engineers under the classification, which he believes doesn’t accurately reflect the current job landscape.

“The situation where jobs can’t be easily added to the ANSCO list emphasises why the current system isn’t flexible enough for high growth companies and startups,” McCauley says.

StartupSmart has contacted the Department of Immigration for further information about the Entrepreneur Visa.

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Michael Ratner
Michael Ratner
4 years ago

And therein lies the problem.
Eloquently put and in simplistic turns … As long as there are departments and/or people who appear to be doing something…. money is being wasted … until the deficiencies are pointed out.
And the reason is because The Gatekeepers or want of anther term … The paid Government advisers — take the fees for coming up with some fanciful footwork and THE BUCK STOPS NOWHERE……
We need a report on the money Government tips into various grants that go EXACTLY NOWHERE.

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