The Regional Angel Investor Network (RAIN) has launched a petition urging the Australian Government to reconsider proposed changes to the ‘Sophisticated Investor’ test to allow innovation to flourish in Australia.

Australian founders, especially those who don’t have access to the wealth of family and friends, are most reliant on private investors to back their innovations. Without this early stage catalyst funding, the Australian startup ecosystem will be significantly constrained. 

The Federal Government’s proposed increase in the thresholds for ‘sophisticated investors’ – from an annual income of $250,000 and net assets of $2.5 million to $450,000 in income and $4.5 million in assets – risks severely limiting access to investment opportunities in startups and innovation in Australia.

This change significantly impacts the entire startup ecosystem and has downstream effects on the broader Australian economy.

‘By substantially limiting the pool of potential investors in Australia we are effectively slowing down both the rate and magnitude of innovation in Australia. This will have an adverse impact on future job and wealth creation and Australia’s place in the global economy. 

Specifically, raising the thresholds will further exclude knowledgeable individuals, exacerbate gender and geographic disparity in investing, and concentrate investment power in a smaller, wealthier segment of the population.

Our brightest inventors and best inventions have often only come about because of the backing of early stage investors, everyday Australians who have the capacity and nous to be angel investors.’ said Sam Almaliki, Founder and Facilitator of the Regional Angel Investor Network. 

Limiting the pool of potential investors in startups and technology ventures hinders economic mobility and growth, technological advancement, and the creation of new wealth. This change threatens to stifle the cycle of growth and reinvestment in the innovation sector, which is vital for Australia’s competitive edge in technology and innovation.

Immediate action is required to prevent the unintended negative consequences of these proposed changes on Australia’s economic and innovation ecosystem. The startup sector is at a crucial juncture, and limiting investment opportunities could have long-term detrimental effects on the country’s capacity for innovation and wealth creation. By acting now, we can advocate for a more balanced approach that values knowledge and experience alongside financial metrics, ensuring a healthier, more inclusive investment environment.

The RAIN petition calls for a more nuanced approach to the sophisticated investor criteria, one that balances the need for investor protection with the importance of nurturing a dynamic and inclusive startup and technology sector in Australia.

RAIN advocates for the implementation of an education-based certification, overseen by the Australian Securities and Investments Commission (ASIC), enabling experts to invest in Australian startups. This certificate would be designed for individuals who possess experience and knowledge in the startup sector.

The certification process should include comprehensive educational modules covering various aspects of startup investments, risks, regulatory frameworks, and ethical considerations. Upon successful completion, participants would be granted the status to invest in innovative Australian startups, promoting a more inclusive and informed investment environment.

This approach aims to balance the need for investor protection with fostering a diverse and dynamic ecosystem for startups, essential for Australia’s economic growth and technological advancement.

‘We believe this is consistent with the Albanese Government’s focus on creating opportunities for wealth creation, the kind that supports improved flow and distribution of capital, job growth and enables greater diversification and dynamism across the economy.’ said Sam Almaliki.