Do Australians want to be protected from investing in startups?
TL;DR: a majority of Australians would support dropping the financial limitations on startup investors, in favour of an easily accessible education course.
The Albanese Government is reportedly considering plans to lift the financial threshold for wholesale investors in a parliamentary inquiry into wholesale investor test criteria, which is open for submissions until 15 May.
At the moment, you need to have at least $2.5M in assets or an income of at least $250,000 over the past two years to be considered a wholesale or sophisticated investor, which is a requirement if you want to join an angel investor syndicate or invest in tech startups via a venture fund.
If that seems like a lot of money — maybe even far out of reach for most of us—you should know that the government has proposed increasing the asset threshold to $4.5M.
It seems off, right? A Labor government setting out to make it harder for everyone to build their financial future by investing in the next Canva or Atlassian?
Under both the current rules and the proposed changes, an individual who has, say, inherited a few million dollars is free to invest in early stage businesses, whether they’re financially literate or not. While someone from a middle or working class background who is willing to put in the time and effort into working in the startup industry, or learning how to invest responsibly in the startup industry, is excluded.
An influencer earning a tonne shilling beauty products on TikTok could qualify to invest in startups. But someone with a decade-long career at companies like SafetyCulture, Propeller, Bugcrowd or CultureAmp couldn’t? Who really knows more about tech startups here?
Australia says sorry, but you’re not earning a squillion, and you weren’t born a major shareholder of the Bank of Mum and Dad, so… no.
There is a better, and fairer, way: consider replacing the current wholesale investor test from one based on assets to one based on financial literacy. A system where interested investors, regardless of their background, can do an easily accessible course that will provide them with the knowledge and skills to invest in early stage businesses.
About our poll results
We commisioned a national poll with research consultancy DemosAU, of 1087 respondents nationwide between April 15 and May 1, and it showed 53% of respondents supported replacing the current financial tests for startup investors with an accessible education program such as a TAFE course to make sure they understand the essentials of startup investing and the risks involved.
By contrast, only 35% of respondents favoured keeping the current laws to preserve the distinction between wholesale and retail investors.
In addition, the poll also showed majority support (56%) for lowering the current financial threshold for startup investors, while 52% believed there should be no restrictions in place at all.
Respondents were given a neutral explanation of the current legal situation surrounding the wholesale investor test for startup investors, and asked whether they agreed or disagreed with four statements relating to the present situation and alternatives.
DemosAU Head of Research George Hasanakos said the results showed community sentiment was generally in favour of widening access to startup investing.
“There is a general view that people should be allowed to invest their money how they like, though there is also support for safeguards like an education course,” he said.
Thanks George. I think any reasonable person would agree that it’s crazy that we block ordinary Australians from opportunities to generate wealth by investing in early stage businesses with genuine growth potential.
Anthony Albanese and Labor often talk about helping working people to build a better future for themselves. Restricting access to startups goes against that ambition.
Labor has a track record to be proud of when it comes to opening up access to wealth generation opportunities to working Australians, especially the creation of our world-leading superannuation scheme during the Hawke-Keating era.
All we’re asking for is that they start to view this issue through that same prism.
Investing in startups definitely isn’t for everyone — there are risks to be considered and managed, but is it really fair to say that the only people “sophisticated” enough to comprehend those risks are our wealthiest?
We’ll be submitting the full report to the inquiry early next week and then we’ll publish it in full shortly after.
