Dr Victor Paul, TransFinanceSolutions
If you are exploring opportunities in the Asia-Pacific financial region for capital safekeeping, lucrative business, and tax optimization, have a look at our services in 2021. The proposed review will also be useful to an investor who has already made his choice in favour of Australia. It is a wise decision: Australia is one of the first places in the world in terms of investment attractiveness (see Global Innovation Index), but take into account that investing is a multi-criteria choice. That is why we show you all the key pros and cons to make the right choice.
Business Investment vs Business Immigration
Why such opposition? Because business is the first word not only by order but also by significance. The desire (and sometimes a vital necessity) to invest in Australia may be accompanied by personal plans, a non-exhaustive list of which may include:
Finding more favourable jurisdiction to live safely in a good climate.
Educate your children in Australia with the prospect of a future life here.
Move elderly parents here and provide them with the best medical care in the world.
All these (as well as not listed above) plans are directly or indirectly alluded to immigration, but there is no point in rushing to contact immigration consultants. Doesn’t matter whether you choose Business Innovation or Investor streams visas, they are provisional (temporary) and a precondition for the subsequent obtaining the permanent resident status and citizenship is a successful business in Australia. This also applies to those who prefer passive investment – a passive position cannot be eternal, it is not beneficial (see some cons below), and the day will come when you have to think about your business here.
Much better to comprehend and launch investment plans today, then personal plans will be realized almost automatically tomorrow, without filling out a heap of papers, and painfully waiting for the decision of your fate by bureaucrats.
Direct Investment vs Passive Investment
It would seem that as a passive investor’ position is attracting: you track a market index, and then hire a professional fund manager to actively manage your investment on your behalf. For some investors who are ready for average returns, engaging with an active fund manager to oversee their investment might be a good option. But there are a couple of cons:
By using professional fund managers you are placing your trust in them and have to accept there is a possibility they could misjudge the market and choose underperforming stocks.
Having a middle man to oversee your investment comes at a cost, including a management fee and an administration fee.
As an active investor, you have to choose your market niche, and employ a higher level of confidence when making investment decisions. When you succeed, you can receive higher than average returns. But it would typically involve higher risk, which should be taken into consideration. Additionally, paying an active role you can choose any sector, investing in the most profitable and sustainable business projects.
Early Stage Businesses vs Mature Ones
Well established businesses have typically demonstrated viability, positive cash flow, and a well-known product with a strong market presence. A mature business has enough liquidity to position itself for an acquisition or an initial public offering. There are two essential shortcomings in this kind of investment:
Costs are much higher in comparison with start-ups because goodwill and a customer base are often overpriced.
In our time of changes, the future of some well-positioned businesses is rather uncertain despite current success.
Early-stage (including seed) businesses prepare for a market launch or have low market penetration (Early beta customers for system testing and feedback). Typically its cash flaw is constrained or even zero. In the best case, such companies generate some revenue but pursuing additional capital to invest in customer acquisition and business development. Investments in early-stage businesses are less illiquid and riskier than investments in mature companies. Nevertheless, if you have a high tolerance for risk and low liquidity needs you can enjoy a low-cost entry and high prospective ROI.
Investment to Innovations vs Investment to Traditional Businesses
Innovation has become such a hype topic that its true meaning is often lost in the buzz. While some use it as a buzzword, we mean new products and services, more efficient processes those solving current business problems and cut down on costs. Primarily, it means better ways to collect, process, and apply information. Innovative businesses are risky but can be sold later at a much higher price than a traditional one. While the average multiple for most traditional businesses is around 10x, for some innovative businesses this metric can be 200x.
You have to understand that the capital structure also has essential specifics in innovative businesses. It is predominantly intellectual capital consists of non-physical or intangible assets, including patents, trademarks, copyrights, and know-how/commercial secrets. Due to intangible values, innovative businesses have different focuses compared to traditional types of enterprises:
Using outsourcing or different forms of cooperation instead of using own staff and physical assets to implement some business operations.
Having limited physical facilities and workers because most business operations are virtual.
Employing business models that use a temporary lack of regulation as a competitive advantage.
Your start-up can leverage the intangible capital applications to scale-up quickly, generating more revenues without a proportional increase in costs.
In Tech We Trust
A research and development circle (R&D) looks frighteningly long for an investor. That’s why Australian businesses are increasingly inclined towards non-R&D innovations which are predominantly in the sphere of information and communication technologies (ICT). According to Austrade, the size of the Australian market, its innovative outlook, and a varied and sophisticated customer base combine to make Australia an ideal location to develop and test new ICT products and services. Besides, software and processes that are built and adapted in Australia are often rolled back into the global development environment and subsequently used by customers in the Asia-Pacific financial region and worldwide.
The size of Australia’s digital economy in 2020 is about $ 139 billion due to well-developed ICT business infrastructure and soft regulations. The Australian Securities and Investments Commission (ASIC) grants finance services licenses to start-ups intended to create online financial services platforms that were once the domain of banks. TransFinanceSolutions works as a registered ASIC agent and can assist you in all ICT business-related matters including:
Understanding your investment requirements and matching them with Australian realities and legislation.
Identifying your business development strategy and matching it with personal plans.
Establishing your equity structure and shaping your company with appropriate licensing (when it is applicable).
Launching and supporting your ICT project.
If you are ready to make your vital choice we offer:
A unique project that is attractive for investment with a detailed financial justification: projected IRR, potential returns, sales projections, etc. (or your project will be properly adjusted for implementation in Australia).
Full legal protection (all terms will be detailed in the legal documents: Term Sheet, Share Subscription Agreement, Shareholders Agreement, Deed of Accession).
The exit terms are expected to increase investor confidence, stock price protection, and anti-dilution provisions.
Payment for a set of works will be negotiated in stages. The amounts will be clarified in the contract and will be paid upon completion of partial works according to invoices issued for payment, and depends on their actual labour intensity and complexity.
Last year Australia showed the best world result for the number of significant investors moving here – 12,000 (for comparison, this figure was 10,000 in the US, 4,000 in Canada, and 3,000 in Switzerland). Take your vital choice!
Do you have any questions? Contact us by e-mail firstname.lastname@example.org for a confidential consultation.