The Australian startup sector could be heading for a whole lot of hurt

iStock

The Australian startup sector is propped up by multiculturalism.

According to Startup Muster’s annual report, 35.7% of founders in the sector were not born in Australia.

Along with that, 16% of the nation’s startup companies have employed a foreigner on a work visa, with the majority (7.9%) of those on the temporary work (skilled) visa, formerly the 457 visa.

That could all be about to change.

In July, the Turnbull government replaced the 457 visa with a new program of temporary skilled visas with tighter eligibility categories and shorter working period terms, neither of which lead to permanent residency.

It’s likely the effect of the restrictions will start to infiltrate the sector as foreign workers struggle to meet the stricter rules.

To date the sector has seen a “slow and gradual increase in the amount of foreign talent” with many of the startup founders themselves having not been in Australia for more than 10 years, says Startup Muster CEO Monica Wulff, but work will need to be done in order to continue that.

While admitting the restrictions will likely have an impact on all sectors, Wulff says it will prove particularly problematic for the startup community.

“Anecdotally, my feel from the community is that the changes to the 457 visas haven’t been well received,” says Wulff.

“New startups need to be able to fill skills deficits with talent from overseas if they are to survive and prosper and the startup community has been hit hard by the these changes.”

She continued: “Those who have workers on 457 put in the time, effort and money to get 457 approval with the expectation that they’d be able to hire more and more staff as their business grew.

“Now that it’s been grandfathered not only aren’t they able to source talent, but they’ve made a large sunk cost.

“I think people would welcome changes or a return to how it was previous.”

Wulff said the consequences of changes “should become clear in next year’s survey results”.

Earlier this month, Atlassian co-founder Scott Farquhar said the government’s cutback on skilled worker visas sends “the wrong signal to the world about being closed for business” and has damaged Australia’s reputation as a great place to work.

Even as the country’s largest and most successful software exporter, Atlassian too has been struggling with attracting and retaining staff in Australia since the new working visa rules were implemented.

Going forward, as startups look to expand into larger international markets, Wulff says flexibility in attaining skilled talent, and talent that brings diverse experiences and insights, will be crucial in achieving growth and sustainability.

The Startup Muster report is the fourth annual survey of Australian startup companies. It is designed to identify the challenges and opportunities that early stage companies face, as well as the contribution they make to economy.

It is based on the responses of 567 verified startup founders, 226 future founders and 452 startup supporters. The online survey collection period took place between July 5 and August 14.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.