Victoria is claiming the title of “tech unicorn” capital of Australia following the release of a new report into the state’s startup ecosystem.
While Sydney is home to NASDAC-listed Atlassian, worth $AU10 billion, Victorian small business and innovation minister Philip Dalidakis claimed “unicorn” (companies worth more than $1 billion) bragging rights for Melbourne, and will launch the “Mapping Victoria’s Ecosystem” report on Wednesday.
The REA Group ($8.7bn), SEEK ($5.9bn), and Carsales.com.au ($2.8bn), are all based in the city.
“We already knew Victoria was the startup and innovation capital of Australia and this report confirms that,” he said.
The report, commissioned by LaunchVic in collaboration with Startup Victoria and management consultancy group dandolopartners, concluded that Victoria led the way in turning startups into high value, high growth businesses. It’s the first of what’s intended to be an annual startup map.
It defined a startup as “any business with high impact potential that uses disruptive innovation and addresses scalable markets”.
They concluded that of the 1600-plus firms responding to the survey on which the report is based, 1137 met their definition.
LaunchVic CEO Dr Kate Cornick said it was the largest sample size they’d ever had for Victorian startups and will help her organisation decide how to support it.
Startup Victoria CEO Georgia Beattie said they wanted to make the local startup scene easy to navigate.
“Startups will know exactly where to find capital, meetups and accelerators and on the other hand, corporates will be able to easily find start-ups for collaboration opportunities,” she said.
“Whether you’re an aspirational entrepreneur looking to make the jump or a founder looking to raise your series A – this is designed to make that next step a little easier.”
Among the report’s key findings it found the 97% of the state’s startups are based in Melbourne – 71% in the city centre, with Richmond and South Melbourne other key hotspots.
Health is the leading sector in terms of startup numbers and jobs, followed by enterprise and corporate services, then media and entertainment.
“Significantly, startups and scaleups in the health sector create a disproportionately large number of jobs for the number of companies operating in the sector,” LaunchVic says.
The report found that two thirds of startups think globally from day one. Key markets include the US and UK, plus China and New Zealand.
LaunchVic concluded that “one of the most promising elements of survey responses is that startups in Victoria are successfully executing monetisation strategies very early in their journey” with 60% being revenue positive in their first year, and almost 80% by year two.
One third of all startups in Victoria report that they are bootstrapped, even firms in later stages of development and those seeking external investment have an average time frame of five months to score the cash, with $250,000 as the median amount raised from angel investors.
There are some fascinating insights into who founds a startup.
Their average age is 36, and women are more likely than men to establish a startup past the age of 45 – perhaps a reflection of starting a new career after a focus on parenting. But an overwhelming three quarters of founders are male and while the gender gap has reduced in companies established in the last seven years, it’s still a chasm even in sectors such as social enterprise and design.
That lack of gender diversity is something that bothers Dr Cornick.
“We want to see increased engagement in the startup ecosystem community from underrepresented groups and this will continue to be a significant focus for LaunchVic,” she said.
More than half of all founders (54%) are educated to graduate diploma level or higher, and 50% previously started another business.
Two thirds of founders are Australian-born, but more than half (56%) have one or more parents born overseas.
And here’s a snapshot of who’s around. The report categorised the stages of development around revenue and staff size, depending on whatever was the bigger figure.
Seed is revenue up to $1 million with 1-5 staff, early is $1 million to $10 million revenue and 6-30 staff, growth is $10 million to $100 million, 31-100 staff and later stage is revenue of $100 million to $1 billion and 101 or more staff.
LaunchVic concludes it’s a pretty healthy ecosystem overall because a quarter of founders turn to mentors and advisors who have experience working in startups worth more than $100 million.
“Given that such a small proportion of founders (8%) have previously worked at a startup that reached a valuation over $100 million, this figure shows that those who have experienced success are giving a significant amount back to the ecosystem to help others grow,” Dr Cornick concludes.
On top of that – and despite the recent setback of the collapse of the 500 Startups project in Melbourne which is in tatters after LaunchVic ended its $2 million deal to launch locally – there are more than 20 startup accelerators in Victoria, with six new programs planned over the coming year.
Victoria also has 190 meetup groups specifically focused on startups and entrepreneurship. Startup Victoria tops the list with over 10,000 members.
But LaunchVic says it needs to focus on the where-to-next side of the businesses because more than half of the businesses firms (54%) have not considered an exit strategy or want to remain private indefinitely. Just 10% are aiming for an IPO and 36% are punting on acquisition.