Australian startups building for the future
Australia is considered one of the quickest countries in the world to start a business – and the nation’s dynamic tech sectors are proving fertile ground.
Australia’s physical infrastructure, internal market dynamics and commercial and legal infrastructure all contribute to making it one of the world’s fastest-growing startup ecosystems, according to global market and consumer data provider Statista.
Investment figures confirm this confidence in Australia’s startup landscape, with a record A$866 million funnelled into more than 70 deals in the first quarter of 2022 – the richest period in Australian startup history.
While late-stage investing has since moderated, seed and early-stage funding remain more robust, according to the expert panel at Startup Daily’s recent 2023 Tech Playbook From Idea to Unicorn event, which analysed startup trends tech companies need to look out for in the year ahead.
“We’ve done more seed deals this year than we did last year,” says Raaj Rayat, CFA, Investment Manager at AirTree Ventures, one of the region’s largest VC funds. “So there’s a tonne of momentum and a tonne of funding still going into really strong early-stage startups.”
This follows a stellar year in 2021 when Australian startups banked more than A$10 billion worth of investment – more than three times the amount in 2020 – says the inaugural State of Australian Startup Funding report by Folklore Ventures and Cut Through Venture.
“There are world-class Australian startups being launched … and more international investors hunting for Australian deals,” say the report authors. “There has never been a more exciting time to be an Australian startup founder, investor or ecosystem participant.”
The report, which analysed data from more than 800 Australian founders and startup investors, found that many international investors deployed capital in Australia for the first-time last year – in fact, overseas investors participated in one-quarter of all reported startup deals.
Global investor activity is expected to continue growing, but interest in 2022 has shifted to Australia’s booming climate and cleantech sectors. Australian renewable energy company Green Gravity is one of many local startups reaping the benefits of this trend, announcing recently that it was partnering with international engineering heavyweight GHD to accelerate the commercialisation of its gravitational energy storage technology.
The focus on tech industries is reflected in Startup Genome’s 2022 Global Startup Ecosystem Report, showing that tech companies worldwide have grown 2.3 times more than non-tech businesses since the pandemic.
The report by the US-based research organisation ranks Sydney in the world’s top 20 strongest startup ecosystems. The harbour city is thriving in the fintech and cleantech sectors in particular, with 60 per cent of Australia’s 800 fintech startups located there.
Sydney also boasts the highest-density startup space in the Southern Hemisphere – the Sydney Startup Hub. Collaboration and growth opportunities for local startups have been further bolstered by the recent opening of a new innovation precinct – the Western Sydney Startup Hub – operated by Spacecubed, a company that runs a similar hub for startups and innovators in the Western Australian capital of Perth.
Spacecubed Founder and Managing Director Brodie McCulloch says the new hub will cement Western Sydney as a top destination for innovation and technology on the global stage – “a competitive place for business investment for forward-thinking innovators, entrepreneurs and change-makers”.
Startup Genome’s report also highlights Australia’s southern state of Victoria, where there are more than 2,600 startups “and counting”, with development across a variety of sub-sectors like life sciences, SaaS (software as a service), artificial intelligence, advanced manufacturing, blockchain, big data and fintech.
The state’s rising startup sector, notes the report, is due largely to significant government investments, Victoria’s educational institutions and programs such as those by LaunchVic, an independent agency established in 2016 to support startups and investors. Early-stage funding has also increased massively over the past few years, with the development of new unicorns like fintech company Airwallex and employee engagement platform Culture Amp.
The Tech Council of Australia (TCA) says Australia has clear specialisations. In a new report titled Turning Australia into a Regional Tech Hub, the TCA highlights both established tech sector industries and “potential star segments that are on track to produce or attract Australia’s next globally successful companies” – including mining tech, edtech, diversified fintech and augmented reality / virtual reality.
Segments in which Australia excels in creating startups often align with traditionally strong industries such as mining, financial services, agriculture and education.
And the “ecosystem effect" means the presence of a single globally successful local company can anchor and grow an entire sector – including Atlassian for business software, CSL for biotech, Cochlear for medical devices and Afterpay for paytech. The presence of large global tech companies and investors also strengthens the local tech ecosystem, says TCA Chief Executive Kate Pounder.
Australia’s quantum sector is one of the leading lights. The TCA says Australia is home to 3.8 per cent of global quantum startups, and the sector attracts a 3.6 per cent share of global quantum venture capital funding – much higher than its 1.6 per cent share of GDP.
Medtech is another rising star. The global telehealth industry alone is estimated to grow from A$143 billion in 2021 to A$1.5 trillion in 2028. One of the many Australian startups riding the medtech boom is Connect2MyDoctor by Neev Tech Labs, an all-in-one virtual health platform that launched in 2016 and is now used by patients in over 15 countries to access health professionals, book appointments and manage prescriptions.
Agriculture, too, is attracting a growing number of innovative Australian companies in areas ranging from smart farming and robotics to drones and efficient use of water.
Western Australia’s AgriStart, one of the organisers of this week’s West Tech Fest startup event in Perth, is a key player in this space, supporting agrifood businesses and connecting innovators, advisers and investors. AgriStart is also collaborating with AgriFutures evokeAG. Startup Network to help agrifood startups adopt new farming technologies and innovations.
To find out more about Australia’s supportive startup environment, visit our Why Australia pages.