Seven insights into Australia’s startup sector from Startup Muster’s annual report

“Seventy-two percent of startups need funding to continue operating—we need to fix that,” says Startup Muster chief executive Monica Wulff.

In its third annual survey of Australian startups, released last week, Startup Muster reveals that while many new founders are taking a mature approach to building new ventures by backing themselves, running lean and thinking global early on, the majority of startups are still at risk of failure.

Adding to this concern is each Australian startup now employs four full-time people on average.

Speaking at Pause Fest in Melbourne on Thursday, Wulff said there appears to be a disconnect between the industries that startups are breaking into and the markets that investors are interested in backing in Australia.

“If there isn’t at least a relationship between what the investors are interested in and what the startups are interested in, there might be issues,” she says.

Alignment between startups and the supporters in the ecosystem is critical for the whole sector’s success, says Wulff.

“They go hand-in-hand, this ecosystem is not being built just for one,” she says.

“No startup is an island.”

Here are six other key findings from the Startup Muster report.

Fintech is the biggest industry for Australian startups, but not for supporters

Of the 43% of startup founders with a specific industry focus who participated in the survey, 15.9% work in fintech, followed by 14.8% in retail, and 14.4% in content and media.

But for supporters of the startup sector, which includes investors, their biggest focus markets are medical, health or bio technology (47.9%) followed by the Internet of Things (45.5%), and fintech (43.1%).

Government grants are unpopular

Wulff notes that many Australian startups are taking a mature and planned approach to raising capital.

On average, the startups surveyed generated $345,200 in annual revenue and raised $448,300 in investment in the 12 months prior to completing the survey.

Government grants were found to be largely unpopular, with ineligibility (38.7%) and time-consumption (27.8%) nominated as the biggest barriers for startups.

“It was interesting to see the uptake of grants at [federal and state] levels was quite low,” says Wulff.

Australian founders are not young guns and most are highly educated 

“The average age of startup founders is 36 to 38,” says Wulff.

“Fifty-five percent are first-time founders, 33% wanted to do their startup because they were dissatisfied with their previous job, [and] 77% wanted to have ownership of the value they were creating.”

A quarter of Australian founders hold a job outside their startup and over 70% have completed a Bachelor’s degree or higher level of education, according to the report.

Wulff says women now make up 24% of Australian founders, which means there’s still a long way to go but change is evident. In 2014, the figure was just 16%.

“We’re seeing each year it’s increasing,” she says.

Startups are outsourcing to local businesses 

The survey also found that nearly 90% of Australian startups outsource work and 70% of this is within the country. Wulff says this is helping to create a sustainable and healthy small business and startup sector.

“Startups like to outsource,” she says.

“A lot of products startups are creating are B2B. We need to rephrase our thinking around outsourcing means bad.”

Australian startups are thinking global 

A majority of the Australian startups surveyed plan to go global, with 43% saying they want to expand overseas to drive sales, and 25% wanting to do so to raise international investment.

“Ninety-two percent of our startups had export revenue,” Wulff says.

“Fear” is preventing would-be startup founders

The report found the three biggest barriers to potential startup founders starting up are funding, financial risk and technical skills.

“Risk, fear and responsibility” inhibit those who haven’t yet made a start, says Wulff.

Learn how to conquer your fears on the Audacity to Fail podcast

On the other side of the coin, founders who took the leap said “ownership, development and independence” are their favourite parts of the job.

Wulff says this matches with the top motivational factors that influence soon-to-be founders, which were “developing technology”, “new skills”, “opportunity for financial success” and “being my own boss”.

“Expectations are aligned,” she says.

About the survey 

Wulff says more than 2500 respondents and 100,000 answers were screened in Startup Muster’s survey, which is supported by the Commonwealth Department of Industry, Innovation and Science.

Respondents included founders, soon-to-be founders and other members of the startup ecosystem, including accelerators, incubators, investors, mentors, educators, service providers and government.

The findings are based on validated respondents.

“We are independent and incredibly transparent,” says Wulff.

This article was first published by StartupSmart.

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