Australia’s $1 billion tech funding boom highlights the role of startups in economic growth

In the space of eight days in mid-September, more than $1.1 billion was announced in investments into Australian startups.

Experts said this was something of a “coming of age” of the local tech ecosystem; a level-up in terms of maturity. But it also shows the growing economic clout of this sector.

Speaking to SmartCompany, Tech Council chief executive Kate Pounder says Australia is in the midst of a “tech boom” that is adding thousands of jobs to the economy.

There are now about 100 Aussie tech companies valued at $100 million or more, she says.

More than two thirds of those were founded within the past ten years, she adds, “highlighting how rapidly the industry is growing and scaling and how many exciting new companies we’re producing”.

In particular, Pounder points to new businesses emerging in the fintech, B2B and Software-as-a-Service verticals. Australia’s track record and continuing progress here is attracting attention from all over the world, she notes.

At the same time, she suggests the COVID-19 pandemic has likely had an effect, as tech adoption and interest in tech companies have picked up on a global scale.

According to data from McKinsey, which has been tracking market valuations in various sectors since February 2020, the ‘high-tech’ and ‘advanced electronics’ industries have been the second- and third-fastest growing in terms of total valuation, respectively.

There is increasing interest in the sectors Aussie companies excel in.

Finally, Pounder adds that there is a lot of capital around, in Australia and the world.

“Private and institutional investors are looking for new investment opportunities in alternative assets because interest rates are so low and the property and share markets are so high.”

All of this means more money is available for investment in startups, and Australia has the startups to attract it.

“This is driving a huge jobs and economic opportunity for Australia — 65,000 tech jobs were created in the pandemic alone, second only behind retail as a new source of jobs in the economy,” Pounder says.

Today, there are some 860,000 people working in tech-related jobs in Australia, she adds. There are more people in software engineering jobs than there are plumbers, hairdressers or solicitors.

Sydney and Melbourne on the global scale

According to the Startup Genome Startup Ecosystem Report 2021, the effects are starting to show in Sydney and Melbourne.

Last year, the two biggest Aussie ecosystems took a hit, with Sydney sliding from the 23rd spot in 2019 (and 17th in 2018) to 27th.

Melbourne has, to date, failed to crack the top 30, therefore remaining a ‘challenger’ ecosystem.

This year, Sydney was bumped back up to 24th place, while Melbourne was in 36th, tied with Geneva, Delhi and Dublin.

But a closer look at the ecosystem analysis paints a much more impressive picture.

The estimated value of Melbourne’s startup ecosystem has grown from about $7 billion to $10.5 billion over the past 12 months.

Sydney’s estimated ecosystem value is also up considerably, from about $15.1 billion last year to just shy of $24 billion in 2021.

In particular, the report highlighted ‘anchors’ of Sydney’s tech ecosystem — Atlassian, Canva and Zip Co, as well as an educated workforce.

However, it said what sets the city apart is its “tight-knit tech community centred around a handful of innovation centres and accelerators”.

The Sydney Startup Hub alone generates more than $280 million in investment and more than 1,000 jobs in its first two years of operation, the report said.

In the Melbourne ecosystem, the report pointed to growing levels of VC investment, as well as various local government funding initiatives designed to help early-stage startups attract more capital.

The report also noted the strong fintech presence in the ecosystem, as well as equally well-educated workforce.

In a statement, Kate Cornick, chief executive of Victorian startup agency LaunchVic, said her focus has been on addressing the “early-stage funding gap” in the state.

“We’ve already seen promising results in the space of a year, with our new angel investor networks pumping millions into Victorian startups,” she said.

“I expect early-stage investment funding will be even more impressive next year.”