The latest report to detail Australia’s startup performance has been released, with the 2017 global startup ecosystem ranking from Startup Genome seeing Sydney slip one place down the list to 17.
The list, based on a global survey conducted last year that received over 10,000 responses, along with publicly available data around startup valuations and investment, saw Silicon Valley, New York, and London take the top three rankings, while Beijing and Shanghai, analysed for the first time, came in at number 4 and 8 respectively.
Though it has fallen, Sydney can take heart in the fact that this year’s report put it up against more competition; the 2016 edition assessed 55 ecosystems across 28 countries, with Japan, South Korea, and China the new entrants, compared to just 40 ecosystems across 25 countries in 2015.
The ecosystems are assessed according to a variety of factors including performance, looking at startup output, exits, valuations, early-stage success, growth-stage success, and overall ecosystem value; ‘startup experience’, or how well an ecosystem recycles experience into future startup performance; resource attraction; access to and quality of talent; market reach; and global connectedness.
The report found Sydney has an estimated 1,300-2,100 active tech startups, with an overall ecosystem value of US$6.6 billion; the global average is US$16 billion.
Highlighted as a positive is the growing network of coworking spaces, accelerators, and incubators emerging to help boost growth and show Sydney is “on the path of establishing a globally competitive framework”.
The report believes the proof of this is in the exits, singling out big money events including Atlassian’s IPO, AfterPay’s listing, and the acquisition of Menulog by Just Eat for US$687 million, while significant funding rounds, such as Canva’s last US$15 million round at a valuation of $345 million and Tyro’s$100 million raise, were also identified.
However, though Sydney sits in the top 10 Exit Factor ranking, its Startup Output and valuation rankings are significantly lower, with the report suggesting the city may be benefiting from a few outliers.
Also highlighted is the fact that Sydney is one of the most globally connected startup ecosystems, however its market reach is held down by its relative lack of foreign customers, this in turn contributing to a poor ranking in terms of financial performance.
Rankings for talent are also low, however the report finds Sydney has one of the highest percentages of women founders in the world with 22 percent, while the global average sits at 16 percent. The city also boasts a high number of immigrant founders, with 31 percent, compared to a global average of 19 percent.
Alex McCauley, CEO of StartupAUS, said the report reflects Australia’s growth over the last 18 months but more must be done to keep up with the competition.
“Sydney still ranks as one of the best startup ecosystems in the world, and there are only nine countries ahead of Australia on this list. Yet despite the clear progress we’ve made, the rankings remain largely static,” he said.
“There’s a very clear message here: this is a hugely competitive, global race. We need to run fast to even maintain our position. That’s why it’s so critical that we don’t lose focus.”
His thoughts were echoed by TechSydney CEO Dean McEvoy, who agreed that Sydney is doing well but needs more to push further ahead.
“It’s a critical time for our industry. This report proves Sydney has what it takes to be in the Top 10 ecosystems in the world. We just need to accelerate our growth and the size of the industry with a central hub for startups,” he said.
“If we provide space for the density our industry needs to grow and we all come together – in spirit and in one location – we will be an unstoppable force and create the next generation of jobs for Australia.”
The development of a central hub has long been an issue for the Sydney startup community, with hope renewed recently after the NSW government announced it would look to develop a 15,000 square metre startup hub in the CBD.
Looking beyond Sydney, analysed as part of a cluster of cities in Asia Pacific, the report found Melbourne is “itching to crack the top 20”, however it “isn’t quite there and faces stiff competition”; though it almost scored a top 20 ranking in terms of its startup output, its valuation and exit numbers lag too far behind.
Despite the competition, the report highlights Melbourne’s strong early stage funding rates, strong global connectedness, and high quality engineering.
Also analysed was New Zealand, where the report found the talent and funding factors are above average, though overall performance is “significantly below average”. However, solid funding and talent should lead to better performance over time.
A strong indicator of future potential is the fact that New Zealand startups have the highest percentage of foreign customers outside their continent at 25 percent, highlighting a strong ability to go global.
New Zealand also ranks fifth in terms of startups finding positive corporate interest and involvement, with a rate of 65 percent compared to the global average of 51 percent.
The full top 20 ranking:
- Silicon Valley
- New York City
- Tel Aviv
- Los Angeles