Startup rating system Oddup has released its first reports on the state of Sydney and Melbourne’s startup ecosystems, with its key finding that Sydney has continued to dominate Australia’s startup and tech scene.
However, the report revealed that while Sydney is home to the majority of investors, Melbourne has secured the best and brightest tech talent in Australia.
As the two cities continue to compete for the title of Asia Pacific’s tech leader and make a name for themselves globally, the Oddup report has highlighted the strengths and weaknesses of each. While Sydney is still home to almost half of all Australian startups and the majority of investors, the report found it’s not all bad for Melbourne.
In fact, Oddup found that Melbourne has what Sydney doesn’t, having secured the best and brightest tech talent in Australia. Melbourne has also experienced an economic growth higher than that of New Zealand and even Singapore, with its economic growth an estimated US$20 billion higher than Singapore. However, this growth has not been flowed into its startup ecosystem.
With Sydney being home to the ASX, the number of IPO deals across the NSW tech scene has increased by 34 percent year-on-year since 2014. While this may indicate there are more startups coming out of Sydney, the average size of those deals has decreased by 32 percent since 2014.
It is interesting to note that while Sydney has the greater number of startups and injects the largest amount of funding into the sector, Melbourne is actually pumping out more IT graduates per year.
According to the report, 20,000 new technical professionals have relocated themselves to Melbourne over the past five years. Victoria has a total of nine universities, with NSW currently sitting at seven. Melbourne produces 2,500 IT graduates per year from its universities and employs 91,300 people into technology companies, making up 31 percent of Australia’s total tech workforce.
However, while Melbourne continues to produce the best tech talent Australia has to offer, Sydney continues to attract tech talent from other parts of the world. Top talent from Southeast Asia is a large contributor to Sydney’s international talent pool, with this largely due to location and investment opportunities.
Funding remains one of the largest challenges facing Australia’s startup ecosystem. Though there has never been more VC funding available in Australia, a recent joint research paper conducted between Blue Sky Venture Capital and Harvard Business School has revealed that Australia’s availability to capital is still seven times less than that of the US.
Australian investors are mainly located in Sydney, which is one of the city’s strong suits. The amount of VC funding available to startups in Sydney is increasing, with AirTree Ventures this week announcing Australia’s largest VC fund at $250 million, following on from Blackbird Venture’s $200 million fund, announced last year. Square Peg Capital is also raising a newfund of $300 million.
However it should be noted that while there is more capital available in Australia than ever before, the report highlights that local VCs like Blackbird Ventures, Right Click Capital, BlueChilli, Reinventure and AirTree Ventures are increasingly becoming more active in the international startup space, seeking out global deals. The report warns that this could see startups in Sydney struggling to raise significant amounts of capital.
According to Oddup report, Melbourne is struggling to raise a significant amount of capital for its startups, revealing that the investor community is close to non-existent. The bulk of Melbourne’s investment goes towards property and stocks and has yet to see any large injection into tech. To turn this struggle around, the report suggests that a program mirroring negative gearing could see an explosion of investment.
Sydney is still viewed as the best location for Asian entrepreneurs and startups to relocate to, given that it overlaps with their working day. Sydney is viewed as the location for emerging fintech startups and is on the path to dominate the APAC region in this sector.
However what’s more interesting is Melbourne’s reputation as a freight hub, which brings countless possibilities for startups focusing on ecommerce, transport and logistics. While Sydney continues to serve the international market, logistically speaking Melbourne has more of an opportunity to serve the domestic market.
Through the Government’s innovation agenda startups and technology have been brought into the limelight, with support from government opening up opportunities for both local and international talent to further develop their ventures in Australia.
The support network of incubators and accelerators first began to grow in 2010, with Sydney now home to 22 spaces and programs including ATP Innovations, Startmate, Ignition Labs, BlueChilli, Incubate, muru-D, and Sydney Founder Institute.
While more coworking spaces are coming out of Sydney, Melbourne’s Startup Victoria organisation has the largest startup-focused entrepreneurial membership base around Australia at more than 11,000 members.
The Victorian Government also has a strong focus on the digital industry as it looks to transform the state into a world leader in technology. It is estimated that the digital industry injects $34 billion into Victoria’s economy every year. The state has this year launched its inaugural Digital Innovation Festival in the hopes of encouraging even more interest into this space.
Seeking to rival Victoria’s push to become Australia’s leader in tech, NSW has also produced a community that looks to change the state’s global startup ecosystem ranking, which fell from 12 to 16 last year. Community-founded group TechSydney has raised over $500,000 to push Sydney into the world’s top ten startup ecosystems.