The value of the Melbourne startup ecosystem has the potential to grow from $1.6 billion to more than $4 billion over the next few years if key gaps in the space are addressed, according to Startup Genome.
Startup Genome’s Melbourne Startup Ecosystem Report, commissioned by LaunchVic, found the city has “raced through” the ‘Activation’ phase of the ecosystem lifecycle and is now sitting in the ‘Late Activation’ stage, with solid growth in support organisations such as coworking spaces and accelerators, and investment from LaunchVic.
With 1,100 tech startups in the city, the report found Melbourne has about twice the average for other ecosystems at a similar stage of development, with strong fundraises and a solid number of exits to boot: the city has produced five tech exits worth over $100 million over the last five years, with the latest being the acquisition of Aconex by Oracle for US$1.2 billion in December, and another to come with the expected IPO of 99Designs this year.
Dr Kate Cornick, CEO of LaunchVic, said, “The report shows that startups are an incredibly important part of our future economic mix and represent a major opportunity for Victoria and Australia to make greater global gains in innovation.
“By capitalising on Melbourne’s strengths and addressing the opportunities highlighted by the Startup Genome research, we can build more successful startups and drive greater economic value for the entire region.”
According to the report, among Melbourne’s strengths are its global connectedness and its global attraction, with one in four entrepreneurs in the city moving from overseas specifically to start a startup. The city also ranks in the top five globally for growth in early-stage funding.
As it looks to move to the ‘Globalisation’ phase of ecosystem growth, the report highlighted a number of actions for the ecosystem to focus on.
To increase early stage funding, the report underscored the need to create more structured angel groups and a “fund of funds” program, while to make Melbourne a globalised ecosystem the report suggested moving programs from activation to globalisation focus, and expanding ways for those in Melbourne to build relationships in top global ecosystems.
Connecting to global ecosystems could assist in helping founders with their ambition, with the report finding Melbourne startups report lower levels of ambition and global know-how than other ecosystems.
With Melbourne showing particular strength in the adtech, biotech and lifesciences, and healthtech sectors, meanwhile, the report urged the ecosystem to leverage these sub-sector strengths, by for example experimenting with different ways of commercialising discoveries from universities and research institutions, as well as creating more ways for industry and researchers to collaborate.
The report also found that Melbourne startups have lower levels of ambition and global know-how than over ecosystems,
Dane Stangler, chief policy officer at Startup Genome, said, “Startups, especially in technology sectors, are the key to economic prosperity in Victoria and across Australia. Melbourne has made great progress in creating a vibrant environment for these startups.
“Continued support through LaunchVic and other public and private channels will help the region realize the massive economic potential to be generated by successful startups.”
The Melbourne ecosystem report follows the release of the global ecosystem report last month, which put Australia in the top five countries for artificial intelligence-related patents and blockchain-related patents in 2017.
Sydney and Melbourne were both highlighted as ecosystems to watch for adtech, with Melbourne highlighted as one to watch in the health and lifesciences space, and Sydney an ecosystem to watch in fintech.
Despite the number of patents held in AI and blockchain, however, Australia was not identified as an ecosystem to watch in these spaces. Australia also did not make the list of the five ecosystems highlighted to watch for agtech and new food development, despite strong investment into the agtech sector over the last two years.