Australian deep tech inventors have given the world wifi, Google Maps, cochlear implants and the goon bag, but a new report into the state of play for the sector suggests that while there’s no shortage of ideas, that potential is being stifled by limited support from venture capital, industry, and government.
Pioneering deep tech incubator Cicada Innovations has taken a deep dive into what’s going on as it gears up for the annual Tech23 showcase later this year.
The result is the Cicada x Tech23 Insights Report 2024: Deep Tech: Australia’s Critical Technologies which reveals that 72% of Tech23 applicants were founded within the last five years and a majority align with the federal government’s “critical technologies” list, which spans artificial intelligence, hardware, advanced manufacturing, clean energy, and biotechnology.
It collated data gathered from 141 deep tech applicants to Cicada x Tech23 2024, as well as insights from Cicada’s 25 years tenure as a deep tech incubator.
But when it comes to putting investment and commitment behind the flag waving, a different story emerges. Just 17% of deep tech startup funding came from VC, when the figure for offshore countries is 20-30%.
When it came to industry collaboration, Australian corporates were also almost equal to international colleagues – 58 collaborations compared to 57 – but it’s the little guys and gals who are doing the heavy lifting with smaller SMEs, delivering 92 collaborations.
Cicada Innovations CEO Sally-Ann Williams said the figures indicate limited engagement from local industry, and that smaller firms with more limited resources may be more engaged in deep tech commercialisation than large corporations, who could be missing large opportunities.
“Australia has a strong foundation of deep tech talent, but startups are still struggling to scale. So we have to ask ourselves, why are international companies and governments seeing the value in Australian deep tech before our own local corporates and government do?” she said.
“Successive government failure to bridge the gap between early grant funding and procurement also raises another critical question: Has Australia inadvertently been subsidising global deep tech innovation?”
The Insights Report analysis found that many deep tech startups reported securing international government procurement contracts before gaining local traction, which means Australian deep tech needs to look overseas to succeed ahead of domestic procurement pathways, even though 38% of early-stage funding coming from local government grants.
Australian business defined
Last week at Southstart, science and industry minister Ed Husic announced the federal government was introducing a definition of an “Australian business” to improve their chances of winning government tenders
They’ll need to:
- Have 50% or more Australian ownership, or be listed on an Australian equities market
- Have Australian tax residency
- The principal place of business in Australia.
In addition, the Government is also issuing “Broader economic benefits in ICT sector procurement” planning and engagement guidance to assist ICT businesses navigating Commonwealth procurement, with ICT representing around 15% of that expenditure.
It’s an improvement on the report’s findings, but Williams says there’s plenty more to do at the VC, corporate, and government levels.
“The clear gaps in funding, industry engagement, and procurement revealed by this report highlight areas where more coordinated support could unlock significant economic potential for Australia,” she said.
“For instance, while government plays a key role in funding, its impact must extend beyond R&D support to drive market adoption through procurement and pilot opportunities.
“The ingenuity of Australian deep tech founders is undeniable. What we need now is to match that ingenuity with the right support—investment that reflects deep tech’s longer timelines, industry partnerships that drive real commercial outcomes, and procurement strategies that back homegrown solutions first.”
Other key findings in the report include:
Scaling challenges remain
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78% of startups have raised some form of funding, but accessing capital for later-stage growth remains a major hurdle.
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71% were founded independently, rather than spun out from universities or research institutions (77% in 2023 report)
Funding gaps persist, especially later-stage
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Government grants (38 %), friends and family (34%), accelerator programs (34%), and angel investment (30%) are the most common funding sources.
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Startups with early users or paying customers are more likely to raise larger amounts—of the 46 startups that have reached this stage, 22 have raised over $1m, while 9 have raised more than $5m.
Corporate, SME and government support
- A lack of structured corporate engagement, makes it difficult for partnerships to progress beyond early discussions.
- International players actively seek out Australian deep tech innovations.
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State (52) and federal (50) government collaborations are also supporting deep tech, particularly in health tech, defence, and sustainability.
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101 collaborations were reported with Australian universities, 40 with research institutions, and 41 with CSIRO, reinforcing the role of academia in deep tech development.
Meanwhile, any deep tech startups keen to be part of Tech23 in September can apply here.
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