A new report on Queensland’s startup sector estimates the economic impact of disruptive technology on Australia’s Sunshine State in 2025 could be over $96 billion, or roughly 24% of the state's future economy. To prevent international tech companies from capturing this value 1000s of new startups need to be formed and $2 billion to $5 billion in funding needs to flow into the sector over the next ten years – substantial increases from the current formation rates in the tens of startups and funding rates in the tens of millions.
Australia's 'Sunshine State' is beginning to establish itself as an international tech hub with the likes of Accel investing $35M in local invoicing app Invoice2go, Expedia buying travel booking site Wotif for $703M, Twitter acquiring music streaming service We Are Hunted and indie gaming studio Halfbrick topping 300M+ installs with blockbuster games such as Fruit Ninja.
To dig a little deeper into the regions vibrant tech ecosystem, Australian big data and wearable analytics startup Boundlss recently released a report on South East Queensland’s (SEQ) startup ecosystem - in partnership with the Queensland Department of Science, Information Technology, Innovation and the Arts; Arts Queensland; Brisbane Marketing; the Sunshine Coast Council and City of Gold Coast.
The report is the first time Queensland’s tech startup sector has been comprehensively quantified, and is one of the most comprehensive reports on a startup ecosystem throughout the world. The report maps all the founders, startups, accelerators, invetsors, events and funding rounds within the ecosystem since January 2009; benchmarks it against other tech ecosystems; and identifies critical issues and opportunities. It also highlights key startups such as the music streaming service Guvera that has raised $45M to date, micro loan platform Nimble with over $20M in revenue and explores the mature gaming and emerging IoT clusters.
The report focuses on companies under 5.5 years in age (startups), developing digital technology, such as software and connected hardware products (eg. drones, sensors, and wearables), but also includes funding data on digital technology companies of all ages. Data was gathered on over 200,000 people and organisations through workshops and interviews with approximately 130 key community members, and from sources including Angel List, Crunchbase, Linkedin, Twitter, Meetup, Pozible and Kickstarter.
Future Impact of Technology on the State Economy
- Inline with research by McKinsey and Deloitte, we estimate the potential economic impact of disruptive digital technology on Queensland's economy in 2025 is $96B per annum, or roughly 24% of the state's projected $396B Gross State Product, with a direct contribution from digital technology companies of over $6B per year.
- To ensure the majority of this value is created and retained by local tech companies, we estimate Queensland will need 3,000 startups, hundreds of established tech companies and a few unicorns.
- To achieve this we estimate that $2B to $5B in total funding needs to flow into the sector over the next ten years to support the growth of these firms. With the rate of investment increasing from their current average of $23M per year to between $500M to $1B per year by 2025.
- Startup formation rates would also need to increase from 12 new startups per year per million people, to 170 in 2025 - comparable to current US rates.
- There are approximately 226+ startups, 500+ founders and 1,900+ employees involved in the SEQ ecosystem.
- The number of startups forming each year is increasing, with 55 formed in 2013.
- In 2013 Queensland had a startup formation rate of 12 startups per million people per year, compared with US technology hubs such as Boulder and San Francisco which had startup formation rates per million people ranging between 97 to 256 in 2010 (the last recorded data on the US).
- Independent Gaming Studios are the largest startup type, with 26 of 226 startups, 12% of all startups. This part of the ecosystem is relatively mature with a games seed accelerator and over 38 indie studios, 26 of which are startups. With past, established and new studios that have achieved global success, including Krome Studios, Halfbrick, 5 Live Studios, N3V Games, and Defiant Development.
- Marketplaces, from clothing & retail to food & real estate, are the second highest product type.
- $126M was raised by startups and established digital tech companies over the past 5 years - across 165 deals and 136 digital technology companies.
- Of this total, $37M went into 99 startups, across 116 rounds.
- Median total funding raised by all digital tech companies was $200K, the average total raised was $928K.
- Median total funding raised by startups was $100K. The average total raised was $371K.
- The per capita funding (excl government grants) of SEQ tech startups was $4.02, compared to $4.09 for Australia, $4.69 for Western Australia, $170 for Israel and $3,945 for Silicon Valley. By way of comparison per capita betting on the last Melbourne Cup was approximately $52 per capita.
- Private equity was the largest source of funding at $47M (37% of all funding) to digital tech companies, driven primarily by AMMA’s $45M investment in Guvera - a music streaming service.
- Government funding was the second largest source of funding at $24M (19% of all funding).
- Commercialisation Australia (CA) played a critical role in attracting funding into the sector. CA provided $20M (16% of all funding), and attracted $18M (14% of all funding) in matched funding from angels and VCs.
- Crowdfunding is a growing source of funding with $1.4M of funding coming from Kickstarter and Pozible.
Boundlss’ CEO Jonah Cacioppe said he hopes the latest report will help entrepreneurs, investors, policy makers and industry leaders understand what factors contribute to creating a healthy tech ecosystem, who the key people and organisations are within the community, and what is needed to create an environment in which the next Atlassian or Seek could flourish.
“The SEQ ecosystem is young and vibrant, with lots of strong startups like Invoice2Go, Commission Factory, Halfbrick and Nimble. Its also starting to see substantive exits like Wotif, and has really mature pockets of talent in areas such as gaming. In many ways it’s comparable to other leading Australian ecosystems like Sydney and Melbourne. However when compared with international tech hubs it lags way behind in terms of funding per capita, formation rates, talent pools, and substantive exits – as do all Australian ecosystems.
We’re also concerned about the impact the federal governments closure of Commercialisation Australia will have on startup investment both in SEQ and across Australia. We found almost all the top 35 raises included matched funding from CA. The new Entrepreneurs Infrastructure Program has a substantially reduced funding pool. Given how critical CA is in attracting risk capital into the sector, it will be interesting to see how this effects the sector. Our bet is it will almost certainly have a negative impact on the sector across Australia.
This is a real shame as the opportunities arising from disruptive technology within the global economy over the next ten years are truly enormous.
Even if you just look at the opportunities for tech within the state, they are huge. In line with Deloitte and McKinsey’s estimates, we estimate the economic impact of disruptive digital technology on Queensland's economy in 2025 is $96 billion per annum, or roughly 24% of the state's projected $396 billion economy. $6 billion of this could be directly handled by local startups. It’s certainly within the ability of Queensland's high caliber startups to capture a meaningful portion of this, given the right support - otherwise we’ll be handing this value straight to international competitors.”
The report is now the second detailed analysis of an Australian tech ecosystem by Boundlss after their 2013 report on Perth’s startup ecosystem.
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For a copy of the full report see our website: www.boundlss.com/seq
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