Victorian Startup Ecosystem Rapidly Matures, Growth Outpacing Major Global Cities

Last Updated: Thursday 9 March

LaunchVic, Victoria’s startup agency, has found the State’s startup ecosystem is maturing rapidly, with growth outpacing some of the world’s most renowned entrepreneurial cities including Tel Aviv, Toronto and Amsterdam.

The 2022 Startup Ecosystem Mapping Report, the fourth report of its kind developed by LaunchVic in partnership with consulting and research firm dandolopartners international, identified 1,300 new firms since the previous report in 2020, reflecting a strong pipeline of new ventures in the state.

The number of first–time founders has also jumped by 20 per cent since 2020, increasing from 44 to 53 per cent of all founders.  

New ventures are becoming more innovative. Between 2018 and 2022 the share of Victoria’s startups aiming to create a new market more than doubled from 24 to 58 per cent of all firms surveyed.

In another sign of maturation, there is a higher proportion of larger startups, with 32 per cent firms now having 10 or more employees compared to just 21 per cent in 2018.

In total, Victorian startups employed more than 52,000 employees in 2022, an increase from 38,000 jobs in 2020.

LaunchVic CEO, Dr Kate Cornick said findings of the report vindicate LaunchVic’s strategy to aggressively invest in programs to support new and more innovative startups to be created and help existing startups to scale.

“The impressive growth rate of the ecosystem, demonstrated by the number of new startups coming to market, the increase in innovation and the growth of larger firms is extremely positive for Victoria’s future.”

Diversity of founders

Firms with at least one-woman founder have grown from 20 per cent in 2020 to 34 per cent in 2022, however they still only represent 22 per cent of founders across all firms. This suggests that in firms that have both men and women founders, male founders are outnumber by a ratio of 2:1.

Firms with a woman founder have a significantly smaller median firm capital raise.

Most founders have one or more parents born outside Australia, reflecting almost identical proportions as in 2018 & 2020, while the share of founders from outside Australia has reduced slightly from 35 to 32 per cent.

The average founder age is 42, the same average reported in 2020. However, the share of founders in their 30’s has increased substantially from recent years.

“It’s exciting to see the number of women-led founders increase but there is still work to do to ensure that women founders and their firms reach their full potential. LaunchVic is committed to increasing access to capital for women founders in the startup ecosystem through initiatives such as the Alice Anderson Fund,” said Dr Cornick.

Sector Strengths

The share of startups in the Enterprise & Corporate Services, Consumer Goods & Manufacturing and Financial Services sectors has also grown since 2020.

Growth in the number of Health firms remains unchanged from 2020, which remains the joint largest sub-sector at 16% along with Enterprise & Corporate Services (also 16%).

Increased participation in accelerator programs

A third of startups surveyed participated in accelerator programs in 2022, up from 27% in 2020. The average age of startups participating in accelerators increased.

Dr Cornick said this indicates a growing recognition amongst experienced operators that these programs can add substantial value.

Capital raises

An estimated $4 billion in total capital was raised by Victorian startups and scaleups in 2021, from both venture and non-venture capital sources such as corporate investment and debt financing. There was also growth in deals worth more than $1M and a decline in smaller raises since 2019.

These findings are consistent with LaunchVic’s State of Startup Funding Report released in December 2022, which revealed that Victorian startups raised a record AUD$2.3B venture capital funding in 2021. However, this report showed that much of the growth is in later stage capital raises (Series B and beyond), while early-stage funding continues to flatline.

Dr Cornick said the report highlighted that Victoria’s early-stage investor ecosystem continued to lag and that more work was required to get capital flowing to startups at this vital stage.

Driving research commercialization

Only 6 per cent of firms reported that they were commercializing a technology developed at a university.

Relatedly the report shows 88% startups have a founder with at least 2 years of prior work experience in a relevant industry and 83% of firms have at least 1 founder with a business degree or at least 2 years’ experience as a manager.

“More needs to be done to drive research commercialization into startups. We must recognize that most founders have commercial experience, so more needs to be done to connect commercial expertise to university research commercialization opportunities to generate new startups from our universities,” said Dr Cornick

The full 2022 Startup Ecosystem Mapping Report can be found at: https://launchvic.org/research/