US-based companies raise almost five times more capital than Australian companies in the early stages, according to a new report, which also shows that Sydney remains our largest start-up hub.
The report, titled Silicon Beach: A study of the Australian Startup Ecosystem, was co-authored by the Startup Genome Project, Pollenizer, From Little Things and Deloitte Private.
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It compared more than 1,000 Australian tech start-ups with more than 50,000 early stage companies being tracked worldwide.
The research identifies four main start-up hubs in Australia: Sydney, Melbourne, Brisbane and Perth.
Sydney is home to the greatest number of tech start-ups – 1.5 times more than Melbourne, six times more than Brisbane and eight times more than Perth.
According to Deloitte Private partner Joshua Tanchel, Sydney is “without a doubt” the country’s largest start-up ecosystem.
“We’re seeing some good companies come out of Melbourne and the other capital cities,” Tanchel says.
“But Sydney demonstrates the most established network of start-up founders, investors, and accelerators and incubators.”
While Sydney is the standout in Australia, it pales in comparison to Silicon Valley, which has a start-up ecosystem almost seven times the size of Sydney’s.
According to the research, Sydney entrepreneurs are 86% less likely to want to get rich and 45% less likely to want to change the world than entrepreneurs in Silicon Valley.
Looking at Australia overall, only 4.8% of Australian start-ups are scaling into sustainable, global businesses.
This could be due to a lack of funding. The research shows US companies raise 4.8 times more capital in the early stages than Australian companies.
When Australian companies are ready to scale their operations, they’re once again outshined by their US counterparts, which raise 100 times more capital.
The findings form part of the Startup Ecosystem Index, a wider initiative by Startup Genome, which has identified the world’s top 20 start-up ecosystems.
The index is based on data from more than 50,000 startups around the world.
According to the index, the world’s top 10 ecosystems are Silicon Valley, Tel Aviv, Los Angeles, Seattle, New York City, Boston, London, Toronto, Vancouver and Chicago.
Sydney takes out the 12th spot while Melbourne is ranked 18th. Here’s why:
- Sydney entrepreneurs are as highly educated as Silicon Valley entrepreneurs (37% have a Masters and PhD versus 42%).
- Entrepreneurs in Sydney have a similar amount of mentors per start-up as Silicon Valley entrepreneurs.
- Sydney entrepreneurs work 9.17 hours per day, which is almost as many as in Silicon Valley (9.95 hours).
- Sydney start-ups outsource as much product development as their peers in Silicon Valley, with less than 6% of product development being outsourced.
- Founders in Sydney are as likely as entrepreneurs in Silicon Valley to tackle markets they have had previous experience in (50%).
- Melbourne start-ups are 42% more data-driven than Silicon Valley start-ups.
- Entrepreneurs in Melbourne work 9.8 hours per day, which is almost as many as in Silicon Valley.
- There are similar levels of support for start-ups in Melbourne as in Silicon Valley.
- Melbourne entrepreneurs are less educated than entrepreneurs in Silicon Valley (22% have a Masters and PhD versus 42%).
- Funding for start-ups in Melbourne is insufficient before and after product market fit. Melbourne start-ups receive 86% less funding than Silicon Valley start-ups.