Startup News & Analysis

Not just a myth: Unicorns are helping to pour $1.6 billion into the Victorian economy

Kate Cornick /

LaunchVic

LaunchVic's Kate Cornick. Source: Supplied

For decades, the myth of the elusive unicorn has plagued popular culture. But the latest report from LaunchVic and EY proves that not only do they exist, but that unicorns are part of a community of digital marketplace innovators contributing almost $1.6 billion to the state of Victoria, as well as directly and indirectly providing around 93,000 jobs.

We’re obviously not talking about rainbow manes and glittery horns here: “unicorns” are startup companies valued at over $1 billion. At present, Australia’s unicorn population totals 12, three of which — Seek, REA Group and Car Sales — are digital marketplaces and were ‘born’ in Victoria.

Envato, 99 Designs and Redbubble — just a few of our other homegrown heroes that are also online marketplaces — are also rapidly on a trajectory to the elusive unicorn status. But for more to join this “blessing” (yes, that’s the collective noun for unicorns) there is a need for tech startups to reinvest in the local economy, and for investors to pay better attention to the potential opportunities in this field.

Ultimately, we want more businesses to scale, reach sustainability and, where appropriate, achieve liquidity events. We want successful founders to re-engage in the ecosystem, creating a virtuous cycle whereby skills are lifted and money is reinvested in early-stage companies.

Contributing unprecedented employment, revenue and innovation to Victoria

A Review of Melbourne’s Digital Marketplaces’ found that 190 online marketplace startups currently exist in Victoria (predominantly in the retail, travel, property and employment markets) and together, they generate an annual $88 million of revenue in Victoria alone. Almost 60% of this revenue is created by startups who were founded right here in the state, and in terms of future potential, the Victorian online marketplace sector is growing at a rate of 11% — almost quadruple the current growth state product of 3%.

Online marketplaces are defined as intermediaries between sellers and buyers of goods, assets or services — an attractive business model with low up-front costs, no need to own products or hold a physical inventory.

Whether it is connecting businesses with an on-demand workforce, ensuring surplus food doesn’t go to waste, or helping artists monetise their designs on clothing and homewares, these digital marketplaces are also contributing an estimated $135 million in savings to their communities.

But it’s not just about money: they’re also revolutionising the employment landscape, disrupting traditional industries with non-conventional employment models (like freelancing). Each sector has experienced different impacts — for example, retail jobs have faced a downturn as digital marketplaces have increased, whilst warehousing and logistics roles have seen a massive boost.

Other benefits of startup growth in Victoria includes skill development, increased innovation owing to digitisation and also productivity gains stemmed from tapping into under-utilised physical capital such as real estate and transport.

We can’t stop here: Victoria has the potential to house some of the world’s most innovative startup activity and the continued growth of this ecosystem is critical.

At LaunchVic, we think of this as a funnel — helping more people engage with the community, establish companies and begin their scaling journey will result in more founders, more quality investors and more people willing to work at startups.

More unicorns + more reinvestment = more innovation

The saying ‘a rising tide lifts all boats’ sums up this vision perfectly. As the sector goes from strength to strength, more pioneering companies appear and begin their search for investment. We want to see more local successful innovators paying it forward and reinvesting in peer-led ventures.

Local entrepreneur Cyan Ta’eed did exactly that last year, investing in a fellow Victorian-founded digital marketplace YourGrocer in its latest $1.3 million raise. Her own company, the Melbourne-based online marketplace Envato, now boasts 8 million community members worldwide, customers in 197 countries and 300 employees, 200 of which are based in Melbourne.

In fact, Melbourne boasts one of the strongest grassroots communities in the world: one-quarter of founders are drawing on their mentors and advisors who have had experience working at startups valued at greater than $100 million. And local innovators are successfully executing monetisation strategies very early in their journey: 60% are revenue positive in their first year, and almost 80% by year two.

But we know from our research that one third of all startups in Victoria report they are bootstrapped, even amongst firms in later stages of development.

If we want to see more startups achieve unicorn status, we need unicorns and investors alike to put their money where their mouths are and nurture the innovative hub we’ve come to know and love.

NOW READ: LaunchVic unveils $2.9 million in funding to further educate and upskill Victorian startup founders

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Kate Cornick

Dr Kate Cornick is the chief executive of LaunchVic.

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