NSW startups secured twice as much funding as any other state in the last financial year, Techboard report finds

NSW budget

Startups and tech companies in New South Wales scooped up more than twice as much funding as those in Victoria and Queensland in the last financial year, according to Techboard’s first country-wide funding report — and Australia’s other states are trailing even further behind.

The Techboard Australian Startup and Young Technology Company Funding Report 2017/18 tallied up funding received by startups and tech companies under 10 years old, including venture capital, angel investment, public funding, debt facilities, ICOs, equity crowdfunding and more.

Generally, the report showed a gradual increase in VC investment over the course of the year, with a spike in the third quarter. Equity crowdfunding also saw a slight upward trend, although it only accounted for 0.2% of the total funding.

ICO activity increased up until Q3, before levelling off in the last quarter of the financial year.

The report found of the $3.5 billion raised in total, 44.6%, or $1.58 billion, was allocated to startups in New South Wales.

By comparison, Victorian companies bagged less than half of this amount, taking home $783.8 million, or 22.1%, of the total funding.

Queensland companies secured 21.6% of the funding, totalling $766.9 million, although the report largely put this down to two major funding events for Brisbane-based data centre operator NextDC, which scored a $300 million debt facility in Q1 and a $377 million placement in Q3.

Western Australian and South Australian companies secured $294.9 million (8.3%) and $110.2 million (3.1%) respectively, while the Australian Capital Territory and Tasmania brought up the rear with $2.8 million apiece (0.1% each).

There were no funding events recorded in the Northern Territory at all.

When the data was adjusted to account for population, New South Wales still came out on top, and secured the highest amount of investment per million people in both Q2 and Q3.

Western Australia and Queensland both had higher amounts of funding per capita in Q1, and Victoria edged ahead in Q4.

Speaking to StartupSmart, Peter van Bruchem, chief executive and chief startup evangelist at Techboard, said the disparity between New South Wales and the rest of the country doesn’t come as a great surprise.

“It’s been recognised for quite a few years that New South Wales is the leader in terms of the level of startup activity, the number of VC funds and the amount of capital raised,” he says.

However, when comparing fund per capita, the gap between New South Wales and Victoria closes somewhat, which is indicative of an active Victorian startup space as well.

“Victoria is certainly putting a lot of energy into growing its ecosystem, and I think that’s bearing fruit,” he says.

There are some “very successful companies and a fair amount of funding flowing”, he adds.

“I wouldn’t be surprised if Victoria catches up to an extent.”

Alex McCauley, chief executive of StartupAus, adds it’s difficult to get an insight into any trends based on a 12-month snapshot of funding events.

“It’s probably not enough data to get a conclusive picture about where the money is flowing in Australia,” he says.

“It might have missed significant funding events outside of these dates,” he adds, while “one big funding round can change the picture dramatically”.

The report shows a good result for Sydney — and there are a lot of very successful startups based in Sydney and New South Wales, McCauley says.

But, rather than being a cause for concern for the other states, the total amount of funding raised should be seen as “a great result for the country”.

McCauley adds it’s “fantastic for the sector that it’s got such great data”, and praises Techboard for its commitment to “building a longitudinal data set for Australia”.

The only way to glean any real trends in the long-term will be to compare data over a longer time period, he says.

Van Bruchem echoes this, saying there are certain trends he would expect to see even in the next financial year’s results.

While the 2017/18 financial year saw “a number of substantial ICOs”, including Canya’s $12 million raise in December, Power Ledger’s $34 million in October and Havven’s $38.6 million in March, “I think you will probably find a substantial drop off in the next quarter”, van Bruchem says.

The report shows a levelling off of ICO activity in Q4, and there have been ICOs “being cancelled, postponed or just going very quiet”, he adds.

While ICOs may feature in next year’s results, the numbers and sizes are likely to be smaller, van Bruchem says.

In broader investment terms, “we may find there are seasonal impacts”, he says, with the “silly season” in the December quarter and the “other silly season, from a financial perspective”, in the June quarter, when investors may be getting their own affairs in order at the end of the financial year.

“It will take a few years to get a bit clearer, and we look forward to doing that,” van Bruchem says.

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