Sydney, October 16th, 2024 – There is a tangible opportunity for the Australian continent to emerge as a “Star” ecosystem on the global stage, according to the “Tech Scaleup Australia 2024 Report” produced by Mind the Bridge with the support of Acciona, NSW Government, Investment NSW and Crunchbase and presented today in Sydney at the MTB Scaleup Summit Sydney.
“Australia has made significant strides in recent years. There is a tangible opportunity to emerge as ‘Star’ ecosystems on the global stage, but, to truly compete with top-tier innovation hubs, Australia must overcome its geographic isolation by building strong international connections.”, said Alberto Onetti, Chairman of Mind the Bridge.
Over the past decade, Australia’s innovation ecosystem has rapidly evolved, positioning itself as a competitive force among both emerging and established global hubs. Australia is home to 1,501 scaleups and around 60 “scalers” (startups raising $100M+), which have collectively secured a total of $32.8 billion in funding. This translates to 5.6 scaleups per 100,000 people and approximately 2% of the country’s GDP invested in innovation. These data significantly outpaces the European average of 2.7, as well as other emerging ecosystems like South Korea (3.4), with only a few global innovation epicenters – such as Silicon Valley, Israel, and the UK – outperforming it.
The ecosystems’ evolution and resilience
After rapid growth from 2021 to 2022, producing about 200 new scaleups and attracting $6 billion annually, in 2023 the country was affected by the global VC industry pullback that slowed the innovation economy worldwide and reverted to pre-2020 figures, recording 140 new scaleups with $3 billion in financing. Preliminary data for 2024 shows a similar pattern, with 74 new scaleups raising $2.3 billion by Q3. Despite the overall not positive trend, Australia has demonstrated resilience compared to other economies, and the proportion of “mega-rounds” (investments over $100 million) increased to 35% in 2024, indicating a potential shift toward focused investments.
Isolation – An opportunity for growth
However, while it’s true that Australia has significant potential, its relative isolation from global hubs poses challenges for growth. Given the vast geography and relatively small population, there is an intensified focus on digitalization to enhance various aspects of daily life, the first three sectors being represented by Fintech, Healthtech, and Business & HR Tech. The booming fintech sector has 240 scaleups raising $7.9 billion, while 147 healthtech companies have secured $2.5 billion. Additionally, 237 scaleups in business and HR tech have raised $6.7 billion to address workplace challenges and data management.
Craig McGrory, Chief Transformation Officer, ACCIONA AU/NZ commented on how ACCIONA constantly encourages innovative thinking in how they deliver sustainable infrastructure and renewable energy solutions. “Embracing innovation in how we think and how we operate is critical. Collaboration between startups and our projects through ACCIONA’s I’MNOVATION program supports testing groundbreaking solutions in real-world environments” said Craig. “These collaborations are delivering operational efficiencies for our business, particularly in relation to providing solutions to Australia’s energy transition challenge”.
FDI
The country is implementing several initiatives to strengthen cross-border links, including attracting foreign direct investment (FDI): in May 2024, the Australian Government unveiled reforms to enhance its foreign investment framework, aiming to create a faster, stronger, and more transparent process for attracting FDI in key areas such as net zero transformation, cleaner energy, increased housing supply, and the development of critical technologies.
“The global race for innovation and startups is accelerating, fueled by increasing geopolitical tensions and stricter regulations. Without achieving critical mass or establishing strong international connections, local ecosystems risk stagnating.”, added Marco Marinucci, CEO and founder of Mind the Bridge. “In a world increasingly dominated by AI and generative technologies, Australia has the opportunity to lead innovation in traditionally low-tech sectors like mining, construction, and energy—industries that are becoming more critical as AI transforms the global economy.”
Other actions involved supporting public entrepreneurship, focusing on underrepresented groups, and promoting world-class events like SXSW Sydney to showcase its potential.
The IPO track and the VC Market
In this context, the Australian Stock Exchange (ASX) plays a pivotal role in providing growth capital for Australian scaleups, with 212 scaleups conducting IPOs in 2024, raising an average of $6.5 million each. Over 90% were on the ASX, with 14% of Australian scaleups accessing capital through the stock market—higher than the global average of under 10%. Notable examples include Siteminder and Tyro Payments. While few Australian scaleups venture onto foreign exchanges, strengthening global connections could lead to larger IPO deals and more exit opportunities, including dual listings.
In parallel, US investors heavily influence the Australian venture capital market, accounting for 41% of total capital invested in local scaleups, totaling $10.3 billion. Domestic investors follow closely with 39% ($9.8 billion), while UK and Chinese investors contribute 5% and 4%, respectively. Other global investors play a smaller role, highlighting the strong US presence in Australia’s startup funding landscape.
New South Wales and Victoria driving the innovation engine
As innovation activity worldwide tends to concentrate in a few key hotspots, Australia is no exception, with New South Wales and Victoria representing the 2 main hubs, followed by Queensland and Western Australia.
NSW, after experiencing a rapid surge between 2020 and 2022, has reached the “late scaleup” phase, with 709 scaleups that have collectively raised $17.3 billion, putting it in close competition with hubs like Berlin (870 scaleups). Meanwhile, Victoria, historically following a more steady growth trajectory, continues to advance through the Early Scaleup stage, now home to 409 scaleups that have raised $8.7 billion – comparable to the Catalonia (Barcelona) region (419 scaleups). Both states saw a notable slowdown between 2023 and Q3 2024. Queensland and Western Australia, primarily driven by their capitals, Brisbane and Perth, have both entered the Startup stage surpassing the 100-scaleup mark.
If transitioning from ‘Scaleup’ to ‘Star’ ecosystem typically takes 7-8 years, New South Wales is about three years away from achieving this status with steady growth, while Victoria is still 2-3 years behind and has yet to enter its exponential growth phase.
