How Many Startups Get Started in Australia?

There is no definitive survey and so I have been using a rough estimate of 400–500 tech startups created per year and about 100 raising capital from external angel, seed or venture capital sources. This estimate is just a gut feel from experience in the market rather than based on any data, so I thought it might be useful to check this against other sources of data. Here’s what I’ve found so far and as a result I’m changing my view! If you can think of any other sources of data, or have your own opinions, please chime in.

Google PWC Startup Economy Report 2013

Last year the excellent Google-backed PWC report into the Australian Startup industry was released. It estimated that 1,000 startups were formed in 2012, although didn’t give a source. With all due respect to the authors, I’ve always thought that this was on the high side. It also states that 62 companies achieved fundraising in first round investments which kind-of matches my thinking.

AngelList

AngelList is a US based website which allows startups and investors to list and find each other. It’s been a huge phenomenon in the seed stage world is now the leading way to “announce” your startup and gain an early reputation. AngelList shows 2,321 Australian located startups listed since its founding in 2010. It is unclear how many of these companies are still active.

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The number of Aus startups created each year is significantly higher than I had estimated. The earlier years suffer from negative bias as AngelList got going and the data should be a more accurate in the last two years as it has gained popularity with founders.

There are certainly companies listed on AngelList and never really got started and some backlog of companies listing on AngelList, but I’ll bet there are still more that start but don’t list on AngelList. So I’m happy for these numbers set a floor for my estimations about the number of companies founded in Australia each year.

The number of companies that report their fundraising is clearly only a small subset of those that fundraise. Blackbird alone funded more companies in 2013 than shown above. My guess is that while they are keen to list, most Aussie companies do not bother to update their AngelList profile once as they start or complete fundraising. So let’s disregard the reported fundraising on AngelList until this changes.

Crunchbase

Crunchbase is the database on startups and their funding created by Techcrunch — the best known startup blog from Silicon Valley (now owned by AOL). Most of its data is from press reports of companies and their funding, but it can also be updated by registered users.

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Crunchbase shows a far lower number of companies founded in Australia each year. This lower figure is to be expected. Crunchbase draws its data largely from press reports. I surmise that not many Aussie startups get themselves into the US (or Australian) media on founding. So I think we can safely disregard Techcrunch’s numbers of companies started each year.

However the total number of fundings completed has potential to be more accurate. I rationalise this by assuming that while most Aussie startups do not get announced in the press on founding, they are pretty good at getting themselves some press on completing fundraising. The 2014 YTD figure seems low — I know of more fundings than that so far — so clearly this is not catching them all. At least these numbers can give us a floor to our estimate of funded companies.

Changing my Estimates

So what does this mean for my estimates? Clearly I’m no closer to having a definitive answer, but I’m upping my estimates for startups created. I’m going to predict 1,000–1,200 new startups in Aus for 2014 — scaling out the AngelList number for the full year (and discounting December which I’m sure is quiet for new startups). That’s a huge growth over my previous estimate and reflects the strong growth in the ecosystem. I’ll check AngelList’s number at the end of the year. [Note: in hindsight I think this estimate is too high. As I have watched AngelList for longer, I’m seeing at least 20% of entities listed on AngelList which are not startups in the sense tht I use the word. I know a bunch of accelerators (e.g. Startmate) now use AngelList to accept applicaitons and many of those companies don’t actually get started unless they are accepted, so that is further inflating figures. So I’ll decrease my estimate to around 700–800 per annum.]

I’m going to stick with my view of around 100 getting funded by external angels, seed and VC funds (it doesn’t include funding from founders, friends, family). This is almost double the Techcrunch 2013 number and I don’t feel comfortable going much higher than that. (Interestingly that’s a 1 in 12 chance of getting externally funded from the venture system, a much lower chance of getting funding than I previously thought.)

Comparison With US market

The US venture capital market is better quantified. The PWC MoneyTree Report suggests that in 2013 around 2,500 tech companies got funded in the US. So the Australian startup and venture capital ecosystem is at best 4–5% of the US market in size.

As you’ll know the Australian startup ecosystem is still in its own early stages, but we’re seeing good growth worthy of any startup: growth in numbers of startups, growth in fundraisings, most importantly growth in the number of sophisticated founders (call that quality). In the end, proof is the continuing creation of valuable Australian companies like Atlassian, Campaign Monitor, Freelancer, Ozforex, Half Brick Studios, Aconex, RetailMeNot, 99Designs, Big Commerce, to name a few. I’m confident we’ll see a bunch of new heros emerging over the next few years.

The Sunrise Conference

And now time for a plug for the Sunrise Conference presented by Blackbird and Startmate. Come along and hang out with a bunch of the iconic Australian tech companies listed above, and hear the founders re-tell their early years in graphic detail. More info and tickets:

www.thesunrise.co