Jonah and Mike at Boundlss have done another assessment of a startup community; this time South East Queensland.
You can find their report at http://www.boundlss.com/blog/press-release-seq-startup-ecosystem-report-2014, but the key findings are:
Future Impact of Technology on the State Economy
- Inline with research by McKinsey and Deloitte, we estimate the potential economic impact of disruptive digital technology on Queensland’s economy in 2025 is $96B per annum, or roughly 24% of the state’s projected $396BGross State Product, with a direct contribution from digital technology companies of over $6B per year.
- To ensure the majority of this value is created and retained by local tech companies, we estimate Queensland will need 3,000 startups, hundreds of established tech companies and a few unicorns.
- To achieve this we estimate that $2B to $5B in total funding needs to flow into the sector over the next ten years to support the growth of these firms. With the rate of investment increasing from their current average of $23Mper year to between $500M to $1B per year by 2025.
- Startup formation rates would also need to increase from 12 new startups per year per million people, to 170 in 2025 – comparable to current US rates.
- There are approximately 226+ startups, 500+ founders and1,900+ employees involved in the SEQ ecosystem.
- The number of startups forming each year is increasing, with 55 formed in 2013.
- In 2013 Queensland had a startup formation rate of 12 startups per million people per year, compared with US technology hubs such as Boulder and San Francisco which had startup formation rates per million people ranging between 97 to 256 in 2010 (the last recorded data on the US).
- Independent Gaming Studios are the largest startup type, with 26 of 226startups, 12% of all startups. This part of the ecosystem is relatively mature with a games seed accelerator and over 38 indie studios, 26 of which are startups. With past, established and new studios that have achieved global success, including Krome Studios, Halfbrick, 5 Live Studios, N3V Games, and Defiant Development.
- Marketplaces, from clothing & retail to food & real estate, are the secondhighest product type.
- $126M was raised by startups and established digital tech companies over the past 5 years – across 165 deals and 136 digital technology companies.
- Of this total, $37M went into 99 startups, across 116 rounds.
- Median total funding raised by all digital tech companies was $200K, theaverage total raised was $928K.
- Median total funding raised by startups was $100K. The average total raised was $371K.
- The per capita funding (excl government grants) of SEQ tech startups was $4.02, compared to $4.09 for Australia, $4.69 for Western Australia,$170 for Israel and $3,945 for Silicon Valley. By way of comparison per capita betting on the last Melbourne Cup was approximately $52 per capita.
- Private equity was the largest source of funding at $47M (37% of all funding) to digital tech companies, driven primarily by AMMA’s $45M investment in Guvera – a music streaming service.
- Government funding was the second largest source of funding at$24M (19% of all funding).
- Commercialisation Australia (CA) played a critical role in attracting funding into the sector. CA provided $20M (16% of all funding), and attracted $18M (14% of all funding) in matched funding from angels and VCs.
- Crowdfunding is a growing source of funding with $1.4M of funding coming from Kickstarter and Pozible.
We asked Jonah for a quote on the report’s implications for the Perth Startup Community, and his response was:
I just did a ‘back of the napkin calculation’. If we say current Gross State Product for WA is $214B, average growth until 2025 is 3% (it could well be more), our GSP would be approximately $305B in 2025. Given McKinsey’s, Deloitte and our estimates, the portion of WA GSP disrupted by tech is probably in the order of 18 to 30% of the economy. So approximately $76B, of which around $5B could be direct revenue to technology companies (excl telecoms). That’s probably around 4000 startups under $1M in revenue, 600 under $10M in revenue (lets call them ‘mature startups’), 40 under $100M (established), and around 5 with revenue under $1B (unicorns).In terms of the capital required to develop and scale these companies you probably need around $250K for the startups, $2M for mature startups, $20M for established and $100M for the unicorns. So somewhere in the order of $3.5B invested over the next ten years. I think we identified $14m raised on average over the last 5 years, and possibly $20M in 2013, so that’s a large growth in funding that would need to flow into the local economy to capture this value. By way of comparison $47B was invested in the mining industry in the 2014FY, so an average $350M a year for tech is a drop in the ocean.
To summarise that: $76B of the state’s revenue will go to disruptive technology companies in ten years’ time. To build enough startups to even out the incoming/outgoing revenue streams to disruptive tech, we’d need to invest $3.5B over ten years, which is <1% of our current resource investment amount.
Easy! Let’s get it done 🙂