Scaleup funding gap in Australia to hit $53b by 2030


Justin Hendry
Administrator

The gap between scaleup funding available in Australia compared to funding available to comparable firms in the US could reach $53 billion by 2030 without more government and international investment dollars, new research from the Tech Council of Australia has found.

But in more positive news, the survivability of early-stage companies founded in the last 10 years is now on par with the United States, United Kingdom, Canada, Israel and Singapore, with a 78 per cent increase in startups founded during the period.

The report, released during the industry group’s National Tech Summit on Thursday, found that Australia is comparable to the US in the startup phase between founding and a Series A round, but that this “diverges significantly” after Series B.

“This suggests that while Australia is an increasingly competitive ecosystem for startups, we are nowhere near the best place to scale,” the report said.

Sydney city

To determine survivability, the report, entitled ‘Shots on Goal’, examined the startups founded in each country between 2013-15 using funding data.

The report found that if Australia is to match the United States on a per capita basis across Series B, C and D, funding would need to increase by “five times above BAU growth” in Australia by 2030, creating an “expected gap in scaleup funding of $53 billion by 2030.

“Without action, Australia will continue to have significant funding gaps at the scaleup stage. Work underway towards the establishment of the National Reconstruction Fund (NRF) will help, but complementary policy reforms to ensure we maximise the benefits of this program and open up other sources of funding are essential,” the report said.

With Australian VC firms raising $4.5 billion in 2022, less than one-tenth of the $53 billion required, closing the funding gap would require investment by government and greater foreign investment in Australian-based scaleups, the report said.

The Tech Council is calling on the federal government to expand investment in Australia’s scaleups using a range of policy mechanisms, including expanding direct investment programs such as the new $392 million Industry Growth Program.

“We recommend the design of programs, such as the Industry Growth Program, reflect that Australia has a broad range of strengths in technology. This ranges from existing strengths in areas like business software to emerging strengths in areas such as quantum tech and agtech,” it said.

“While it is important for some programs – such as the NRF – to have more specific areas of focus, this should not constrain other government programs’ scope.”

The report also recommends indirect measures such as tax system changes, amending regulatory structures around superannuation, and facilitating investment by establishing strategical procurement programs.

With scaleups typically home to 50 per cent of people working in SMEs in the OECD, fixing the challenges facing scaleups by matching the success rate in the US could also add 300,000 additional tech jobs to the Australian economy, the report said.

Do you know more? Contact James Riley via Email.

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