Victoria’s startup sector is experiencing “growing pains” after a rapid expansion over the last five years, a new report from government-backed startup agency LaunchVic and the Tech Council of Australia has found.
The report maintains that demand for talent among the state’s startups remains “robust” despite recent layoffs in the broader tech sector and strong economic headwinds, with shortages stemming from a confluence of other factors.
Amid record low unemployment across the economy, the Startup Skills Report found “shortages across most non-technical occupations” in the state, particularly senior business, operations, and design roles deemed “crucial” in the scaleup phase.
The report, released on Tuesday, said that previous research into talent shortages across the Australia tech sector had not identified “significant issues in recruiting and retaining” staff in these areas.
Technical talent such as coding skills also remains a concern for startups, which are facing the same shortages in technical roles as larger companies due to “a sheer lack of talent amid record and rising demand”.
“While demand may have lessened slightly across the whole tech sector, there still appears to be strong demand and limited supply across a range of roles commonly found in startups,” the report said.
For non-technical roles, the report said “attraction and retention issues” rather than “a lack of suitably skilled talent” was to blame, with approximately 25,000 people with suitable skills and experience in Victoria for every vacancy in business and operation roles, on average.
Unlike larger organisations, jobs in startups carry an expectation of longer hours, different remuneration packages that sometimes consist of equity, higher risk of the company failing, and “significant cultural differences”, broodingly “diminishing the attraction of the startup ecosystem”.
Other issues include cultural mismatches and a ‘winner take all’ effect, whereby a small number of successful startups receive a very large number of applications for open positions and most others struggle to recruit enough people.
“An Australia VC firm reported that it was not uncommon for senior business and operation people to be hired then only stay two to three months. Their rapid departure is almost always hastened by a deteriorating relationship with founders which makes their position untenable,” the report said.
But the “rapid growth” of the sector has also contributed to the “skills gaps”, with over 30,000 new startup jobs created in the last five years alone, bringing the size of Victoria’s startup sector to more than 52,000 people.
In total, the tech industry employs around 259,000 people in Victoria. According to another Tech Council report that found more than 10,000 new tech jobs were added in the six months to March, Victoria has seen the second-fastest growth of tech jobs of all jurisdictions in the last 10 years.
“Victoria has experienced a notable upswing in its startup sector, resulting in a marked increase in the combined enterprise value of its tech companies. Between 2016 and 2022, the combined… value surged from $5.6 billion to $91 billion, representing 16-fold growth,” the Startup Skills Report said.
“This expansion reflects the state government’s effective stewardship of this nascent industry, the entrepreneurial spirit of its founders and the risk tolerance of its investor.”
World-leading technology startups like Airwallex, CultureAmp and LinkTree – which earlier this month sacked around 60 staff, or more than a quarter of its workforce – have contributed to this steady growth.
LaunchVic chief executive Dr Kate Cornick said that the report confirms what was already known anecdotally following significant growth in the sector that puts it on par with the size of Tel Aviv’s ecosystem in 2016.
“Despite reported job layoffs in the tech sector for notable startups and scaleups, the demand for talent is strong. We need to look at better pathways to attract talented Victorians to work at startups and help them better transition into the startup world – so they stay there,” she said.
The report has made eight recommendations that seek to improve the structures that already exist to support the sector, including that the 30×30 program run by LaunchVic be expanded to add a stream dedicated to founders looking to scale.
Tech Council chief executive Kate Pounder said that with many startups still struggling to find the talent they need, governments and the broader tech industry should work together on ways to boost awareness of the sector.
“Government and the tech ecosystem need to find ways to connect tech workers to startups and raise awareness about the range of pathways they can take to build long-lasting careers in the tech sector,” she said.
“Startups are where the innovate ideas and companies that will power Australia’s future are nurtured – we need to make sure they have every chance to succeed.”
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