The Australian Startup Ecosystem In 2023

Jason Atkins: Hello, welcome to today's Startup Equity Matters. I'll be reviewing and sharing insights on the Startup Muster 2023 Report--a report on the state of the Australian startup space. It's founded in 2013, the last one was in 2018, and there's a fresh one out in 2023. It talks about the who, what, why, when, and as much information as they could possibly gather and share. Although it was well worth having a quick run through, it's important to know what's going on to be able to get value from our equity--it helps us make better decisions and support the whole startup community. I've done a quick run through prior to this: my summary, my thoughts, and sharing a few insights that I pick out. Want to check out the report in detail? Go to Australian Startup Muster online, and check it out.
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First up, we've got a bit of an overview. This was put together by Danielle and Murray Hurps, Adam Spencer, Muhammad Jafer, and Paul Conyngham--thanks team for putting this all together! It's sponsored by the New South Wales Government, Atlassian Foundation, Microsoft, The Guild Group, and Antler. Many of those organisations I've worked with over the last few years. It's good to see them stepping up and helping put this together.

The methodology that's been used was a widely designed survey, so they asked a lot of people from the community, what they should be doing and what's going to be valuable. It was also tied to the 2018 Muster Report, so that was a nice reference and we can see what the changes were between those periods, which is kind of cool. It was mainly a survey, and it was put out to founders and the tech community, and tons of work went into it to make sure that the data was accurate and clean and helpful and all that kind of stuff that needs to get done when you have a lot of data and you want a really high level of confidence. Thanks to the team for doing all that good work! It says 585 founders responded and 322 supporters, so awesome effort there. I estimate it's probably 5,000 funded startups in Australia at any given time, it's a bit of a rough number because it's hard to tell exactly. It looks like they got around 10% of all those startups to participate. Awesome job!

All right, so the next page up: the biggest surprises in 2023. According to the report, 56% of startups are using AI for key team functions. 24% of incubators and accelerators are run by universities. That's interesting. 15% of founders have PhDs and six versus 6% in 2018, so people with PhDs are more than twice as likely to be doing a startup, according to this report in 2023, it's pretty interesting. The emergence of green tech as the largest and fastest growing vertical, from 5% to 14%. I don't know exactly what green tech is. I think that's climate tech or sustainability, I guess that's what that's relating to. 21% of founders say their decision are driven by impact. 56% from impact and profit equally, so that's pretty awesome. At Cake, we are passionate about helping innovators and entrepreneurs to change the world for the better, so it's great to see that intent coming through in this report. The last big surprise, 31% of startups identified as being part of an innovation precinct or cluster. I know whenever somebody asks me what they should be doing and should they be joining an accelerator, I always say yes. I think it's really difficult to do a startup without being part of one of these clusters, as they call it. So, very good. I think that number should be higher, 31%, I reckon it should be 60% or more. Anyway, maybe that's something we can all work on.

This is a demographic slide here on who is launching. Female founders by survey years, 2014, there was 16%. It's been steadily increasing. 27% of startups have a female founder in 2023, that's about a quarter. Average age is 46. [I'll turn] 46 in two months. I'm bang on the average age, nothing like being average. That's all right. Don't pick on me. Demographics, what else we've got here? Low socio and economic background, 13%; person of color, 11%; invisible disability, 9%; and there's some nice information there on some minorities and how much they're participating. Great to be able to share that information. Age distribution, so the vast majority in the 30s and 40s, and the range going from 20s to 60s. What about countries of birth? Yeah, a lot. So 62%, Australia; UK, 8%; New Zealand, 4%; India, 4%; USA, 3%; and the rest are 'others'. The institutes for the highest level of education, University of Tech, Sydney is the highest. There's a bunch of unis there. Founders currently studying is only 8%. That makes sense. I wouldn't want to be studying and being a founder at the same time. It's hard enough as it is. Founders with past startup experience is around 46%. I guess that's someone that's done a startup before. It helps a lot to be a second or third time founder, in my opinion. Founders working an outside job in their startup--41%. I wonder if that means a significant proportion of these founders were pre-seed stage or even before that. I don't know that we're gonna get that information from this report. I think it'd be useful if we did have it. Working a job outside your startup seems like an almost impossible thing to do, and I would normally advocate that you can't really get funding if you've got a side hustle, certainly past the pre-seed round. But anyway, maybe that we can dig into that at some point. Status of their last startups, I suppose if that's repeat founders are still operating. 46% sold for a good amount; 21% found a better idea; 15%, I suppose that's a pivot or a jump; still actively involved, 15%. So some founders running two startups at the same time. I suppose that's possible in some capacity. Then a bunch of other items there as well. Why are they getting started? Why are people starting a startup? Identifying a compelling opportunity is the top, 62%; solving a problem I was experiencing, 49%. Jumps down really, really quickly after that. 25%, having a supportive partner or spouse, no major changes on that from the last report. The top two have come down a bit, so the compelling opportunity and solving a problem have come down quite a bit. And some of the other long tail ones have come up a bit. What founders enjoyed about running a startup? What have we got here? Most of the top 10 responses have actually come down since the 2018 survey. Solving an important problem, ownership of the value created, developing technology that excites me, being my own boss, developing new skills, opportunity for financial success. Interesting, I guess there's a mix there in the top between creativity, solving problems, and creativity--oh, sorry, value creation and control. Interesting insights. Helping others is down at about number 10. Where are they demographically? Oh, poor old Northern Territory, 0%. Tassie's got 0.4, so a couple of states there need a bit of investment and support. But look, no surprise, I guess, 55% in New South Wales. I think Sydney's well out in front on a lot of measures. Second is Victoria and a very close third is Queensland; 17%, Victoria; 16%, Queensland. Go Queensland, that's where I'm from. Great to see that. That is actually a nice little surprise. Where do people work from? So the home office is preferred, 68%; coworking space, 32%, so that's come down a lot-- 52% in 2018. I guess that's part of this whole remote trend and the pandemic and all that, showing very evidently there on the report. This adds up to way more than 100%, so people must be answering more than one thing, but that's fine. Our own office, 24%. Cake has its own office. University, anywhere I can use my device. Yep, pretty much everybody should have clicked that. It says only 10%. It's crazy. Cafes and restaurants, only 10%. I don't believe that. Anyway, incubators, 9%. Public spaces. Yeah, I like to work in the park sometimes overlooking Burleigh. Postcodes, number one postcodes, probably not that surprising, 2000 Sydney, 2007 Ultimo. Adelaide got third. What? Adelaide, kicking goals. Shout out to people down there. 2010 Macquarie Park, 4000 Brisbane. Surrey Hills, so Brisbane. Sydney's got about four of the top six there. What else? Where are they? 31% of founders identified as being part of an innovation precinct. As I said, I thought that would be higher, but what are the top precincts? Fishburners, Stone and Chalk, WeWork. I wonder what's going to happen with them. Great spaces. Hopefully they can continue, or at least the good ones can continue to help supporting our space. River City Labs is the top one out of Queensland there that I can see.

What else have we got? What are they doing? What are our startups doing? Themes that apply strongly to startup products and services. So B2B, 68%; software as a service, 45%; B2C, 30%. It's probably a bit higher than I would have thought. Has or will have patents. Interesting, 21%. Mainly government customers, 20%. Interesting. We'll have to know how they secure those customers. Marketplaces, 17; environmental impact, 17 up from seven. Huge growth in environmental impact startups. What about any I can find there with big changes since last time? FinTech, FinTech's down a lot. Only 12% now versus 18% previously. Internet of Things is down quite a lot as well. I guess we're not really talking about that anywhere near as much as we used to be. Marketing is way down. I guess, what do we call that? MarTech seems to be way down. Social media, way down. Big changes in those trends. The fastest growing industries for startups. Green tech, advanced manufacturing, med tech, health tech. Health, separately. AI, defense, and aerospace. Cool. All right, what else have we got? For whom? What does that mean? Startups with revenue. 61% of the startups have revenue. That gives us an indication of what percentage of pre-seed or perhaps deep tech hardware based startups there are. So 40 odd percent don't have any revenue, so that would normally be indicating pre-seed or deep tech. Years to add 10 million in annual revenue, about six years. So how's Cake going? Probably a bit behind. We're going good, but probably be a little bit behind that. Largest current or expected revenue sources. Subscriptions, 33%; Services billed by the hour, 12% in innovation. Weird, doesn't make sense to me at all. Purchase from our website, 8%. What have we got here? Countries with the majority of customers. We're getting about 80% of our revenue from Australia. It is a hard market to go global from, for various reasons, so I guess that kind of makes sense. And a lot of the startups would be early stage, so you start off in your home market and then expand. 12% out of the US. That's where Cake's going at the moment. And 8% from other. Plans geographies for expansion. USA, Australia, UK, New Zealand, India. For whom, again? Target industries for startups. Healthcare, government, financial services, energy, education, construction, manufacturing. Probably no major surprises there.

Oh, here we go. Target customer type. So mid-sized corporations , 57%; enterprise, 56%; SMBs, 48%; government, 23; consumer, 21. Universities are there, nine. So 9% of startups are targeting universities. Interesting. With whom? Oh, here we go, what are the teams made up of? Well, let's check this out. Average size of the founding team, 2.2, 27% female. Cool, good to know. I think funding for females is more around 2%, so it gives you a bit of an idea, the difficulty and disparity that those poor teams are suffering with. We're all trying to work on resolutions and solutions there. Average full-time employees, currently 7.7, 37% female, so about 18 members. Interesting. Question about interns, skills in the founding team. General business operations is the highest, 54%. So the skills of the founding team, business operations, general is the highest. Okay, I guess that's that. You've got to be very broad in a founding team, have that real broad skillset before you specialize. That makes sense. Strategy, project management and then software development's 41%, product management's 32%. So that's probably where you're starting to see that mix between  those business leaders, product and software leaders. I guess a lot of those people have quite general business experience as well. Anything funny or weird in there that I can see? Managing people, 32. Any big changes? Software development's down quite a bit from 50 to 41%. That's just showing, I guess, the no-code revolution and the advancements in software engineering. Skills they wish were in the founding team. Well, this is interesting. Marketing, yeah, I bet that's the case. Marketing and sales are the top two. Yeah, I bet that's the case. Getting these things off the ground is hard. And then the next two, software development and UX design. Yep, I relate with all that. Financial management's next, legal and accounting, graphic design's dropped down a lot. I wonder why that is.

Skills they plan to hire in the next six months: software development's way down, it's still the top, from around 60% down to 44%; sales and business development, 39%; marketing, 27; general operations, 19; UX is way down as well, from 28% to 15. So those are the top things. Current team skills tasks being outsourced. What are we outsourcing? We're outsourcing our accounting and our legal. Makes sense. You don't need all that in-house early on. Software development, graphic design, UX. With what? 56% of startups are now using AI for key team functions. Again, makes sense. It's been a real explosion in that. Here we've got a quote from the Guild Group. Amit Shah, the director, "When the capital markets for early stage venture's tightening, it's crucial for founders to have a solid grip on their finances. That means understanding cash flow and being prepared for different scenarios." Very true. There are now plenty of SaaS tools to assist with this, or you can simply roll with good old Excel and Sheets. Jeez, they've survived well, haven't they? Excel and Sheets. Job functions being performed by AI are content creation and writing. I'm using that every day. Marketing, software development, social media and communications are all the top ones. Top AI tools, obviously, OpenAI (81%), Midjourney (6%), and Google Bard with 6% as well. Obviously, huge leader there with Open AI, but they've got all sorts of growing problems at the moment, as we've been seeing. I was trying to use their platform this morning, and it was maxed out and not letting me on. Probably a good problem to have, not like the other problems they currently have. But anyway, I think most of us would swap those problems, sorry, our problems, if we could.

Here we go, most notable changes in support: co-working is down from 50% to 39%, accelerators is way up from 25% to 32%, seed investments are up, awards and competitions is down, events are way up, assisting with developing a pitch has doubled 25%. Cool. Top challenges faced by supporters: financial viability, I think you're always facing that, 42%, program awareness, not sure what that means, scaling 20%, talent availability. Top requests supporters receive couldn't help with: seed investment, B round investment or higher, A round investment. Everybody wants their supporters to help them with funding, but that can't always be done. Plus, most advisors and mentors aren't really into that kind of thing, and it's so time consuming, so that makes sense to me. Here, we've got a quote from Antler, Mike Abbott, partner of Antler. I just met Mike this week, actually. Awesome guy! love Antler. Cake partners well with them globally. Here, we have a quote, "A better future will not happen automatically. The world needs talented, driven and resilient people to build it." Love it. "By supporting Startup Muster, we're doubling down on our mission to back the world's most driven founders from day zero to greatness to ensure we make progress inevitable." Awesome, love Antler. I think they recently were announced as the world's number one early-stage investor with over a thousand investments globally, so that's super cool.

All right, I think we're probably, what are we at, page 18? Yeah, over halfway now. Hopefully, this is informative. I haven't done one of these before, but I thought for those of you wanting to capture this information, this would be a good way to take it in. Hope it is. If not, of course, you can just download it and read it, but if it is, then good. I'll keep going and hang in there. We've got about 10 pages to go. So here, we're in the supported bio section again. 46% of startup supporters focus on being specific to industries or themes. Okay. That makes sense. You got more power if you stick in a particular niche or vertical. Huge increase in green tech and shout out to Mick Liubinskas and Climate Salad. They're running an amazing community there. I'd say they've been having an impact on that. 19%, that's the top. I guess we're all really conscious of that at the moment, so very good. Lots of investment in that space as well. They've been bucking the investment trend, so that makes sense. Agriculture is up in second, 17%; health tech or biotech, 17%. I presume that's more health tech. I don't know of much biotech. MedTech with 17%. So HealthTech, Biotech, MedTech, probably dominating 34% there altogether. Holy moly. Super interesting. Hydrogen is 11% versus previously zero. That is weird. Someone fact check that or teach me what that is. I've never heard of a Hydrogen based startup and they've got 11%. Very cool. Love to know more about that. Advanced manufacturing. Yep, definitely, I do hear about that. AI has come down 14% to 11%. Oh, this is the best page so far. Shocks and interesting stats everywhere. There's less AI startups now, apparently, than there was in 2018. Come on, Australia, get with the program. Or maybe we're just dodging the hype. We do have a less hype-y market. That's cool. Then health is another 10%. So between health tech, biotech, medtech, and health, we've got 44%. Far out. Let's make sure that we get that out there. Environmental services is another 10. So between green tech, environmental, 29%. Add that to health, we've got 60% of the Australian market's doing environmental health at the moment. Crazy! That's a huge takeaway. What have we got down the bottom here? Software development. Boring. Robotics is there. Education. Blockchain. Ooh, good luck. VR and AR.

Top target themes for startup supporters. We can cover that. B2B, environmental, SaaS. Top entrance criteria for supporters: growth potential, demonstrable social impact, prior sector, technology, participants location. Supported by, continues, this is the network, this is the community, the startup community. What else have we got happening? Accelerator or incubator, 32%. All right, so 32% are using an accelerator. We went through Startmate, absolutely loved it. I recommend every startup does an accelerator. Some people complain about how much equity they get, but if you're starting out, you just absolutely need it. It speeds you up by months, if not years. I just talked to a founder the other day that'd be gone for two years and now they need to go to an accelerator because they haven't done one. So just do yourself a favor and get involved unless you're a second or third time founder. You've got a great network and you've some people to talk to. Startups that have benefited from a coworking space, 39%. Top reported benefits: networking, 59%; mentorship, 37%, way up from last time, peer support, funding and capital, way up from last time. So I guess maybe the investors are getting around these accelerators and co-working spaces more than they used to. No one seems to be caring about space and facilities anymore, which I guess is not that surprising. Fishburners is top of the rank there. I do need to get a bit more involved with Fishburners. Recently met one of their wonderful board members, so hopefully I can get a bit more involved with what they're up to soon.

Events, all right, what events are we running? Oh, events are way down. Average events attended per month down from 1.8 to 1.2. Post-pandemic, working from home, all that stuff, people just aren't going to events as much anymore. That kind of makes sense. Southstart, Top Festival, Adelaide. Everybody loves Southstart. They've been a real market darling since the pandemic. Sunrise by Blackbird, number two. Intersect FinTech, getting number three. Spark Festival, West Tech, I think that's on in the next couple of weeks over in Perth. Mentors, who are the top mentors? Australia's most recommended. We've got about 20 there. On the top, we've got David Burt and Adeline Chu. Plenty of industry leaders there, including Julia Spicer, Rachel Newman, Matt Allen, Mick Liubinskas. Heaps of good people around, lots of give first mentality. Areas where more mentorship is needed, sales and marketing, fundraising, strategy. Yep, absolutely. All right, funded by... okay, who's investing? How are we funding this thing? Startups that need funding to continue, about 70%. No surprise there, the first few years are pretty cash hungry until you can get product market fit and get unit economics under control. Average runway is about 9.9 months, so that means pretty much every startups out there are raising or preparing to raise or should be. It says they're currently trying to raise 55%, that makes sense, but it's almost probably half startups are raising all the time and it's a bit of a rolling situation. How's early stage funding today? Got better or worse? Pretty even, worse, better, seems to be about the same opinion around all the founders.

Funding sources: my own cash, 72%; family and friends, 34%. Interesting. R&D, 29%; private equity and VC, 28%. So 28% of these companies are VC funded or private equity, which would be the minority. State government grants, incubators or accelerators, 20%; federal government grants, 17%. So that's on top of R&D or maybe people answered the question a bit differently. Fundraising experience, never tried, 33; tried but couldn't raise as much as I needed, 18; tried and raised as much as I was seeking, 17. All right, what are the top grants? R&D, tax incentive, makes sense. New South Wales, makes sense, the biggest state by far. EMDG, yeah, that sucks now, they scaled us back by about 80% based on what we're supposed to be getting. Thanks, government. No grants, 39%. Makes sense, those grant applications suck. Top grants secured, R&D, EMDG. What else have we got? Top grants planned, pretty similar. Government, top recommendations to government. Oh, what do we think recommendations to government should be? Provide funding. Yeah, why not? So much money out there for everything else and startups are building the future, so I would agree with that. Improve and simplify the ESOP. Yes, definitely. We're definitely behind that. Engage more with startups, buy from startups, focus support on early stage startups specifically. Cool. What else have we got? Impact. We've got a bit of a thought cloud there on startup missing helping the world, sustainability, people, startup values, integrity, innovation, people, transparency, trust and collaboration. Interesting. The voice of the community. I guess we're getting towards the end and the impact section still. Top startup impact areas. Women, that means helping women participate and get it done. Preventing emissions, rural and remote. Top startup sustainable development goals. Innovation, industry and infrastructure, good health and wellbeing, decent work and economic growth, 28. What are the top challenges? What hindered founders circumstances? Yeah, by the oath. Financial, dependent, kids and mortgage? Yep, absolutely. Lack of access to investors? No doubt. Primary challenge, fundraising is three times everything else. Yeah, I get it. Totally keen to help change that.

The final page, what are our plans? Expanding sales significantly inside Australia is the top. Expanding outside Australia is number two. Undertaking a capital raise, joining a startup support program, those are the top. After 12 months, again, expanding outside, expanding inside Australia, undertaking a capital raise. And looks like the very last page, info sources for founders. Top news sources, Australian Financial Review. Hilarious. Startup Daily, great. Smart Ccompany, TechCrunch, SMH. Hopefully we can get some more. I've seen some really cool independent media coming through. Top books: The Lean Startup, Zero to One, Hard Things About Hard Things, Innovators Dilemma. Top online learning: YouTube, ChatGPT, 52% up from zero. LinkedIn groups, 29%. Interesting. We'll have to get in some. Okay, very good.

That was the run through of the Australian Startup Muster 2023. Tons of data in there. Helps us build our startups, helps us build our communities, so I thought it was worthwhile going through it for Startup Equity Matters. Yeah, let me know if you like the format. I can run through other content. It was a bit of an experiment. I hope that it's useful. Good luck with the founder journey. Peace.

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