Annual Startup Muster shows falling start-up numbers and fewer women founders

Australia’s start-ups have become fewer, older and more male, an annual survey of 3476 founders and their service providers has revealed.

In a sign that the government’s 2015 “ideas boom” has busted, the 2018 Start-Up Muster report estimated the number of ongoing start-ups in Australia has fallen from 1675 to 1465 since 2017, with the number launched between the current survey and the previous one falling to 712 from 1291.

The survey, which is in its fifth year and is paid for by University of Technology Sydney (UTS), Atlassian, Google, the federal Department of Industry and MYOB, defines a start-up as an early-stage business that uses technology to capture a “large addressable market” in a “scalable way”.

The fall in the number of start-ups was seized on by the federal opposition spokesman for the digital economy, Ed Husic, as evidence the government had “abandoned” the sector after using it as a “political prop” before the 2016 election which saw its majority slashed.

‘Political prop’

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“Besides charging up jobs growth, start-ups help deliver smarter ways of doing things for existing businesses in the wider economy,” Mr Husic told The Australian Financial Review.

“If our start-up base contracts, what does that say for our future economic and job opportunities?”

Mr Husic said his feedback from start-up founders was that technology skills shortages, exacerbated in Mr Husic’s view by Coalition cuts to TAFE and university funding, had stunted growth in the sector.

“It’s definitely starting to feel like we’re in a post-‘ideas boom’ Australia, where a burst of enthusiasm from government and support organisations helped fuel the creation of a huge number of new tech start-ups, but if we want a growing tech ecosystem, then support needs to grow as well,” said Murray Hurps, chairman of Start-up Muster and director of entrepreneurship at UTS.

“Australia’s future depends on Australian companies generating exports, investment and creating jobs. It took Atlassian 13 years to reach its initial public offering at a valuation of $4.3 billion – what are we doing today to create the next Atlassian-sized IPO in 2031?”

Government silence

Industry Minister Karen Andrews, whose foreword to the survey highlighted the $2.4 billion the Coalition had invested in research, science and technology, was contacted for comment, but had not responded in time for publication.

The reduced growth in new start-ups meant there was a leap in the average age of existing start-ups, from 32 months in the 2017 survey to 36 months. The first Start-Up Muster in 2014 recorded an average start-up age of just 20 months.

The trend to bigger, fewer start-ups has seen the proportion of start-ups with at least one woman founder decrease, from a high of 25.4 per cent in 2017 to 22.3 per cent in 2018, a proportion below the 2016 level.

Slightly more encouraging for gender diversity, 31 per cent of start-ups reported a woman on their founding executive team.

AI on the rise

Meanwhile, artificial intelligence (AI) overtook financial technology as the industry being targeted by the most Australian start-ups, leaping from 14.5 per cent in 2017 to 20.6 per cent in 2018.

Ms Andrews’ foreword said this vindicated the government’s decision to spend $30 million over the next four years strengthening Australia’s capabilities in machine learning and other AI-related disciplines.

The financial industry is being targeted by 18.1 per cent of start-ups, followed by education (14.7 per cent), internet-of-things (13.6 per cent), marketing (13.4 per cent) and medicine (11 per cent).

“Artificial Intelligence coming out as the new top industry for Australian start-ups has been a huge surprise,” Mr Hurps said.

“I think it’s time for people to start thinking about entrepreneurship as a way of leveraging AI, rather than waiting to be replaced by it.”

The larger profile of start-ups was reflected in intentions for their next fund-raising, with 40.4 per cent planning a raising between $1 million and $10 million, and 6.9 per cent a raising above $10 million.

The research and development tax incentive, which will be slashed to a refund of 38.5 cents in the dollar under reforms currently before Parliament, was the most oft-received government assistance, followed by NSW Government “MVP” grants and federal Accelerating Commercialisation grants.

Silicon Valley bible TechCrunch was considered the top news source by survey respondents, followed by The Australian Financial Review, Startup Daily, SmartCompany and Business Insider.

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