$12bn richer, Victorian start-ups target NSW and the world

Watch out NSW, start-ups from Victoria are now worth $103bn, have raised $668m this year and show no sign of slowing down.

Victorian start-ups are catching up to NSW, having reached a collective $103bn in value and raised $668m in the first 11 months of this year.

The sector, which LaunchVic chief executive Kate Cornick believes is hot on the tail of NSW, grew by an estimated $12bn in a little less than 12 months, according to data from LaunchVic and venture capital intelligence platform Dealroom.co.

Dr Cornick, who has held the role of chief executive at LaunchVic for several years, said her state’s start-up ecosystem was the fourth-fastest growing in the world, according to reports she had seen, and there was no sign of slowing down in the year to come.

Health tech and biotech were the strongest performing start-up markets, raising a collective $180m this year. Fintech followed with $100m, followed by real estate at $90m, event tech at $88m and marketing at $36m.

Telecom, robotics, food, recruitment, education and energy raised between $8m and $20m.

“I think confidence in the market is higher than it was at the start of the year and investors have got money,” Dr Cornick said. “They are willing to invest, but they’re being very scrupulous about how they go about investing and taking their time to do deals in a market.”

There are now about 4000 more people employed in the sector compared to July 2021. Today, 35,600 people are employed by Victorian start-ups across the country.

Amid global economic pressures and rising interest rates, the amount of capital flowing into start-ups had been critically reduced in 2023 compared to 2021 and 2022, when “you saw a lot of frenzy particularly around hot deals”, Dr Cornick said.

“A lot of start-ups benefited at the time, but what we saw was deals being closed as quickly as they opened,” she said. “People would jokingly say, ‘we’re doing due diligence around the boardroom table’ – meaning that they were doing due diligence after the investment had been made.”

In 2021 and 2022, more than $2bn was invested in start-ups in Victoria each year, while $10bn and $8bn respectively was invested nationwide.

This year, the $668m raised in Victoria accounts for about one sixth of total investment in the Australian start-up ecosystem, which attracted a total of $4bn.

Across other states, NSW recorded $2bn in investment, Queensland $297m, ACT $142m, South Australia $134m and Western Australia $56m. The ACT this year overtook SA and WA on the venture capital investment ladder to sit in fourth place.

Dr Cornick describes 2021 and 2022 as “bumpy years”, adding: “I don’t think we’ll go back to that level of investment for a little while until the economic climate globally becomes more confident.” The drop in investment this year was not a reflection of the sector shrinking but rather what Dr Cornick describes as “a very sensible market”.

Over the past two decades, more than 1000 Victorian start-ups have received investment from venture capitalists, with about 25 per cent of those raising $5m or more. That $5m mark sits just below the global average of 30 per cent having raised that much. In Victoria, about 15 per cent of those start-ups have staged an exit via a public listing, strategic sale or buyout, which lagged the global average of 30 per cent.

Dr Cornick said NSW had a more mature ecosystem, with many start-ups in their scale-up stage. However, in a few years Victoria would be well placed to outnumber NSW with more start-ups at an earlier stage.

“We were once a long way behind (NSW) but we’re now certainly competing in terms of the number of start-ups, and I think that is really good for Australia,” she said.

There were now more than 3200 start-ups in the state, a number that increased more than 20 per cent from the 2650 recorded the previous year.

However, when it came to comparing its performance, LaunchVic typically put its numbers up against other countries rather than Australian states, Dr Cornick said.

LaunchVic was also preparing next year to open the Hugh Victor McKay Fund, which provides up to $200,000 in equity-free support to agriculture start-ups.

“We want innovative companies being built here, we don’t just want to purchase technology that’s developed overseas and the sleepy sales arm of tech companies,” Dr Cornick said. “We want to be home growing some of the world’s best technologies.”

Originally published as $12bn richer, Victorian start-ups target NSW and the world