Funding shortfall stifling WA startups: Report

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Panel Startups Unwrapped
(L->R) Kate Harris Slade, Tim Brewer, Sheryl Frame, Peter van Bruchem and Marcus Tan

This is not anything we’ve not heard many times before, but a new report (‘Startups in Perth Unwrapped‘) from Sydney-based consultancy Think & Grow has confirmed that a lack of capital for local startups is limiting the sector, and stifling its growth and impact.

The report interviewed several startup founders and members of the ecosystem, over many months, and was published yesterday. On Wednesday night, 100 people made it down to the Flux basement to hear some of the authors and contributors to the report discuss its main findings:

  1. Significant gap in funding for female-led businesses: female-led startups were raising an average of $320K per funding round in comparison to an average of $1.2 million per funding round for mixed or male-led teams. Men are funded four times more often than women and with raises that are three times larger than women.
  2. WA is Australia’s fourth-highest funding state in 2020, having raised a total of $270 million last year. The western seaboard follows NSW, VIC and Queensland in annual total funding raised in 2020.
  3. Private funding proving to be a challenge for Perth’s startups due to a combination of factors, including difficulties in identifying private funding sources and an overall lack of capital being funneled into the tech and startup ecosystem.
  4. Funding trends in WA are inconsistent with national patterns: WA startups are going into public markets (ASX) much earlier than their counterparts in other states. National trends reveal that a majority of startups are seeking private funding, not going to the ASX
  5. Some sectors are attracting more funding than others: in 2020, the top sectors for funding were: Health & biotech, Safety & security, Robotics, Cleantech, Fintech and Engineering & construction

Despite the challenges, the report has found Perth is primed for a boost in innovation. The city boasts a “tight-knit and supportive community and ample opportunities for expansion.”

Packed FLUX basement Wednesday night

Jonathan Jeffries, co-founder and partner at Think and Grow said that despite being the underdog, Perth has all of the characteristics of the ideal launchpad for Australian startups.

We have found [Perth’s] position unique compared to our other locations around the world. In many ways, the state’s major industries and the innovations that have been born out of these sectors – for example to solve mining problems – primes the region for success. However, this hasn’t led to great amounts of [startup] success as yet.

Jonathan Jeffries

“Geographically, Perth shares its time zone with over 50 per cent of the world’s population making global collaboration seamless. Yet this is untapped in many ways and it certainly should be a bigger drawcard to Australian and New Zealand businesses seeking to expand their global footprints.

“As it stands, the ecosystem is facing some pressing issues – namely, funding and talent roadblocks. Once we see a few more success stories begin to pop up, Perth’s startup community will firmly position itself as a thriving ecosystem, which will inherently open up streams of funding into the region’s startup sector. This will incentivise the quality talent that already exists in the region to stay and grow with the city and its bustling community and will hopefully enable future unicorns, like Canva, to stay put.” he said.

True, but without the funding, you are less likely to get success stories. Chicken and egg.

Derek Gerrard presented to the report launch, and told the gathering that while WA has 10% of the population, it delivers 15% of Australia’s GDP (economy). However, it only has around 1% of total venture funds in the country, despite Perth being the city with the most self-made millionaires in the world.

Where are all the investors? Why are they missing this exciting early stage tech sector? It’s something many of us have been asking for nigh on 20 years now.

VCs missing in action

While Derek heads up the only, seriously active VC for early-stage in Perth with the RAC-backed $23M (BetterLabs Ventures) fund, he argued that Perth really needed $300M in early-stage venture funds to be on a par with the east coast.

Derek Gerrard. Photo – Startup News

Perth really needs several funds like Better Labs; then we could see collaboration on deals, and some competitive tension between funds chasing the best companies.

Derek Gerrard, BetterLabs Ventures

Everybody say AYE!

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The full report can be downloaded here.