Australia falls to 9th for startup ecosystem

australia globe
Australia was among the top five countries in 2019. Image - Canva.

The Global Startup Ecosystem Index, which has been updated annually since 2017, ranks 1000 cities across 100 countries using a sophisticated algorithm that considers dozens of parameters.  

Despite Australia being among the envy of the world for much of last year and earlier this year, it has not fared well in the rankings. Most of the cities fell  in rankings. Perth, in particular, has declined significantly.

However, it isn’t that the startup scene has declined per se; it’s more than many other ecosystems have become more competitive in recent times.  

“As the world manages to slowly but surely innovate its way out of a devastating pandemic, it is clear that a new reality has emerged,” explained Eli David, CEO of StartupBlink, a startup ecosystem map and research centre that produces the report with various global data partners

Firstly, trends such as E-commerce and remote work have accelerated at unprecedented speed,accelerating us toward an inevitable future where our digital presence is at times more dominant than our physical presence.

Eli David, StartupBlink CEO

“Secondly, major geopolitical changes are underway. A few startup ecosystems (notably China) are in the process of decoupling from the global startup ecosystem. Our rankings show that those efforts are so far successful, as Chinese cities rapidly close gaps with their western counterparts.”

Since 2019, the United States and United Kingdom have held the first and second places respectively. Australia on the other hand has lost ground, from fifth place in 2019 to ninth place this year – excluding the Netherlands, this is the greatest decline in ranking of any country in the top ten.

What about the cities?

In terms of cities, no Australian ones rank in the top 20. The top two cities, rather unsurprisingly, are the San Francisco Bay area followed by New York City.

However, there are some surprises in the top ten.

London, which was in third place in 2019, has fallen to fifth place. Beijing has catapulted from 19th place to third place. Shanghai, which was not among the top 20 in 2019, is now in seventh place. In fact, only eight cities of the top 20 are American – many cities in developing countries make an appearance such as Sao Paulo and Bangalore.

In terms of industries, the strongest ranked industry in Australia is E-commerce and Retail Technology, of which we rank third worldwide.

Sydney, the highest ranking Australian city, fell by five spots to 36th. Melbourne is not far behind at 39th. Brisbane fell out of the top 100 by 34 points to 112.

So what about Perth? Well, Perth fell by 39 to 175th place.

The ranking of Australian cities within the report.

While not specifically outlining why Perth fell by so much, it does note “Energy & Environment” are “overperforming” industries.

Australia has a solid startup ecosystem, with few of the country’s startups becoming well known global brands, such as Canva and Atlassian. However, it is still a young ecosystem, and considering how fast other nations are developing their startup hubs, Australia needs more inspiring startups to scale globally.

Global Startup Ecosystem Index 2021 report

However, the report noted some positive aspects of the Australian startup ecosystem.

“Australia enjoys a smart and proactive approach from its federal and state governments, supporting the growth of its startup ecosystems.

“Another advantage we have witnessed in Australia is the direct involvement of universities as active stakeholders in the development of the city ecosystems, which adds to the inertia of creating an entrepreneurial culture and forges connections that improve.”

At a local level, this is evident here in Perth where there are several government programs in place – such as the Accelerating Commercialisation grants– along with active participation from the tertiary sector, such as via the Curtin Ignition program.

The report doesn’t shy away from suggesting what Australia needs to overcome to make its way up the ranking. It suggests to “rekindle growth” by generating more high quality startups and unicorns, however, it does concede Australia has significant hurdles.

”Some significant obstacles facing the growth of Australian ecosystems are the time difference and the traveling time between Australia and the US and Europe, which create challenges for partnerships, sales teams, and integrated remote teams.”