OPINION: WA’s startups and scale-ups have hit a record valuation, but continued investment is needed.
Western Australia’s early stage innovation ecosystem consists of 1,000 startups, several angel investors, venture capital funds, universities, corporates and levels of government.
So, from where we are now, in 2024, how is the startup and innovation sector doing in WA, and how would we know?
Measure it, manage it.
As the adage goes, if you don’t measure it, you can’t manage it.
To measure the startup sector, we can turn to Dealroom, an online data platform run out of Amsterdam, Netherlands, since 2013.
Dealroom tracks more than 3 million startup companies globally, as well as their funding rounds.
In WA, you can follow along at wa.dealroom.co, a free, public site made available by the WA government.
Dealroom uses artificial intelligence to track reports of startup fundraisings, as well as providing subscriber account moderator access to local jurisdictional leads.
Most states in Australia subscribe to Dealroom, so the platform can be used to follow our innovation sector over time, as well as draw comparisons with other centres of startup activity.
According to Dealroom WA, there are 1,001 verified startups and scale-ups (former startups that are now growing fast). As Dealroom collects data on all these companies’ fundraising successes, they can impute the valuation of each company and, thereby, the sector overall.
They report that WA’s 1,000-strong sector hit the $10 billion-plus valuation mark for the first time in 2024.
To put that into perspective, Business News recently reported that the combined total valuation of all WA-based ASX businesses was $349 billion.
So, the startup sector in WA is 35 times smaller than those more established public businesses.
This is not altogether surprising. Startups are trying something new, and the most likely outcome is that they will fail. They are usually woefully under-resourced, are not yet fully commercialised, but have the potential for high growth.
And growing they are.
Back in 2017, the total combined valuation of WA’s startups and scale-ups was $814 million. In that year, they attracted $66.9 million in funding.
At the time, I lamented in this column this relatively low level of funding, equivalent to only 0.4 per cent of total equity capital raising for WA companies that year.
By 2020, the sector had grown to a $2.9 billion valuation, a three-fold increase in three years. In a further four years it tripled again, to $10.7 billion currently (August 2024).
One company – Virtual Gaming Worlds, or VGW Holdings – accounts for a third of the sector’s valuation by itself, with $3.4 billion. The top dozen companies account for another third.
This is to be expected. A thousand companies may spit out one unicorn (private company valued at more than $US1 billion) and perhaps a few more ‘soonicorns’ worth more than $100 million or so. The rest, for the moment, are picking up relative table scraps.
From its comparatively low levels in 2017, funding for the sector has finally shown some life.
By 2021, total investments shot up to $183 million and hit $246 million in 2022, as the sector snapped out of the global pandemic, attracting higher sums and valuations.
Everything has fallen since, but the year-to-date figure for 2024 looks like it will sail past $100 million, well above pre-pandemic levels.
The thousand companies now collectively employ 8,892 people, so real jobs are being created.
Overall, in WA, the early stage innovation sector is on a scale-up phase as the number of startups, investments and valuations expand rapidly.
Of course, it’s a chicken-and-egg question: does more investment create more successful startups, or do more startup successes pull in more investment?
Probably both, but with the average investor wanting to have tech somewhere in their portfolio, there should be some good pickings among the 1,000-plus startups featured on the Dealroom WA platform.
• Charlie Gunningham has spent 25 years in WA’s startup sector in various roles
