The tech sector in WA is slowly maturing and the focus on startups is laying the groundwork for future growth.
The tech sector in WA is slowly maturing and the focus on startups is laying the groundwork for future growth.
The mining downturn between 2014 and 2016 was a fruitful time for Western Australia’s tech sector, which attracted record support from investors.
WA-based tech firms raised $132 million in 2015, according to deals listed on the BNiQ Search Engine, including nearly a dozen backdoor listings on the ASX.
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Investor support has been patchy since then, but tech firms have continued to attract substantial sums in both the public and private markets.
Prime examples have included Power Ledger raising $34 million through its ‘initial coin offering’ and HealthEngine raising $26.7 million from private investors.
Listed tech companies with compelling growth stories have also attracted investor backing, with robotics company FBR raising $35 million late last year, and medical marijuana stock AusCann Holdings raising $33 million this year.
To place this in context, however, these amounts pale next to the money raised by dozens of mining and exploration companies, year in, year out.
In fact, FBR and AusCann are the only WA-based tech companies that are ranked among the state’s top 100 listed companies by market value.
They are also still essentially R&D companies, focused on developing their products.
The rare beast in WA is a tech company with a mature business, with strong cash flow from paying customers.
Only a handful of companies fits this description, and most of them were named in the inaugural WA Information Technology and Telecommunications Alliance (WAITTA) hall of fame in June.
The hall of famers included online medical booking service HealthEngine, which also won the Mal Bryce WA tech company of the year award.
The hall of fame also comprises edtech business SEQTA Software, agtech business Agworld, and messaging platform ClickSend.
Perth-based venture capital fund Yuuwa Capital is an investor in Agworld.
The farm software business was launched by Doug Fitch in 2009 and has grown to have 30,000 users across 15 countries supported by 60 staff globally, including 35 in WA.
General manager Australia Simon Foley said a big focus was on getting the basics right for its customers, who are farmers and agronomists.
“We focus on what people need and use, and ensuring they have a seamless uninterrupted experience,” Mr Foley told Business News.
“People need to trust in their technology.”
Doug Fitch.
Another success story backed by Yuuwa is Curtin University spinout iCetana, which is commercialising a live security monitoring system that uses machine learning.
Led by chief executive Chris Farquhar, the business has installations in 10 countries monitoring more than 10,000 camera streams.
Yet another Perth tech company building a global presence is VGW Gaming, which achieved rapid growth in revenue to $155 million in the half year to December 2017.
Yuuwa co-founder Matt Macfarlane said there was a common link across all these companies.
“None of them are tied to the mining sector,” he said.
“They don’t need to be in mining to execute and grow amazing businesses.
“They also have a strong focus on execution and getting customer revenue.”
Mr Macfarlane said businesses that survived the initial five to seven years often went onto a rapid growth trajectory.
“That’s when they really start to shine,” he said.
But Mr Macfarlane acknowledged plenty of tech startups had fallen by the wayside, including companies that had made it as far as an ASX listing and raised millions of dollars in the process.
The latest example was Perth-based Velpic, which had developed a cloud-based training and education solution for business customers.
The company announced last month that the majority of its staff had been made redundant, and this month said it had accepted a takeover offer from national firm Damstra Technology.
Mr Macfarlane said the success stories, combined with Perth’s startup ecosystem, meant there were far more budding tech companies in operation.
“It’s funnel economics; there are way more because people have seen what can be achieved,” he said.
“That means we can look forward to more success stories in future.”
Seqta co-founder Sharon Grosser, whose company won a Business News Rising Stars award in 2015, said she was humbled to be accepted into the hall of fame.
“When we started Seqta over 10 years ago, we never dreamed it would grow to what it has,” she said.
“It’s taken a lot of hard work from a lot of talented people to build Seqta into the reputable, client-focused provider it is today.”
Funding for Seqta’s growth has come primarily from high net worth investors, allowing the Joondalup-based business to expand nationally.
South Perth-based ClickSend illustrates the manner in which many tech companies achieve accelerated growth after several years of grind.
Founded by Matthew Larner in 2006, the privately owned business has enjoyed rapid take-up of its universal messaging service.
It now boasts more than 7,000 customers including liquor chain Dan Murphy’s, retailers Coles and Woolworths, Uber, Greenpeace, Curtin University, Deloitte and Australia Post.
While the business was focused initially on being an SMS gateway (for text messages), it has broadened its offering to cover multiple marketing channels, including voice and fax, and even has a print centre to support direct mail.
The naming of HealthEngine as WA’s tech company of the year came at a delicate time for the business, which has grown to have more than 130 staff, mostly in Perth.
The company enjoyed 87 per cent growth in active users over the course of 2017 to 1.5 million per month.
It also achieved 305 per cent revenue growth over the three years from 2015 to 2017.
Co-founder Marcus Tan described 2017 as a landmark year for HealthEngine.
“From moving to new offices in Perth and Sydney, to launching a new product every four weeks on average, 2017 has been a year when being ‘happy in the hustle’ has never been truer,” he said at the end of last year.
The past few months have been a different story, with the company forced to deal with a succession of major problems concerning its use of client information and casting doubt on its independence.
The business responded with extensive reviews of its partnerships, processes and policies and major changes to the way it operates.
“These haven’t been easy decisions to make,” Mr Tan said in a letter posted on the company’s website.
The changes included: ceasing its third party referral service; ceasing the publication of user comments on medical practices; and ceasing third party banner advertising on its website.
It also plans changes to give users greater visibility and control over the way it manage their personal information, and will establish an advisory group.
