OddUp says Melbourne’s investor pool is “atrocious”: Other insights on the Australian ecosystem from the global startup research firm

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A global startup research engine has opened a new office in Melbourne and released reports on the ecosystems in Australia to coincide with the launch.

The “startup about startups” aims to provide analysis and data on emerging startup ecosystems around the world in order to educate and inform investors and entrepreneurs.

Despite having a strong base of tech talent, OddUp founder and CEO James Giancotti says Melbourne’s investor pool is “down-right terrible”.

“I knew it was bad but compared to other cities it was atrocious,” Giancotti tells StartupSmart.

“Unfortunately that’s to do with Melbourne’s love of property not tech talent.

“Usually talent and investors go hand in hand, but Melbourne is losing on investment in Asia but it’s winning in talent. The talent in Australia is on par with Silicon Valley but 30-40% cheaper.”

To turn this around, Giancotti says a series of further tax incentives could help shift the focus from property to tech.

“It’s a great seed ground but Series A’s and beyond that is very hard,” he says.

It’s also important that the ecosystem works to convince tech talent to make the jump from big corporates into startups, he says.

“The talent is stuck in corporate nine to five jobs, not in tech,” Giancotti says.

“If you were to pull them out you would turn Melbourne around and make it one of the world’s top 10 startup cities in the world.”

Melbourne versus Sydney

OddUp provides rankings of Australia’s best investment firms and startups in Melbourne and Sydney.

In Sydney, the research firm puts Blackbird Ventures, Black Sheep Capital and Elevation Capital on top, while Square Peg Capital, Oxygen Ventures and rampersand are leading the way in Melbourne.

Giancotti says Sydney boasts a larger pool of investors than its crosstown rival and, as the home of the ASX, has seen a series of successful startup exits. These include DroneShield, which raises more than $7 million through an IPO, and Freelance, which raised nearly $20 million through a public listing in 2013.

“There are more fundraising opportunities,” Giancotti says.

“Sydney is growing slightly faster than Melbourne, but Melbourne has more impact going forward. Melbourne can catapult them from a tech perspective.”

OddUp’s report finds that both cities rank well in terms of co-working spaces, while Sydney is in prime position to become a global fintech leader.

“If they do fintech right they could lead as fifth or sixth in the world,” he says.

“Sydney has to be very fast about that or they’ll lose the opportunity.”

The top startups in each city

Of the top rated startups in Melbourne and Sydney, Giancotti says they share one critical attribute.

“They’re companies that have clearly got a global element,” he says.

In Melbourne, LIFX hardware tops Oddup’s list of best startups followed by Culture Amp, Vinomofo, 99Designs and CareMonkey while Sydney is led by BigCommerce, Invoice2Go, Airtasker, Expert360 and Hipages Group.

These startups have also demonstrated rapid growth at an average rate of 20-40% month-on-month, which Giancotti says is relatively easy to pull off in the first couple of years but becomes difficult to sustain from month 24 to 36.

The average valuation of startups overall in Melbourne is $8 million compared with $27.6 million in Sydney, $74.7 million in Singapore and $564 million in Beijing.

About 50 startups were analysed in each Australian city with the support of Oddup’s on-the-ground team.

Giancotti is aiming to increase this to 100 in the months to come.

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Dinushi Dias is a journalist at StartupSmart and multimedia content producer. When she’s out of the office, she works on social projects with her We Love It Productions family and buddying filmmakers.
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  • Boyd

    Some great points in this article

    >“If they do fintech right they could lead as fifth or sixth in the world,” he says.

    I would naturally love Australia to be a giant in the fintech space, in fact in all tech spaces! Sadly, despite some good efforts by the govt and a few industry proponents, our love of property and equities means there are too few people investing in the space at the moment

    There are a few deep pockets- mostly tapped out- and about 45 VC companies who, if they actually do invest, well, we’re talking peanuts in the scheme of things.

    If we look at the S&P500 they have 20% allocation to IT. The ASX200 is about 1%. It will grow, it just needs time, maybe 20 years to get to 3% or 4%

    In the meantime I would hate to calculate the time that is being wasted by thousands of companies pitching unsuccessfully to the same handful of people who in all likelihood are not going to invest in them.

    There’s a lot of inefficiencies to address

  • Christopher Grigg

    Interesting, I’d like to know the details about Brisbane? It has a small but growing startup ecosystem!