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Global Startup Ecosystem Report 2019

Startup Genome report for 2019, hot off its release today in Amsterdam.

The headline numbers Sydney has been ranked 23rd in the world, and while Melbourne wasn't able to crack the top 30, it was noted as a growing ecosystem and given the 'Challenger' moniker in Startup Genome's 2019 report. The biggest news is that Sydney's ranking has dropped 6 places since the 2017 report, which in itself was a fall of one place from 2016. It performed well in connectivity and talent of the local ecosystem, but lagged behind in many other areas including performance, market reach and experience. Both Sydney and Melbourne were acknowledged as growing ecosystems, and it is important not to give the impression that we are moving backwards. But growth in absolute terms is not enough to hold onto your place when other cities and countries are investing more heavily and moving faster. The decline in Sydney's ranking mirrors the decline in national focus on technology and innovation. It's a warning sign that if we continue to let our support for new industries stagnate, we will fall behind. It is entirely within our power to turn this around, but it requires a long-term focus and commitment to do so.

StartupAUS analysis It's worth nothing that this report, like any ranking system, is an approximation. There are many different factors that need to be standardised, investigated and weighted to create one final ranking. Even getting access to data that is accurate is a challenge, let alone appropriately combining this from hundreds of cities across the world and coming up with a meaningful ranking at the end. Sometimes this leads to some questionable results, like Switzerland ranking as the world's most innovative country multiple years in a row on WIPO's Global Innovation Index. For our purposes, Startup Genome is one of the best global rankings available. It's results are roughly intuitive for those who work in tech, it has significant links with local ecosystems to get good access to data and it is very focused on startups in particular. There are some further factors that complicate this particular ranking. This year was the first that Genome included Life Sciences and Deep Tech components - both startups and metrics like R&D spend and patents. While this certainly negatively affected Sydney's rankings, Genome does include a table based on the 2017 metrics that show Sydney would still fail to make the top 20 under the older metrics. Harder to understand is how Sydney can have a growth index of 7 and fall from 17th to 23rd while ecosystems like Chicago have a growth index of 4 yet climbed from 18th to 17th. Our biggest clue is the report's analysis that Sydney's funding scenario 'remains static'. Perhaps this is an indication that some of the structural improvements within Sydney (and much of Australia) have yet to impact the metrics that Genome considers. There have been some large capital raises by venture funds in Australia that are yet to be deployed into the ecosystem, so there’s a lot of dry powder ready to be invested, even if it isn't yet in the hands of founders. Across the country, startup precincts like the Sydney Startup Hub, the Goods Shed in Melbourne, and The Precinct in Brisbane have been built and populated over the last couple of years, and they’ll be producing results for their local ecosystems and the country for years to come.

Why does this matter? It's important to remember that this isn't a niche issue that only effects a few tech founders. At the end of the day, a great startup ecosystem is about getting the conditions right for people to turn big ideas into big companies. That's a key driver for the success of the whole economy. It's important we get it right. Obviously, the ranking itself doesn't immediately change the underlying reality that it's trying to measure. But there's many ways in which these rankings can help or hinder an ecosystem. A high ranking is a measure of prestige, and a force multiplier for interest in the space. Startups and founders are more likely to move to an ecosystem that ranks highly in the world. Investors and enterprise customers are more likely to pay attention to and trust startups that come from high-performing ecosystems. Politicians are more likely to invest national resources in a sector that is globally competitive. Sydney's place in the top 30, and Melbourne's close behind, underline that Australia is entirely capable of building a technology sector locally. This isn't a pipe dream. Given the dominance of the US and some of the other usual suspects, there aren't many countries that feature any cities in this elite group - only 16 in total. But it also reminds us that we need to keep working at it, keep focused on it, keep pushing. Ultimately this is a race with a big prize, and at the moment we're in danger of being overtaken.

This article is republished from StartupAUS newsletter.

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