The 2024 Global Startup Ecosystem Report (GSER) provides a comprehensive analysis of the world’s top 40 and emerging 100 startup ecosystems, offering insights into global trends and conditions. The report highlights the impact of the ongoing "VC Winter," a period of reduced venture capital availability driven by inflation, economic uncertainty, and post-pandemic factors. Despite this downturn, the GSER identifies bright spots in Generative AI (GenAI) and CleanTech sectors, which have seen significant investment growth. The report also delves into the methodology behind ecosystem rankings, emphasizing the importance of understanding what drives these rankings and their implications for innovation policy and practice.
Global and Australian Conditions
The GSER reflects on the global decline in Series A funding, which fell by 46% in 2023 compared to 2022. Large exits also decreased, with a 47% drop in 2023 following an 86% decline in 2022. Startups are now securing Series A funding later in their lifecycle, with the median age increasing from 3.4 years in 2019 to 4.2 years in 2023. Similar trends are observed in Australia, where angel and pre-seed funding dropped by 68% between 2023 and 2024.
However, the report highlights growth in GenAI and CleanTech sectors. GenAI startups accounted for 18% of global VC funding in 2023, with investments tripling compared to 2022. CleanTech also saw a 2.5x increase in late-stage funding in H2 2023 compared to H1 2020. In Australia, CleanTech led in the number of deals, while GenAI topped investor interest, driven by advancements like ChatGPT and climate-related policy initiatives.
GSER Methodology and Analysis
The GSER evaluates ecosystems using five weighted categories: Performance (30%), Funding (25%), Market Reach (20%), Talent & Expertise (20%), and Knowledge (5%). The index comprises 76 indicators, 45 measures, and 42 metrics, with a focus on firm exits and funding events. Key metrics include the count of 50million+and50million+and1 billion+ exits, which significantly influence rankings.
The 2024 report introduced methodological changes, such as shifting from patent counts to percentage growth to avoid rewarding quantity over quality. It also incorporated data from CB Insights, contributing to an 8% increase in ecosystem value. Additionally, the definition of startups was expanded to include older firms, leading to a 36% rise in ecosystem value for top regions. The report also adjusted geographical attribution, now including the value of top startups based on their headquarters and origin.
Australia’s Position in the GSER
Australia’s startup ecosystems are prominently featured in the GSER, with Sydney and Melbourne ranked among the top ecosystems, while Brisbane and Adelaide are categorized as emerging ecosystems. Sydney’s higher ranking is attributed to its superior performance in funding access and quality, despite Melbourne scoring better in cost efficiency, global reach, and startup success.
The report notes significant increases in market reach for Australian cities, driven by methodological changes that merged connectedness into market reach. However, knowledge ratings declined due to adjustments in patent calculations.
Key Takeaways and Reflections
- Methodological Approach to Innovation Evaluation: The GSER underscores the importance of tracking firm progress and enabling factors like knowledge and cost. While metrics like $50 million+ exits may not be universally relevant, they provide valuable insights into ecosystem health.
- Local Ecosystem Values: Rankings should not overshadow what makes an ecosystem unique. Communities may prioritize livability and inclusivity over sheer growth, raising questions about whether regions like Adelaide or Hobart should aspire to emulate larger ecosystems like San Francisco or Sydney.
- Consistent Policy Support: Governments must maintain consistent innovation policies rather than relying on sporadic grant programs. Supporting the broader ecosystem—networks between investors, incubators, and programs—is crucial for sustained growth.
- Investment in Data and Measurement: Australia needs a centralized, reliable source of startup data to complement global reports like the GSER. While platforms like Cut Through Ventures and Techboard provide valuable insights, a national approach is necessary to address data gaps and improve measurement accuracy.
Conclusion
The 2024 GSER offers valuable insights into global and Australian startup ecosystems, highlighting challenges like the VC Winter and opportunities in GenAI and CleanTech. By understanding the methodology behind rankings, stakeholders can better interpret results and tailor policies to support local innovation. However, the focus should extend beyond rankings to include community values, consistent policy support, and robust data infrastructure. As Australia continues to evolve its innovation ecosystem, collaboration among stakeholders will be key to driving meaningful impact and inclusivity.