STARTUP ECOSYSTEM PRELIMINARY REPORT

GROWTH STAGES
FROM SEEDS TO KARRI TREES
Companies like trees grow through different
stages of development, from seeds and saplings
to giant Karri trees. At each stage different
challenges face young companies and different
support, regulation and funding is needed to help
them grow to the next stage.
Company stages are often conceptualised as a
combination of product maturity, market fit, risk,
staff size, customer engagement rates, revenue
levels, culture, company structure and market
trends.
At early stages founding teams often need
education and mentoring along with relatively
small amounts of investment. At later stages
access to large numbers of talented staff is
essential and greater amounts of capital.
Additionally at each stage young companies
provide different value to the ecosystem
surrounding them. Small early stage companies
are often more efficient at developing innovative
technologies and business models and testing new
markets, unburdened by corporate legacies.
On the other hand large mature companies can
deliver high quality sustaining technologies to
large numbers of people and employee large
numbers of people. As companies mature
increasing opportunities arise for early investors,
employees and founders to realise the inherent
value captured in the company, through
acquisition, dividends and listing on public
markets.
At each stage risk and failure rates generally
decrease, unless of course the market has
radically shifted.
Infrastructure at each stage also varies. At early
stage skills training, education and research is
supported by the likes of universities, courses
and community groups. At the seed and company
formation stage pre-accelerator programs such
as Founder Institute, and accelerators like
Amcom Upstart helps small teams develop
innovative technologies and business models,
often supported by relatively small amounts
of seed investment from Angel investors, and/
or government grants like the Department of
Commerce’s Innovation Vouchers Program.
By comparison to more advanced technology
industries such as those seen in the USA and
Korea, and the mature resource sector in Western
Australian, the WA digital technology industry
is still in a relatively youthful phase. This is
both a function of the technology industry
being relatively new when compared to older
industries and the State’s focus on the resources
sector. However with the increasing impact of
technology on the global economy this is certain
to shift, as our estimates show.
COMPANY GROWTH STAGES
To understand the needs, challenges and
opportunities for the industry we examined the
industry through the lens of this stage model -
mapping the lifecycle of technology companies
from: being interested in entrepreneurship to
starting a company and breading a unicorn (a term
commonly used to describe technology companies
that have achieved a $1 billion plus valuation).
We assumed several stages/states based around
estimated revenue brackets. Given revenue is
challenging to identify for private companies in
most cases we have used staff size as a proxy for
revenue:
1. Potential Founders: a portion of whom
(~20%) would actually form a startup.
2. Seed Stage Startup: $0 to $1M in revenue,
3. Early Stage Startup: $1M to $10M
4. Growth Stage Tech Co: $10M to $100M
5. Later Stage Tech Co: $100M to $1B, and
6. Unicorn Stage: $1B+
The graph on the following page shows our
estimated numbers for startups and later stage
technology companies in Western Australia as
of 2015, along with projections for potential
numbers in 2025 given appropriate support. By
way of comparison we have included estimated
numbers for Tallin, a small Estonian town with a
population of 400,000 that gave birth to Skype in
2003.
As companies mature large amounts of capital
and more experienced mentors can be sourced
from entities such as the Federal Government’s
accelerating Commercialisation program, or
Venture Capital firms (of which there are virtually
none active in Western Australia). Beyond this
the public markets traditionally provide access
to larger funding pools, however given Western
Australia’s history with listing small cap resource
companies and the dearth of funding opportunities
across most stages the ASX has increasingly
become a viable option for relatively young
technology companies.
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