SEQ Startup Ecosystem Report 2014

A report on the people, groups and companies involved in developing South East Queensland’s startup ecosystem.

Jonah Cacioppe
Dec 1, 2014 · 9 min read

Australia’s ‘Sunshine State’ is beginning to establish itself as an international tech hub with the likes of Accel investing $35M in local invoicing app Invoice2go, Expedia buying travel booking site Wotif for $703M, Twitter acquiring music streaming service We Are Hunted and indie gaming studio Halfbrick topping 300M+ installs with blockbuster games such as Fruit Ninja. To dig a little deeper into the regions vibrant tech ecosystem, we released a report on South East Queensland’s (SEQ) startup ecosystem.

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The reports cover page with a simplified network map of the tech community showing key nodes.

We’re really pleased to be releasing this rather large report on the startup ecosystem in South East Queensland (SEQ), Australia. The report is the first time SEQ’s startup community has been comprehensively quantified. It identifies key founders, angels, startups, incubators, VCs, events and hubs within the community; benchmarks it against other tech ecosystems; and identifies critical issues and opportunities.

We also mapped fund flows and attempted to identify all the funding rounds within SEQ since January 2009. Much like our previous report for the City of Perth.

The project was done in partnership with the Queensland Department of Science, Information Technology, Innovation and the Arts; Arts Queensland; Brisbane Marketing; the Sunshine Coast Council and City of Gold Coast.

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Fund flows over the past five years in South East Queensland, between tech companies and investors or other funding entities.

We focussed on companies developing digital technology, a scalable business model, and capable of rapid growth. Predominately companies building software products and scalable hardware products, such as drones, sensors, autonomous vehicle technology, Internet of Things technology, and wearables. We also focussed on those under 5.5 years in vintage — however we still captured data on older companies, especially in the funding section.

Data was gathered on over 200,000 people and organisations through workshops and interviews in Brisbane, the Gold Coast and the Sunshine Coast, with approximately 130 key community members, and from public sources including Linkedin, AngelList, CrunchBase, Kickstarter, Pozible and Meetup. We’ve found combining several data sources gives a more comprehensive view than just one or two sources. For example, looking at funding events during the previous 5 years Crunchbase gives only 20 or so rounds out of the 165 we identified.

Key Findings
The key findings from the report include:

Startup Numbers

  1. There are an estimated 226+ startups within SEQ, 500+ founders and over 1,900 employees involved in startup companies.
  2. The number of startups forming each year is increasing, with 55 formed in 2013 — the last full year of data we captured.
  3. In 2013 Queensland had a startup formation rate of 12 startups per million people per year in the region, compared with US technology hubs such as Boulder, San Jose, Cambridge and San Francisco which had yearly startup formation rates per million people ranging between 97 to 256 in 2010 (the last recorded data we could find on the US).
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Summary stats on the SEQ ecosystem.


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List of the top 35 raises over the past five and half years, along with key funding stats.

The per capita funding (excluding government grants) of tech startups for SEQ is $4.02, compared to $4.09 for Australia, $4.69 for Western Australia, $170 for Israel and $3,945 for Silicon Valley. By way of comparison per capita betting on the last Melbourne Cup was approximately $52 per capita.

Total venture capital, private equity, government grants, crowdfunding and angel funding raised by startups and established digital technology companies located in Queensland, from 2009 to July 2014 was approximately $126 million.

  1. The average total funding pool per year for digital technology companies in SEQ over the past five years was $22.9 million per year.
  2. We identified 165 deals in total across 136 digital technology companies.
  3. Of this total, $37 million went into 99 startups, across 116 rounds.
  4. The median total funding raised by all digital tech companies was $200K, but the average total raised was much higher at $928K, and the average round size was $765K.
  5. The median total funding raised by startups was $100K. The average total raised was higher at $371K.
  6. When examining the source of funding, private equity comes out as the leader $47M or 37% of all funding to digital tech companies, driven primarily by AMMA’s $45M investment in Guvera — a music streaming service.
  7. Government funding comes out as the second largest source of funding, both in total amount of funding ($24M or 19% of all funding by type) and total raised by lead investor ($41M or 32% of funding).
  8. Government funding was almost entirely made up of funding from the Commercialisation Australia (CA) program, ~$20M or 16% of total funding. Which attracted matched funding of $18M (14% of all funding) from angels and VCs.
  9. Almost all the top 35 raises included matched funding from CA.
  10. Given how critical CA was in attracting risk capital into the sector, it will be interesting to see the impact the federal governments closure of CA and the substantially reduced matched funding pool available in the new Entrepreneurs Infrastructure Program will have on investment in innovative technology companies both in SEQ and across Australia. It will almost certainly have a substantive negative impact on the sector.
  11. The third largest funding source is individual angels — $18M or 14% of all funding.
  12. Crowdfunding is a growing source of funding with $1.4M of funding coming from Kickstarter and Pozible — the majority of which was raised within the last 2.5 years.
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Crowdfunding from Kickstarter and Pozible for technology projects.

Key Nodes

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Key startups and support organisations with their associated founders. Links are professional relationships.

Key nodes and hubs include River City Labs, a co-working space in Brisbane’s Fortitude Valley; Right Pedal Studios, a gaming accelerator within River City Labs; Silicon Lakes, a co-working space & incubator on the Gold Coast; iLab, an established accelerator within Brisbane; and the Innovation Centre on the University of the Sunshine Coast campus. All played a vital role in bringing the community together, running education programs and incubating startups.

  1. Over 10K people have attended startup related events at these hubs and around 300 hundred of tech companies have been incubated within their walls over the past 14 years.
  2. Over a third of these community building meetup groups and events happen within the Brisbane CBD and South Bank.
  3. The State Library of Queensland, and specifically The Edge within it, on Brisbane’s Southbank is particularly notable for the large numbers of meetup groups that happen within The Edge — 31 in total.
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There are 107 meetup groups focussed on technology within SEQ, with over 9K members, a portion of which are focussed on startups.

Target Markets & Product Types

  1. Independent digital gaming studios are the largest product type by number of startups, with 26 of 226 startups, 12% of all startups.
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A simplified network map of the indie gaming community in SEQ. With the most central and connected nodes highlighted. In the top right corner you can see the whole network.
  1. SEQ has a particularly mature and vibrant community of indie game studios and developers, with a games studio seed accelerator and over 38 studios building their own games for distribution on mobile and web platforms, 26 of which are startups. With past, established and new studios that have in the past or are currently achieving global success, including Krome Studios, Halfbrick, 5 Live Studios, N3V Games, and Defiant Development.
  2. Marketplaces was the second highest product type, however this was spread over a range of target markets — from clothing & retail to food & real estate.
  3. Information Media & Communication tools at 7% was high, along with health tech at 6% of startups.
  4. In terms of what markets funding flowed to — Music, Finance & Insurance, Information Media & Communication, Defence & Safety and Advertising were all prominent markets.

Notable Startups

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An analysis of the size of the ecosystem currently (in yellow) with estimates of the number of startups by stage (potential founders, seed, early, growth, etc). And compared to the governments targets for the size of the ecosystem in 2025.

There are many notable startups and established technology companies identified within the project — from music apps to marketplaces for drone drivers.

A small selection, in no particular order, include: Tappr, Commission Factory, Halfbrick, Wotif, Guvera, Nimble, Cloud DC, Euclideon, BDS, Safety Culture, Krome Studios, We Are Hunted, 5 Live Studios, N3V Games, Cartesian Co, Ollo Wearables, Invoice2Go and Defiant Development.

Key Issues

As part of the community workshops and interviews the workshop participants identified the top ten issues in terms of the growth of the sector. They were in order of most votes:

  1. Raising greater awareness within the community of the tech sector.
  2. Greater technology and entrepreneurship education for founders, developers and investors.
  3. Developing a national and state culture of innovation and entrepreneurship.
  4. Improved access to early stage funding.
  5. Adjustments to government policy to further encourage innovation and entrepreneurship.
  6. Increased collaboration and networking within the community.
  7. Adjustments to government tender requirements to facilitate an increase in the government procurement of technology from startup vendors.
  8. Acceleration of the NBN rollout, particularly to regional hubs such as the Sunshine Coast.
  9. Building, attracting and retaining talented entrepreneurs, engineers, developers, designers and data scientists.
  10. Establishing central hubs such as innovation precincts and community leadership groups was also seen as critical to the growth of the ecosystem.

The Future Impact of Technology on the Local Economy in 2025

We estimate the potential economic impact of disruptive digital technologies on Queensland’s economy in 2025 is $96 billion per annum, or roughly 24% of the state’s projected $396 billion Gross State Product.

  1. We estimate the direct contribution from digital technology companies could be over $6 billion per year.
  2. To ensure the majority of this value is created and retained by local tech companies, we estimate Queensland will need 3,000 startups, hundreds of established tech companies and a few unicorns.
  3. To achieve this we estimate that over $2 billion to $5 billion in total funding needs to flow into the sector over the next ten years to support the growth of these firms. With the rate of investment increasing from their current average of ~$23 million per year to between $500m to $1 billion per year by 2025.
  4. Startup formation rates would also need to increase from 12 new startups per year per million people, to 170 in 2025.
  5. Without this growth in funding and formation, the economic value will almost certainly be lost to international technology companies.
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Yearly startup formation rates per million of population. SEQ vs US tech hubs.

The SEQ ecosystem is young and vibrant, growing rapidly, has many notable startups, is beginning to see substantive exits, has mature pockets of talent such as gaming, and is comparable to other Australian ecosystems in many ways.

However when compared with international tech hubs it lags behind in terms of funding per capita, formation rates, talent pools, and substantive exits.

We’re also concerned about the impact the federal governments closure of Commercialisation Australia will have on startup investment both in SEQ and across Australia. We found almost all the top 35 raises included matched funding from CA. The new Entrepreneurs Infrastructure Program has a substantially reduced funding pool. Given how critical CA is in attracting risk capital into the sector, it will be interesting to see how this effects the sector. Our bet is it will almost certainly have a negative impact on the sector across Australia.

This is a real shame as the opportunities arising from disruptive technology within the global economy over the next ten years are truly enormous.

Even if you just look at the opportunities for tech within the state itself, they are huge. In line with Deloitte and McKinsey’s estimates, we estimate the economic impact of disruptive digital technology on Queensland’s economy in 2025 is $96 billion per annum, or roughly 24% of the state’s projected $396 billion economy. $6 billion of this could be directly handled by local startups. It’s certainly within the ability of Queensland’s high caliber startups to capture a meaningful portion of this, given the right support — otherwise Australian startups will be handing this value straight to international tech companies.

We hope this report will help entrepreneurs, investors, policy makers and industry leaders understand the factors that contribute to creating a healthy tech ecosystem, who the key people and organisations are within the community, and whats needed to create an environment in which the next Atlassian or Seek could flourish.

To download a PDF copy of the report click here:

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