10th August, 2021
LaunchVic’s latest report has placed the spotlight on startups, viewing them as major job creators within the Victorian business ecosystem and uncovering new insights into employment trends that have emerged within the sector over the last few years.
A report recently commissioned by LaunchVic into employment metrics within the Victorian startup ecosystem has uncovered some rare and insightful data about local startups and their contribution to job creation alongside, and in comparison to, broader employment figures across the state.
The findings are collated in LaunchVic’s Startup employment in Victoria, Australia released in July this year.
When analysing job-related startup data for the three-year period between 2018 up until the end of 2020, LaunchVic included jobs created by all forms of technology-enabled businesses, including early-stage startups, growing scaleups, and the very large and successful tech businesses: unicorns.
Aside from comparing startup businesses against traditional ones and highlighting the sub-sectors within the Victorian startup ecosystem that are leading the way in job creation, the report also provides insight into how startups jobs have fared since COVID-19 struck Victoria in early 2020, especially in comparison to the way things were going prior.
While the term ‘startup’ has a fairly broad definition, for the purpose of its report, LaunchVic has used a definition provided by Paul Graham, co-founder of Y Combinator, which is “a company that he been designed to grow fast”.
This definition does not view ‘tech’ as a prerequisite for being considered a startup, but for this report, the businesses needed to be ‘tech-enabled’ in order to be included.
The report defines the term ‘scaleup’ as a company in its ‘growing phase’, with over 51 employees globally, and uses the term ‘unicorn’ for businesses founded since the year 1990 with a $1.3 billion AUD valuation.
When the term ‘job’ was used throughout the report, it makes no distinction between job types, and views full-time, part-time, contractors and interns as the same.
The data used to conduct this deep dive into Victorian startup employment trends has been taken from the aggregation of public data, partnerships, and through information submitted by key stakeholders within the ecosystem.
From the 4,048 entries into the report database, 1,469 companies emerged as ‘homegrown startups, scaleups and unicorns’, and therefore qualified to take part in this study.
Excluded from this report are jobs created by foreign startups in Victoria, as well as startups based in other Australian states with a secondary location in Victoria.
In terms of employment growth levels, the report found that between the 2018 and the beginning of the pandemic in early 2020, annual startup job growth rates had reached 10.75 percent.
Most notably, these growth rates far surpassed those of the Victorian economy overall, which sat at 3.11 percent for the same period.
While the report also showed that the extended Victorian lockdowns throughout 2020 saw these impressive employment growth rates drop to 8.1 percent, it emphasised that this smaller figure was still far greater than the growth rates across the entire Victorian economy pre-COVID.
“Startups by their very nature are job multipliers, led by founders that catalyse job creation through their unyielding ambition to build innovative technology companies with global reach,” said Leigh Jasper, LaunchVic Chair.
When commenting on the future of the Victorian startup ecosystem from a job creation standpoint, the report predicted that more than 3000 active startups would be based in Victoria by the year 2023 and foreshadowed that at least 2000 of those businesses would job creating.
In addition to the comparison of startup growth rates and general employment levels, the report also offered some granular insight into employment levels on an industry level.
In many instances, startups appeared to be gaining employment momentum in far greater volumes that traditional businesses working in the same industry were generating.
For instance, while traditional businesses operating within the ‘professional, scientific and technical services’ industry had experienced employment growth rates of 3.2 percent during the 2018 to 2020 (pre-COVID) period, the job creation rates among legal-tech businesses had increased by 20 percent, marketing-tech by 12 percent, and enterprise software by 9.4 percent.
Additional examples of this trend could be seen from the manufacturing industry, where traditional businesses had reached growth rates of 1.4 percent, while startups working with semiconductors were sitting at 10 percent growth, and robotics at 13 percent.
With the very apparent rise of e-commerce, it came as no surprise that the report found traditional retail job rates to have reduced by 4.3 percent during the review period, while employment in the online shopping space had increased by 10 percent.
Despite being hit the hardest in the country by COVID lockdowns in 2020, the report showed stable job growth across most Victorian sub-sectors when comparing throughout the first year of the pandemic.
In fact, the data indicates that the only sub-sector that lost momentum in Victoria was the events industry. Interestingly, the events sector experienced substantial growth between 2018 and 2019, essentially offsetting the losses it experienced in 2020 and remaining on par with other industries.
The report also found that startups working in real estate and sports employed more people between 2019 and 2020 (during the pandemic) than they did between 2018 and 2019.
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There are various ways through which startups tend to finance their operations. Many founders use their own savings, reach out to family and friends, grants, and some even fund their businesses through debt.
However, LaunchVic’s report placed Venture Capital (VC) funding at the top of the financing list, with data demonstrating that receiving seed funding enables a startup to scale four times quicker than those who are funded by other means, and those who close a Series A investment round tend to grow six times faster.
While startups may only represent a very small portion of overall job creation across the state, these trends indicate local jobseekers can consider a career within the startup ecosystem with confidence, knowing that in almost all sub-sectors, Victorian startups can be relied on for stability in times of disruption.