Global funding and large exits for startups fell off a cliff last year with a decline of nearly 50 per cent, but there are some signs of stabilisation and improvement this year, according to a new report.
Startup Genome’s Global Startup Ecosystem Report 2024, the 12th annual instalment of the research, includes a ranking of the top 40 startup ecosystems in the world.
For 2023, Sydney dropped one place to 21st, while Melbourne placed one higher at 32nd.
The report found that the tech winter of 2023 continued into the start of 2024, with worldwide funding of tech companies sharply declining and large-value exits also falling dramatically, with little hope of a return to the high levels of investment seen pre-Covid.
According to the research, the amount of Series A funding rounds last year dropped by 46 per cent in 2023 compared to 2022, while the value of large exits of more than $US50 million dropped by just under 50 per cent.
The number of new unicorns, or private companies valued at more than $US1 billion, created last year was also nearly 60 per cent lower than the previous year, and nearly 90 per cent less than a peak in 2021.
But the report has found some signs that this may have bottomed out and startup funding is set to rise again, with a slight increase in Series A value in the first quarter of 2024 compared with the end of 2023.
“Conditions have stabilised and are starting to show signs of improvement, with Series A and exits beginning to go up,” the report said.
“Simultaneously, history suggests that VCs that recognise the first mover advantage of a more bullish approach may reap higher returns compared to those who remain conservative.
“Global startup ecosystems are on the brink of a new growth cycle. A slight yet significant uptick in investments in the first quarter of 2024 suggests that we may have reached the bottom of the recent funding downturn.”
This uptick in funding appears to be thanks in no small part to the rapid rise of generative artificial intelligence.
According to the research, nearly a fifth of all venture capital funding in 2023 went towards generative AI companies, a three-times increase from the previous year.
And of the 15 new unicorns crowned last year, more than half of these were in the generative AI and deep tech subsectors.
Sydney is the highest ranked Australian city in the report’s ecosystem rankings, placing at 21nd in a tie with Bengaluru-Karnataka in India, making it the leading tech and innovation ecosystem in the Southern Hemisphere.
According to the report, Sydney is home to more than 3000 tech startups, and the regional headquarters of more than 600 multinational firms.
Last year, more than 60 per cent of the total capital raised in Australia was in New South Wales, with its ecosystem valued at $72 billion.
Far beyond Sydney in the rankings is Melbourne, which placed at the 32nd best ecosystem in the world.
According to the report, Melbourne’s startup ecosystem is worth $26.5 billion, and the city boasts three homegrown unicorns.
Unsurprisingly, Silicon Valley topped the startup ecosystem rankings again, followed by London and New York tied in second place. Tel Aviv and Los Angeles rounded out the top 5, with both tied in fourth place.
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