Dozens of startups are launched every year in Western Australia by budding entrepreneurs keen to take on the world.
But how many of them survive, let alone thrive and become mature businesses?
Research led by former Business News contributor Charlie Gunningham provides some insights.
The starting point was a database of more than 400 WA businesses that have emerged from the state’s startup ecosystem during the past decade, with most (but not all) having a tech focus.
The research found at least 130 of those startups continue to trade and employ staff.
Collectively, they employ more than 1,100 people, signalling the significant contribution startups make in WA.
This group includes fintech company PictureWealth and several medtech companies such as Suitsme, Ascend Health Group and InteliCare (see table).
Tech-focused startups more than five years old migrate to Business News’ technology companies database, which has more than 200 entries.
Here, the tech sector’s economic contribution is clear, with just the top 30 on this database employing more than 2,000 people in WA (see table).
This number understates the scale of Perth-based tech companies, with some of the big players employing far more people outside their home state.
The prime example is sector leader VGW Holdings, which employs about 200 staff in Perth and a further 700 around the globe supporting its social gaming operations.
Mining software developer MICROMINE employs 103 people in Perth and a further 159 interstate and overseas.
Similarly, supercomputing company DUG Technology employs 101 people in Perth and nearly 200 overseas.
These companies illustrate the diversity in WA’s tech sector, which also includes some very substantial long-running business.
The most notable example is smartcard ticketing company Vix Technology, established in 1987.
Named tech company of the year at WA’s 2021 Incite awards, Vix has more than 650 employees in offices across 10 countries, including 120 in Perth.
The tech sector also illustrates a wide array of ownership models and business strategies.
VGW was founded by executive chairman Laurence Escalante in 2010.
The company traded in the red for most of its life, but that has changed dramatically in the past three years.
VGW has found a clever niche in the market by developing online games that resemble casinos and pay out prizes that can be converted to cash.
That allows the company to operate in places that do not allow online gambling, with North America being its biggest market.
The privately owned company raked in $2.2 billion in revenues in FY21, while its net profit soared to $295 million.
Amazingly, VGW has achieved these spectacular earnings figures with paid-up capital of just $34 million.
That represents an extraordinary return on capital.
Its rapid expansion over the past two years has put VGW ahead of medical booking platform HealthEngine, which was long-considered the tech sector leader in WA.
Founded by managing director and 40under40 winner Marcus Tan more than a decade ago, HealthEngine has raised about $52 million from investors to support its development.
Its high-profile backers include Telstra Ventures, Seven West Media, Sequoia Capital and Perth-based Larsen Ventures.
Despite this support, HealthEngine has achieved modest growth in annual revenue to about $21 million, according to data presented to investors late last year.
The investor presentations were designed to support a $100 million initial public offering and listing on the ASX, but those plans were put on hold in November.
HealthEngine’s core product and main revenue generator is an online booking service for medical appointments, with 7,000 providers across Australia on its network.
Some of the most prominent tech companies in WA have used an ASX listing as an important stepping stone in their expansion plans.
Family Zone Cyber Safety, currently valued at about $400 million, has completed several major acquisitions around the world.
It has funded these by raising extra capital on the ASX.
Family Zone announced late last year that more than 10 million students, mostly in the UK and US, were on its cyber safety platform.
Its annual recurring revenue has increased rapidly to $47 million, but like many fast-growing companies it is still burning through cash.
In the September quarter, its net operational cash flow was minus $3.9 million.
DUG Technology opted for an ASX listing in 2020, having operated as a privately owned business for the previous 17 years.
The listing gave it access to more capital but DUG has also discovered the pressure that comes with an ASX listing.
The company’s share price fell by more than 50 per cent last year, with its market value sliding to just $65 million.
Managing director Matt Lamont responded with a major cost-cutting program last November, including substantial cuts to his own remuneration.
Other prominent tech companies listed on the ASX include Pentanet, Orbital Corporation and K2fly.
In contrast, WA tech companies such as MICROMINE and INX Software have opted for private equity to support their growth.
Led by executive chairman Garry Back, INX has developed an integrated workforce management system for the resources sector.
The business received a big fillip in 2018 when Melbourne-based Tanarra Capital became a major shareholder.
Since then, INX has completed two acquisitions, buying Perth-based workforce logistics software developer Vix Resources (a spin-off from Vix Technology) and Adelaide-based Sitepass.
Similarly, MICROMINE founder Graeme Tuder sold a majority shareholding in his business in 2018 to Sydney-based Potentia Capital.
The sale came more than 30 years after he established the business. The new ownership structure has given MICROMINE more capacity to pursue growth.
In 2021, it acquired Queensland company Precision Mining and WA mining software business Alastri.
While ultimate control of MICROMINE has shifted to the east coast, its continuation as an autonomous business under its own name contrasts with the fate of several other Perth-based mining software companies.
The likes of Surpac, Minex, Fractal Graphics and Minetec have all been absorbed into larger national and international groups.
Perth success stories such as Agworld, SEQTA Software and ClickSend have also been acquired by larger firms, with the Perth business continuing as a division of the new owner.
Last year’s sale of Agworld, to Canadian company Semios, illustrated the value that can be created in the tech sector.
Worth more than $100 million, Agworld’s sale was the largest sale in Australia’s agtech sector and the largest sale of any WA-born and bred tech company.
Founder Doug Fitch believes the tie-up with Semios will provide more opportunities for his team, which numbers 45 people in WA and 63 globally.
What’s next?
Several of the current crop of WA startups are emerging as success stories.
A notable example is PictureWealth, which has 31 staff in Perth and a further 12 interstate and overseas.
Led by chief executive and financial planner David Pettit, the company has achieved rapid growth using a hybrid business model that cuts across technology and professional services.
Illustrating its tech credentials, the company’s team – which includes software developers based in Croatia – has written more than 1.5 million lines of proprietary code.
Since its launch in March 2017, PictureWealth has also completed 15 acquisitions and now has $2.4 billion in funds under advice.
Its technology is designed to create a single picture of wealth, bringing together all elements of personal finances onto a single screen.
In a similar manner, startups such as Suitsme, Ascend Health Group and InteliCare are using a technology platform to bring innovation to areas such as disability and aged care services.
Notable startups in WA also include the likes of Roborigger and uDrew, which have won multiple awards and technical accolades and are now going through the tough grind of building a commercial business.
