Australia’s startup scene is thriving at last

Amid the surfers and sunbathers letting loose on Sydney’s Bondi Beach, another sort of denizen can occasionally be spotted. Rather than stuffing her ears with swimming plugs, she dons AirPods and speaks energetically to an unseen companion about cap tables. Instead of reclining with a book, he punches out code on his MacBook.

To many, Australia is a land of scenic vistas and mineral riches. In recent years, however, it has also developed a bustling startup scene. Last year Aussie startups raised over $5bn in venture-capital (VC) funding, the third-best year on record (behind only the frenzied boom of 2021-22), up by nearly half since 2018 and only a little behind France and Germany. From Atlassian (enterprise software) to Canva (design tools) and Afterpay (”buy now, pay later”), the country has produced a number of high-profile successes. Indeed, for every $1bn of VC money invested since 2000, Australia has produced 1.22 unicorns—a higher ratio than any other country, and nearly twice the figure for America.

This is, at first glance, a surprise. Australia is thousands of kilometres away from the world’s biggest tech hubs. It is a small market, with a population of 28m, making it hard for companies to gain scale. Sparse capital and “tall-poppy syndrome”—a cultural norm of resenting high-achievers—have caused many Australian techies to decamp to Silicon Valley.

Three factors explain the growing momentum. The first is that Australia’s tech firms now have a lineage. Atlassian launched in 2002 with a credit-card loan and no VC backing. When Canva was founded in 2013, many prospective investors balked at it being based in Sydney.

Now this earlier generation has come of age. Atlassian listed on the Nasdaq in 2015 and, despite a 70% decline in its share price over the past year amid the wider sell-off in software stocks, is still worth $16bn. Afterpay was acquired in 2022 by Block, an American payments company, for $29bn. Canva, which was valued in August at $42bn, is expected to go public in the next year or two.

Their success has blazed a trail. Many alumni of these firms have gone on to build startups of their own: Dovetail, a developer of customer-analysis software, was built by two former employees of Atlassian. The growing pool of startups has, in turn, led to the creation of local VC outfits, says John Henderson of Airtree, one such investor.

The second factor is talent. Australia has seven of the world’s top 100 universities for computer science, as ranked by Times Higher Education, a magazine. Many graduates go abroad. But the so-called “boomerang effect”—where homegrown talent returns after a stint in Silicon Valley—has grown stronger as the local tech ecosystem has expanded. One such returner is Cameron Adams, who left a job at Google to co-found Canva. A special visa category makes it relatively easy for Australians to get a job in America. Safe streets and a more relaxed working culture draw them back home.

A third factor is Australians’ openness to adopting new technologies. Anthropic, a leading artificial-intelligence lab, reports that the country has the third-highest usage per person of its Claude chatbot, after Israel and Singapore. The country’s early adoption of “buy now, pay later” financing fuelled the global rise of Afterpay. It also helps that Australia’s government is notably tech-savvy: according to a ranking by the OECD, a club of mostly rich countries, it is second only to South Korea.

Australia is still a long way from recreating Silicon Valley down under. The local VC industry remains small; two-thirds of deals in the country last year involved one or more foreign investors. The industry often blames stringent rules that make Australia’s “superannuation” funds, which manage the country’s $3.2trn-worth of retirement savings, particularly conservative. Regulations intended to protect pensioners from getting stiffed on fees discourage these funds from handing money to VC firms, despite their record of high returns, notes Amit Singh of Mandala Partners, a consultancy. Early-stage funding in particular is still limited. Investors prefer to back bigger, more established startups: last year just 20 deals accounted for 58% of all VC funding in Australia.

A recent spate of high-profile lay-offs has also rattled Australia’s techies. Last month Atlassian said it would sack 1,600 staff, roughly 10% of its total, including around 480 in Australia. A local spokesperson for Block who was contacted by The Economist was laid off during the writing of this article. By one count Sydney has had the most tech lay-offs in 2026 of any city outside America. Some bosses argue that the firings reflect the efficiency gains brought by artificial intelligence. The more likely explanation is that, just as in Silicon Valley, many of them over-hired during the pandemic-era boom. More techies may soon be hanging around Bondi Beach plotting their next venture. ■