Budding entrepreneurs might find it harder to start a business in Canberra than any other capital city largely due to the high costs of living, a new study has found.
The analysis considered 18 factors including weekly incomes, cost of living, cost of childcare, talent pool, business survival rates, and internet speed in each city and ranked them out of 100.
Out of the 50 biggest Australian cities analysed by software company Reckon, Canberra had the highest education level and talent pool score (92.1).
But its average score plummeted after including its cost of living (9.5) and cost of childcare scores (0), making it the "worst" capital city for new businesses.
'Not for the faint-hearted'
The pressure of rising costs has weighed heavy on dietician-turned-entrepreneur Josie Grenfell, who co-founded Food2Soil with permaculture scientist Annabel Schweiger in 2020.
The business partners, driven by sustainability, combined their expertise to create a startup collecting commercial food waste from eateries and recycling it into biofertiliser.
"It's not for the faint-hearted," Ms Grenfell said. "We're pioneering a brand-new space so it's even harder for us [because] you're collecting waste, processing, manufacturing, bottling, marketing it and then selling it."
The founders told The Canberra Times they had not taken a salary for more than four years.
Ms Grenfell said growth was slow because they were putting all their profits back into the business.
She also said they were lucky to be part of double-income households with supportive partners, and this gave a sense of security when petrol and grocery prices were rising.
"We would not have been able to do this if we were from a single-income household," she said.
Crowdfunding a startup
Aiming for a thriving business in a cost of living crisis has led the founders to seek other avenues for funding.
Once their initial NSW Minimum Viable Product (MVP) grant ran out, Ms Grenfell said they had limited access to angel funding (money from private investors).
"You either have to put your own money in, put your own sweat equity, get your friends and family to invest in you or crowdraise. Outside of that, banks won't lend you money unless you have a history of credit which is really difficult," said.
The online crowdraiser for Food2Soil has raised close to $250,000 since March 12.
"We're able to get capital to make those expansions needed to be successful [and] it also grows our customer base," Ms Schweiger said.
The State of Australian Startup Funding reported women-founded startups secured 4 per cent of all startup funding in 2023, and only 3 per cent in 2022.
Equity crowdraising platforms like Swarmer has become a way for businesses to reach "mom and dad investors" who can buy shares as low as $250.
According to the Australian Bureau of Statistics, the ACT when compared to other states and territories had the highest rate of businesses opening in a financial year for the past four years.
This promising number was eclipsed by the ACT also having the highest rate for businesses closing each year, until June 2023 when Victoria's exit rate went up.
"I think that startups are an indicator of future prosperity," Petr Adamek, chief executive of the Canberra Innovation Network, said.
He hypothesised the trend of consistently high opening and closing rates could be fairer if the ACT was only compared to other capitals or urban areas.
"The anomaly here is that we have quite an educated population so the propensity to start a business would be higher here," Mr Adamek said.
"Also, [entrepreneurs] will be more likely to close down when they have the right information, signals that the business shouldn't go on.
"There could be also multiple businesses at play as people can have side hustles as businesses."
As leader of the non-profit supporting local entrepreneurs, Mr Adamek said Canberra had a good environment for startups.
"People here are happy to try new things and especially in innovation, this is really important," he said.
