Deal numbers might be high but the absence of those over $100 million has seen start-up funding tank to Q1 levels after a six-quarter high (in Q2).
Key Takeaways
- Start-up funding has tanked to $695 million across Q3 due to a lack of mega-deals (deals above $100 million), according to Cut Through Venture’s quarterly funding report. In fact, no deals exceeding $100 million were announced, and those over $50 million fell to a multi-year low.
- Deal count increased with 92 venture deals and 39 accelerator rounds announced across the quarter. Most deals occurred at the seed stage, accounting for a third for all announcements.
- The fintech sector raised the most funding ($209 million), while AI and big data fell to tenth place, with just $13 million.
- Overall, 2024 is on track to finish as the third-largest funding year on record (should Q4 funding total just under $500 million).
Big numbers
$695 million. That’s how much Australian start-ups banked in funding across Q3, 2024, according to Cut Through Venture’s quarterly start-up funding report. That’s down from a six-quarter-high of $1.5 billion across Q2.
92 venture deals and 39 accelerator rounds were announced across the quarter, indicating that though funding amount is down (due to a lack of mega-deals, or deals over $100 million), there is continued investor activity, particularly at the early stage.
$75 million was that largest capital raise, banked by enterprise/business software company SafetyCulture. $33 million was that largest funding round raised by female investors for health-tech company, Kismet.
Fintech once again topped the charts for the largest sector share of funding at $209 million, followed by enterprise/business software at $122 million and climate-tech at $79 million. AI and big data dropped to tenth place with just $13 million in funding.
Related
What to watch for
Investors say their top priority for the next quarter is to invest in new start-ups, with 49% of investors describing the funding market as more favourable compared to last quarter and ,ore than half (53%) of investors saying they’re evaluating more deals.
But the pressure to return capital to investors is mounting, with Cut Through’s survey finding nearly half of venture capital firms are discussing exits more frequently than this time last year. In fact, 80% of VC investors plan to exit their investments in the coming year, with buyouts and trade sales as preferred avenues.
“Traditional IPOs, particularly ASX listings, have slipped from their pedestal. While the dream of an IPO remains, it is no longer seen as the default route for achieving liquidity,” the report states. “Instead, alternative exits such as private equity buyouts and secondary sell-downs are gaining ground. These methods are undeniably more practical and, crucially, faster ways to return capital to Limited Partners.”
In saying that, more VC investors (63% up from 52% in April) say they anticipate higher IPO activity in the coming year, particularly in sectors like AI.
Looking ahead, Main Sequence’s Phil Morle also predicts Australia will become a ‘deep tech superpower’.
Crucial quote
“Deep tech companies have a ‘moat’ around their invention which comes from the work it took to discover it. When innovators cross the treacherous ground of discovery to make the whole thing work, it is difficult ground for others to cross. Here lies the commercial advantage of a deep tech company. A risky journey for sure, but valuable and sheltered from competition on the other side.” – Phil Morle, Partner, Main Sequence.
Tangent
LinkedIn unveiled its annual list of the top 20 start-ups to work for earlier this year, with Australian employees looking for companies to help them embrace AI and the rapidly changing workforce.
There were a few familiar faces gracing the list for 2024, like cell-based meat start-up, Vow, insur-tech Honey Insurance and freight logistics company Ofload. You can see the full list here.
Top 10 largest deals of Q3
- SafetyCulture: $75 million
- Grow Inc: $60 million
- InDebted: $50 million
- Shift: $35 million
- Kismet: $33 million
- Drift: $25 million
- Apromore: $23 million
- Dash Technology Group: $22 million
- Evolt360: $20 million
- Splend: $20 million
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