In the first three months of 2023, Australian startups reported $661 million of capital raised across 82 deals. That was less than 50% of reported capital raised in Q1 of 2021 and 20% of Q1 in 2022, according to Cut Through Ventures’ quarterly report.
The decrease in funding was reportedly due to the absence of “mega deals”, which meant that the average deal size dropped significantly at all stages.
Across industries, fintech still received the largest share of capital, followed by ag-tech, IOT, marketplace, biotech and deep tech companies. Clean-tech, health-tech and food and beverage rounded out the top 10 industries for funding.
But while fintech companies received the most cash, fintech did not make the list of sectors investors were most excited about, according to Cut Through’s investor sentiment survey, which surveyed 141 participants across venture capital firms, angel syndicate leads and family offices.
Instead, investors revealed they were most excited about AI and big data – and given the rise in ChatGPT and generative AI, it’s not surprising. Investors were least excited about Crypto and Web 3.
“In the next few years, we expect investors to focus more on industries that use capital efficiency, solve actual real world problems and help improve productivity,” an investor wrote in the survey. “These sectors will likely grow and create lasting value, making them popular among investors seeking sustainable long-term results for their LPs [limited partners].”
Loam Bio – an ag-tech company developing seed treatments to increase carbon sequestering in the soil – received the largest amount of funding in Q1: $105 million. (Loam Bio’s raise also meant female-founded teams saw funding share hit its highest point since Q2 2022). This was followed by fintech Till Payments’ $70 million Series D deal and quantum tech company Q-CTRL’s $39 million Series B deal.
“As we move into the second half of the year, we anticipate a surge in late-stage startups seeking significant capital injections. Some will be successful, but, unfortunately, some will inevitably fail,” an investor stated in the survey.
When asked about their deal activity for the remainder of the year, 50% of investors said they’d look to close the same amount of deals as the previous year. One-in-five investors said they’d look to close fewer deals than last year, while another one-in-five said they’d look to close more deals than last year.
Neatly 60% of investors said they’d recommended that founders raise a bridge round from current investors given the current conditions, while 24% recommended founders delay raising.
“The current environment is daunting for startups seeking substantial funding rounds. Many have been forced to cut back on expenses, aiming to extend their runway in these uncertain times,” an investor said. “While this strategy might buy some time, it is not a sustainable solution for the long-term.”
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