2024 was a big year for Aussie startups, especially in the early-stage funding game. A$4 billion. That’s how much funding poured into Australian startups.
But while the numbers are impressive, a sense of hesitancy lingers. This report argues that this “wait and see” approach is not only misplaced but could be preventing you from participating in the next wave of Australian tech success stories.
Pre-seed rounds hit over A$1 million, and seed rounds were creeping up towards A$3 million – huge jumps compared to the past. So, what’s driving this surge? Investors are getting more excited about high-growth industries like AI, HealthTech, and enterprise software, making it a great time for local startups to secure the capital they need. The latest State of Australian Startup Funding Report, dropped today by Cut Through Venture and Folklore Ventures, shows that Australia raised a total of A$4.0 billion across 414 deals last year – an 11% increase from 2023. It’s the third-biggest funding year on record, proving that Aussie startups are definitely holding their ground, even in a tricky global environment. But, there’s still this “guarded optimism” hanging over everything, thanks to global economic uncertainty. A lot of investors are seeing down rounds, and more companies are struggling, which keeps everyone in a cautious mood.
This cautious vibe is all about investors focusing on their current portfolios and making deals a little harder to come by. They’re looking for signs of economic stability, like inflation cooling off and the market getting its balance back. Founders, picking up on this hesitation, might hold off on fundraising and instead concentrate on growing profits and extending their runway. But waiting for that perfect moment could come with big risks. The startup world moves fast, and the next big success could slip by if investors keep waiting for the “right” time. The Australian startup scene is constantly evolving, and game-changing companies don’t always wait for the stars to align.
So, which sectors are capturing the attention of Aussie VCs in 2025?
AI: The undisputed king
Artificial intelligence continues to be a dominant force, attracting significant capital across various applications. From machine learning and natural language processing to computer vision and AI-powered automation, Aussie startups are pushing the boundaries of what’s possible. VCs are particularly interested in AI solutions that address real-world problems, offering tangible benefits to businesses and consumers. The focus is shifting towards AI that is not just innovative, but also commercially viable.
Meanwhile, HealthTech remains a hotbed of innovation, with Aussie startups developing cutting-edge solutions to improve healthcare delivery, diagnostics, and treatment. From telehealth platforms and personalized medicine to AI-driven drug discovery and medical devices, the sector is attracting significant investment. The aging population, rising healthcare costs, and increasing demand for accessible and personalized healthcare are driving this trend. VCs are seeking HealthTech startups with the potential to revolutionize the healthcare industry. In an increasingly competitive business environment, enterprise software solutions that enhance efficiency, productivity, and collaboration are highly sought after. Aussie startups are developing innovative software across various domains, including cloud computing, cybersecurity, data analytics, and SaaS platforms. VCs are particularly interested in enterprise software that leverages AI, automation, and data analytics to deliver tangible ROI for businesses.
While FinTech has been a prominent sector for years, it continues to evolve, attracting VC interest in niche areas. From blockchain technology and decentralized finance to embedded finance and personalized financial management tools, Aussie FinTech startups are pushing the boundaries of traditional financial services. VCs are looking for FinTech solutions that address unmet needs in the market and offer innovative approaches to financial services. And with increasing concerns about climate change, ClimateTech is gaining significant traction. Aussie startups are developing innovative solutions in renewable energy, sustainable agriculture, carbon capture, and climate risk assessment. VCs are increasingly recognizing the importance of investing in ClimateTech not only for its financial potential but also for its positive impact on the planet.
Early-stage startups are winning big
If you’re an early-stage startup or an SME, 2024 was your year. Deal sizes are growing, and investors are dishing out more cash to the ones they believe in. In fact, pre-seed medians topped A$1 million, while seed rounds were knocking on the door of A$3 million. That’s a solid bump from previous years, and it’s mainly because investors are loving the potential in industries like AI and HealthTech. These sectors are making waves in the market, and if your startup is in one of them, the funding spotlight could be shining on you.
Founder of Cut Through Venture and venture capitalist at Five V Capital Chris Gillings said, “We are proud to release the fourth edition of The State of Australian Startup Funding, bringing together trusted insights and data that shine a light on the evolution of our local ecosystem. In 2024, we saw remarkable resilience and adaptability as Australia’s startup sector navigated a challenging global environment. Funding has rebounded, bolstered by stabilising valuations, a disciplined focus on quality, and renewed international interest. More founders are raising smarter, more deliberate rounds, and investors are competing for standout opportunities across key sectors like AI, HealthTech, and ClimateTech.”
“As we look ahead to 2025, the ecosystem is poised for sustainable growth, with a unique blend of global ambition, scrappy founders, and supportive investors continuing to drive Australia’s reputation as an emerging innovation hub,” Gillings said.
But later-stage funding? It’s a little trickier
While early-stage funding is looking great, it’s not all sunshine and rainbows, especially when it comes to the later-stage rounds. Around 65% of investors were involved in down rounds last year – meaning companies had to accept lower valuations than before. Plus, 55% of investors reported a failed portfolio company, up from 42% in 2023. The takeaway? Investors are being more cautious when it comes to bigger, later-stage deals, but they’re still hungry for the right opportunities. For SMEs, it’s a reminder to focus on growing smart and scaling at the right pace. Early-stage momentum is where the action is, so if your business is in a hot sector, now’s the time to get your foot in the door.
Nicholas Guest, Partner, QIC Private Equity says: “For the Australian venture capital market, 2024 was really a year of stabilisation and gradual recovery in deal volume and funding. With investor and founder confidence growing as liquidity unlocks, QIC believes the stage is set for 2025 to bring increased transactions, robust M&A activity, and improved exit opportunities, provided we navigate through global political shifts, inflationary pressures, and next-generation AI developments.”
What’s also cool? International investors are taking a bigger interest in Aussie startups. The report shows that 57% of the deals last year had global investors involved – a big boost for Australia’s reputation as a startup hotspot. The global interest signals that Aussie startups are not only getting more attention at home, but also on the world stage.
Alister Coleman from Folklore Ventures pointed out, “The fact that so many global investors are backing Aussie startups is huge. It shows that the country’s got the talent and ideas to compete globally.”
What’s next in 2025?
Looking ahead, 2025 is shaping up to be another year of cautious optimism. While only 51% of investors believe funding activity will increase (down from 67% in 2023), there’s still confidence in the market. Founders are also feeling positive, with 74% of them planning to raise money this year – slightly down from last year, but still strong. For AI, HealthTech, and enterprise software startups, the future’s looking bright.
If you’re in one of these sectors, there’s a good chance investors will be looking your way. If you’re running an SME, especially in the tech, health, or AI space, now is a golden opportunity to secure funding. With investors showing increased interest in high-growth sectors, your startup could be the next big thing they want to back. Sure, there’s some market caution, but the momentum is still there. 2025 could be your year if you’re building the right product and have a clear plan to scale.
To download the full report, please visit www.australianstartupfunding.com.
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The next big Aussie tech boom is coming. Are you positioned to profit? These are the sectors VCs are targeting in 2025. Featured, Funding Dynamic Business
