The new edition of the State of Australian Startup Funding report, published by Cut Through Venture and Folklore Ventures, reveals that despite overall Australian start-up funding falling by 30 per cent, start-ups in the pre-seed and seed stages saw the most deals ever in 2022.
The report – published with support from JP Morgan, Silicon Valley Bank, Deloitte, Google Cloud and Sling & Stone – notes that 35 per cent of investors reported that early deals were more competitive than ever, and more than 60 per cent of founders are planning their next capital-raising round in 2023.
The report also highlights the fact that while Aussie are slightly ahead of the curve when it comes to funding with this country recording 30 per cent less VC funding in 2022, while VC funding dropped by 35 per cent globally according to Crunchbase data. This suggests slightly more resilience and maturity in the start-up investment market in Australia than elsewhere around the world.
The depth, breadth and diversity of the pre-seed and seed stage deals funding ecosystem has resulted in the number of sub-$5 million deals remaining steady in the midst of broader falls. Total funding for early-stage start-ups increased by seven per cent, with female-founded seed start-ups taking in more investment, with 23 per cent of all deals involving companies with at least one female founder.
Angel investing continued on its upward trajectory in 2022, with female angels more bullish about 2023 than their male counterparts. Almost twice as many female angel investors (83 per cent vs. 42 per cent of male angel investors) expect to increase their angel investments in 2023.
On the whole however, investors are more cautious in their funding. Almost nine in ten investors (88 per cent) reported longer fundraising processes and 61 per cent were taking longer to decide on investments, despite a strong appetite to invest in start-ups.
“The ebb and flow of the last two years is a natural part of our ecosystem maturing, and we should expect funding environments to periodically expand and contract over time, as is the nature of capital markets,” Folklore Ventures’ Founder and Managing Partner Alister Coleman said. “Zooming out, there are real reasons to be excited about the abundance of world-class talent and innovation in Australia’s start-up ecosystem, and the health of the funding environment captured in this report is a demonstration of just how far we have come over the last decade.
“In 2022, we saw early-stage investment reach an all-time high, and looking forward, we believe this trend will continue off the back of significant dry powder in VC funds and a natural tendency for difficult times to be a catalyst for great innovation,” Coleman added. “Folklore has long held that start-up investing is a long-term journey beginning with a first cheque, so we begin 2023 excited and ready to support the next generation of Australian start-up success stories.”
Chris Gillings, Founder of Cut Through Venture and venture capitalist at Five V Capital, said, that it was no surprise funding was down in 2022 given the global environment. He said that it is encouraging, however, that the market showed so much resilience.
