Despite the decline in global venture investments, Australian start-ups received a record US$5.84 billion in investment in 2022.
Data from the latest KPMG Private Enterprise Venture Pulse report also reveal that the investment received by Australian start-ups in 2022 was a two per cent jump from the previous year, although only 623 Australian VC deals were made in 2022 – a decrease from 735 in 2021.
The report notes that the record figure came from multiple deals made that were valued at more than US $100 million, among them deals involving Airwallex, Immutable and Scala Pay.
“It was another record year for VC investment in Australia,” Amanda Price, Head of High Growth Ventures at KPMG, said. “Despite the economic cooldown, deal value maintained its momentum in what was a standout result in 2021, although the volume of deals has decreased. This shows that dry powder is still being deployed – what’s changing is the way it’s being invested.
“To put this into context, overall investment in Australia start-ups has leapt 194 per cent since 2019 – and has delivered year-on-year growth every year since 2014,” Price added. “As we move into 2023, VCs are increasingly looking for start-ups that are efficient, responsible with capital, and focused on revenue. When they find them, they’re willing to invest just as much as they have before, if not more.”
Australia’s VC performance has been noteworthy given that global venture capital investments fell for the fourth consecutive quarter in Q4 2022, falling from $102.2 billion on 9767 deals to $75.6 billion on 7641 deals. Global investment overall has fallen to its lowest levels since Q2 2019. That is despite the large deals in the energy sector in 2022, including alternative energy vehicles, battery technologies, and alternative power generation and distribution technologies, as governments and businesses seek to secure energy independence and meet their climate obligation.
The Americas and Asia secured the largest deals during the quarter accounting for the largest share of VC investment globally during Q4 2022. The US recorded the largest proportion of investment with Asia second,
Global venture capital investment is expected to remain subdued this year with consumer-focused businesses seeing the most strain. The IPO window, particularly in the US will likely remain closed well into 2023, with little to suggest it will reopen fully in the first half of the year. It is also expected that there will be an increasing number of down rounds and an increase in M&A activity.
“Globally, we continue to see downward pressure on valuations in early 2023, leading many companies to postpone fundraising efforts in hopes of better times ahead,” Price said. “However, these companies can only hold off so long and we anticipate an increase in down-rounds during the first half of 2023 as companies begin to exhaust cash reserves.”
