Australian March quarter start-up funding was “sluggish” at A$703 million, down significantly on the final quarter of last year but up marginally on the first three months of 2023, according to the latest Cut Through Venture funding report.
The report said 66 Q1 deals, or 58 with accelerator rounds excluded, was a more-than-five year low.
Cut Through Venture used survey data from 80 venture capital firms, angel syndicate leads and family offices.
The researcher’s data goes back six years.
“Typically, deals completed in the first quarter would have initiated their processes in late 2023, accordingly, the data from the second quarter will provide greater insight into whether the new calendar year has fostered a greater willingness and capacity among start-ups and investors to engage in transactions at a rate faster than what was seen over the last 18 months,” it said.
“The number of sub-$5 million rounds dropped to the lowest level seen in the Cut Through Venture dataset.
“This weakness at the earliest stages meant total count of deals valued up to $50 million also hit a five-year low point.
“While smaller rounds are being underreported in public channels and some founders are actively delaying funding announcements, it’s also evident that the quality threshold for investment has significantly increased, with investors showing a willingness to pay a premium for access to higher quality opportunities.
“Additionally, smaller deals frequently rely on angel investors, many of whom are currently experiencing cost of living pressures, leading to angel investing dropping off the priority list, for now.
“There was one deal exceeding $100 million, four above $50 million, and eight surpassing $20 million, making Q1 one of the strongest quarters for large deal announcements in two years.
“There are currently more than 200 start-ups which have raised at least $20 million in funding but have not announced a funding round since 2021 or 2022.
“For the start-ups that have neither closed their doors, achieved a successful exit via IPO or M&A, nor shifted to profitability, they will need to seek additional capital or pursue an exit strategy eventually.
“The question is, when?”
