Techboard’s Funding Analysis

Techboard’s latest report reveals a significant downturn in Australian startup funding. The 2023 report shows a 50% drop from 2021’s peak, with only $4.438 billion captured across 621 private investments. This marks a 37% decrease from 2022 levels. New South Wales continues to dominate the funding landscape, accounting for around two-thirds of all investments. The per capita analysis indicates a continued decline in most states, with the notable exception of the Australian Capital Territory, which has shown a steady increase.

Quarterly Insights and Sector Performance

In the first quarter of 2023, Techboard identified $1.01 billion in capital deployed across 111 deals. This is a significant increase compared to the $661 million reported in the same period the previous year. Despite this uptick, the March quarter results reflect a broader trend of declining deal sizes and a shift in sectoral focus. Climate tech startups were the major beneficiaries, securing $354 million, representing 35% of the total VC funding for the quarter. Fintech and health tech sectors followed with $192 million and $123 million respectively.

The quarterly data also revealed a stark contrast between the first three months of 2023 and the latter part of 2022. The average deal sizes, particularly in Series A and B rounds, have notably decreased. This decline is attributed to a combination of factors including the collapse of Silicon Valley Bank, rising interest rates, and increased cost of living pressures. Notably, the January funding levels were the second highest on record, while February and March experienced significant drops.

Women-Led Ventures and Funding Distribution

Techboard’s analysis highlights a positive trend for women-led ventures. In 2023, these ventures captured 3.88% of all private announced capital, the highest proportion since 2020. The March quarter of 2023 alone saw women-founded startups securing 16.36% of all capital raised, marking the best quarterly result for such ventures in the last six years. Despite these gains, the overall landscape for women-led ventures remains challenging, with the majority of large deals still dominated by male founders.

The geographical distribution of funding continues to show New South Wales at the forefront, though Victoria is gradually closing the gap. The March quarter data indicated a shift, with Victoria increasing its share from 18% to nearly 30% of all funds. This shift underscores the dynamic nature of the startup ecosystem in Australia, where regional variations can significantly impact overall investment trends.

Major Deals and Investment Trends

Several high-profile deals have shaped the funding landscape in early 2023. Noteworthy among these are the $105 million Series B round for climate change agtech startup Loam, and the $70 million Series D for fintech Till Payments. These megadeals, while fewer in number, have contributed significantly to the overall investment figures. Historically, March has attracted fewer megadeals, but the focus on sectors like climate tech and fintech suggests a strategic shift among investors.

The analysis of deal data by size and label reveals a consistent trend of fewer later-stage deals and a contraction in the number of rounds across all deal labels. This trend is particularly evident in the $1 million to $5 million and $20 million to $50 million ranges, reflecting a broader cautiousness among investors. The March quarter report indicates that pre-seed and Series A rounds have experienced the largest proportional drops, highlighting the challenges faced by early-stage startups in securing funding.

Impact of Economic Conditions

The broader economic conditions have played a significant role in shaping the funding landscape. The increase in interest rates and the fallout from the collapse of Silicon Valley Bank have contributed to a more conservative investment climate. These factors, combined with global economic uncertainties, have resulted in a more cautious approach among investors. Despite these challenges, the resilience of the Australian startup ecosystem is evident in the sustained interest in key sectors like climate tech, fintech, and health tech.

The insights from Techboard’s analysis provide a comprehensive overview of the current state of startup funding in Australia. While the overall funding levels have declined, the targeted investments in specific sectors and the positive trends for women-led ventures highlight the evolving nature of the startup ecosystem. The continued dominance of New South Wales and the rising prominence of Victoria reflect the regional dynamics that influence investment decisions. As the economic conditions continue to evolve, the trends identified in Techboard’s report will be crucial for understanding the future direction of startup funding in Australia.

References

• techboard.com.au. (2024, March 5). Retrieved from “Australian Startup Funding in Review 2023 (With March 2024 update)”
• techboard.com.au. (2023, August 23). Retrieved from “FUNDED FY23 – Australian Startup Funding in Review”
• startupdaily.net. (2023, April 21). Retrieved from “Techboard analysed the first quarter of 2023 VC funding and found more than $1 billion went into 111 deals”
• techboard.com.au. (2023, March). Retrieved from “FUNDED March 2023 – Including Q1 Funding Update”