THE STATE OF AUSTRALIAN STARTUP FUNDING 2021
We’re thrilled to share the inaugural State of Australian Startup Funding report.
2021 was a year like no other for the Australian startup ecosystem— so it is fitting to release this first-of-its-kind, comprehensive look into the key trends and issues shaping Australia’s startup funding landscape.
The funding data featured in the report comes from publicly available information and data provided directly to Cut Through Venture by Australian startup founders and investors.
The report is also informed by survey responses from and conversations with more than 850 Australian startup founders, professional startup investors and angel investors. All additional information sources are referenced throughout the report.
The State of Australian Startup Funding 2021 was published by Cut Through Venture and Folklore Ventures, with support from a long list of extraordinary Australian startup ecosystem participants.
We hope you enjoy it.
Here’s a snapshot on the record-breaking year that
was 2021.
01
Investment into
Australian startups
surpasses $10B.
The state of Australia’s startup funding ecosystem is strong.
Australian startups received more than $10 billion in funding in 2021, cementing the Australian startup ecosystem as a legitimate global innovation hub. There are more world-class Australian startups being launched, more local investors with more capital to deploy than ever, and more international investors hunting for Australian deals. Together, these factors drove a dramatic step-change in both total funding and total deals.
There has never been a more exciting time to be an Australian startup founder, investor, or ecosystem participant.
Total capital raised IN 2021
Equity investment in Australian startups hit $10.1B in 2021, and the number of deals surged to almost 700. The leap above $10B represents a 208% increase in confirmed deal volume seen in 2020. More capital was deployed into startups in 2021 than 2018 through 2020 combined.
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Number of investors recorded across all deals
Cut Through Venture data showed that 891 investors participated in the deals reported in 2021. This excludes any angels who invested via crowdfunding or angel syndicate platforms. While this figure is undoubtedly not completely accurate, notably, the total number of investors recorded in 2021 was up 87% on 2020.
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02
faster to stay
competitive.
Local investors revised their strategies to match the accelerated deal speed, with 50% of investors increasing diligence pace and reducing time to signed term sheets. Ninety per cent of local investors expect investment activities to increase in 2022, and firms are doubling down by raising bigger funds and building larger teams of both investors and operators.
Investors reporting increased investment pace & investors reporting higher valuations
Of investors reported increased pace of investments in 2021
Of investors reported higher valuations in 2021
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Investors reporting deal cadence per quarter in 2021
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Investors reporting a change competition for deals in 2021
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The impact on increased competition for deals
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03
Deal sizes leapt to
new heights across
all stages.
The average seed round doubled, and later-stage average deal sizes all saw double-digit growth. Large local investors were more active at the Seed stage, increasing deal competitiveness and driving significant deal value inflation. The rise of new local investment firms and the entrance of global investors meant that the competition for quality deals across all stages soared.
Average round size by stage
Spurred by intense competition for deals at all stages, average round sizes grew significantly at the Seed through Series-C+ stages. This was in line with the global trend, which saw startup investment soar across all industry sectors, geographies, and stages.
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04
Fintech and Enterprise
Software led the charge,
but new challenger
sectors emerge.
Together, Fintech and Enterprise / Business Software raised more capital in 2021 than all Australian startups raised in 2020. The top five sectors accounted for more than half the total capital raised in 2021. Of the leaders, PropTech / RealTech and BioTech / MedTech saw the most considerable rise, up from 11th and 14th, respectively, in 2020.
Fintech
$2.5B
(25% of total)
Enterprise
/ Business Software
$970.1M
(10% of total)
PropTech / RealTech / Construction
$682.9M
(7% of total)
MarTech / AdTech / SalesTech
$671.9M
(7% of total)
Biotech / MedTech
$574.1M
(6% of total)
Top 5 industries you are most excited about in 2022
Fintech and Enterprise Software are amongst the top investor picks for professional and angel investors for 2022, but CleanTech is a top priority for more than 38% of investors, and Blockchain/Web3 for 26% of investors. Enthusiasm for these emerging sectors, paired with several newly-launched dedicated funds, should see them rise in the funding ranks in 2022.
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Australian startups that raised in 2021
05
Overseas investors
participated in one-quarter of all reported deals.
Global venture investor activity grew more than 100% in 2021, and with the competition for deals in traditional global startup hubs hitting all-time highs, global investors hunted for new fertile investment grounds. Many of those investors landed in Australia, with many international investors deploying capital here for the first time. Expect this trend to continue
into 2022.
The depth and breadth of the Australian startup funding ecosystem is reason to be excited. This strength means more choice for founders, which leads to better outcomes for founders and their startups.
INVESTOR INSIGHTS
The success of the ecosystem brought with it intensified interest from overseas startup investors. Global fund activity in Australia was impossible to miss, and this shows no sign of slowing down.
of Australian professional startup investors believe overseas investors were more active in the Australian market in 2021
of Aussie investors surveyed expect overseas investor activity to increase in 2022
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06
Overseas investors
participated in one-quarter of all reported deals.
A strong angel investing community forms the bedrock to a startup ecosystem that supports diverse founders at all stages of their entrepreneurial journeys.
We see three primary drivers to make this ecosystem flourish: i) continued growth in organised angel groups and ways for angels to invest ii) more people working at startups, and iii) regulation that balances investor protection with access.
The ecosystem should work together to push these three objectives.
angel investing in 2021
Angels are now taking advantage of many pathways for angel investing in Australian startups. Ninety-two per cent of surveyed angels participate in an organised investment group, and 28% expect to invest more in startups in 2022. While 84% of angels surveyed have worked at a startup, diversity within the ranks of angels remains low.
angels participated in deals in 2021, 75% of which expect to invest in the same or more startups as they did in 2021
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How are Australian Angels Investing?
Ninety-two per cent of respondents participate in an organised investment group, which is pleasing but not surprising.
Organised groups provide access to quality deal flow, outsourced due diligence, and an educational element. These elements are all critical for almost all angel investors.
CROWDFUNDING PLATFORM
ANGEL GROUP
ANGEL NETWORK
INVESTOR IN A VC FUND
INVESTMENT SYNDICATE
NONE OF THE ABOVE
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07
Still significant work to be done to achieve greater gender equity in funding.
DEALS INVOLVING AT LEAST ONE FEMALE FOUNDER
IN 2020
IN 2021
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TOTAL CAPITAL INVESTED IN STARTUPS WITH AT LEAST ONE FEMALE FOUNDER
IN 2020
IN 2021
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Just 10% of females feel highly confident about raising
their next round, compared to 63% of males surveyed
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Founders who believe gender has impacted their ability to raise VC funding
of female founders
of male founders
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THE STATE OF AUSTRALIAN STARTUP FUNDING 2021
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