Australian Startup Funding Shows Improvement in Q2 2023 Amidst Lingering Sluggishness

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The latest quarterly report released by Cut Through Venture reveals that Australian startup funding experienced a slight recovery in the second quarter of 2023.

During the June quarter, Australian startups raised $810 million through 90 deals, surpassing the fundraising figures of the previous three months. Notably, the proportion of investors who perceived funding conditions as unfavourable decreased from 40% to 29%, indicating a more positive outlook.

Chris Gillings, the founder of Cut Through Angels and a member of the venture capital team at Five V Capital, expressed optimism, stating that the fear and uncertainty looming over local and global markets in recent months seemed to have dissipated.

“Rather than hurrying to rush through deals, emphasis has shifted to understanding and addressing the needs of all stakeholders,” Gillings said

According to the report, funding in the first half of 2023 was only one-third of the amount raised in 2022. This has caused a significant drop in valuations, especially for companies in Series C and beyond, now worth 48% less on average.

Despite overall valuation declines, funded startups maintained their raised amounts per round. Smaller startups, particularly angel and pre-seed companies, saw a significant 2.6x increase in median raise, reaching $1.8 million. However, seed rounds decreased by 27% to an average of $2.2 million, while pre-seed rounds increased by 21% to $4.6 million.

The report also noted notable deals in early July, including Pet Circle’s $75 million raise and Nomad Atomics‘ $12 million raise, which could surpass the previous quarter’s funding rounds.

“The handful of local investors willing and able to lead on priced rounds are coupling a rigorous due diligence approach with thoughtful deal terms,” Gillings added.

While the Australian startup funding landscape faces challenges, the positive trends observed in Q2 2023 suggest a gradual recovery and a more optimistic investor sentiment.

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