Arrow

Startup funding in decline, but early-stage hits peak in Aus

10 February, 2023
Startup funding in decline, but early-stage hits peak in Aus | News | Pause Awards
George Hedon, founder and CEO, Pause Fest & Awards
George Hedon
10 February, 2023
Share

Early-stage funding reached record levels with a growing number of founders backed in 2022. The Pre-Seed and Seed stages proved to be particularly successful, defying the fall in overall investment by accumulating around $3.2 billion. 

Startup funding in Australia experienced a decline of 30% in 2022 ($10.6 billion – to $7.4 billion), according to the second annual edition of The State of Australian Startup Funding report by Cut Through Venture and Folklore Ventures

Despite the mid-year slow down, 2022 was a record year for the very early deals. There has been real maturing in Australia’s early stage investing landscape.

Kylie Frazer, Co-Founder and Partner, Flyin Fox Ventures

Here’s a bit of recap:

  • Startup funding hit $7.4 billion in 2022
  • 30% fall from record 2021
  • Investors made 712 deals
  • Great time to be early-stage
  • Female founders get more deals, but way less dollars
  • Record year for venture debt and crowdfunding
  • 6 new unicorns crowned

Early-stage hits a record high

Even with a 3% drop in the number of deals announced in 2022 compared to the record number in 2021, sub-$5M rounds saw a growth of 13% while $5-20M rounds remained steady. However, deals larger than $20M experienced a significant decline of 27% from 2021 levels. Interestingly, Australia bucked the trend of dropping funding for pre-seed and seed stages in the US and Europe.

One notable aspect is the flourishing of Australia’s early-stage funding scene. The country now boasts a robust pool of local professional venture funds, family offices, angel networks, and experienced individual investors willing to invest in startups at their earliest stages. This includes both new funds and existing funds that shifted their focus to earlier stages or doubled down on their early-stage mandate. Moreover, conditions were favourable for launching a startup or raising a small early-round in 2022, against local and global funding market uncertainty.

Despite the promising outlook, investors reported longer fundraising processes, indicating a longer time to decide on investments, even with a strong appetite to invest. Additionally, early-stage deals were reported to be more competitive than ever, according to more than a third of investors. The top three funds Airtree, Blackbird and Square Peg raised $2.4 billion in new funds last year, with Blackbird raising Australia’s first $1 billion VC fund. This highlights the continuing interest and investment in the Australian startup ecosystem.

To modify Bill Gates’ quote to describe the Australian startup ecosystem: you will overestimate the data from a year and underestimate it over a decade. To look back and see the rise of our ecosystem over the last decade has been unimaginatively stunning. I can’t wait for the next one.

Niki Scevak, Co-Founder and General Partner, Blackbird VC

The report co-author and founder of Cut Through Venture, Chris Gillings, stated that while there is plenty of dry powder in VC wallets for the years ahead, it is being deployed more cautiously. This is because limited partners (LPs) in VC funds now demand a more conservative investment cadence and portfolio companies have been told to reduce costs. And with all this, more than 60% of founders still plan to raise their next capital round in 2023.

Regardless of the decline in overall investment, the Australian startup funding environment remains competitive, with early-stage investment booming. The growth story of local investment in such a short time remains astonishing, with investment reaching $7.4 billion in 2022, which is still five times bigger than 2018’s $1.4 billion. While challenges persist, Australia’s startup ecosystem is maturing, and the funding environment will periodically expand and contract.


The full report is available for free from here.


Congrats to all winners at Pause Awards '22!
Pause Awards - Standard Trophy
2022 Hall of Fame winner – Prof. Fiona Wood
Pause Awards '23 entries open on 17 May
Pause Awards Trophy

Big shout to all Pause Awards '22 winners!


READ MORE

Category tracks



Creating a safe and open space in which everyone thrives and the collaboration flows through all levels and titles with the power of the one team. The entries should demonstrate how the transformation has been achieved across core business functions, that have delivered a positive impact and growth for business, staff, stakeholders and customers. Judges will only refer to written entries during the evaluation process. No additional research will be undertaken, and for this reason, we recommend you give detailed and sharp answers.

Celebrating commercial effectiveness through success in the marketplace by leaving a dent in the universe, no matter what the size of the company. The entries should demonstrate the highest levels of expertise, leadership and vision in the application of their business strategies. Judges will only refer to written entries during the evaluation process. No additional research will be undertaken, and for this reason, we recommend you give detailed and sharp answers.

Standing up for your purpose and going beyond together as a team aligned on the single mission to positively impact the environment, people and community. The entries should demonstrate ideas intended to change the world; work which sets out to positively impact ingrained gender inequality, social imbalance or injustice. Judges will only refer to written entries during the evaluation process. No additional research will be undertaken, and for this reason, we recommend you give detailed and sharp answers.

Only awarded to a single entry in each category track, Grand Prix is the highest accolade in Pause Awards. To win the Grand Prix, the entire Judging Board must unanimously agree that the entry deserves the accolade of being the best in class.

​​Focusing on the productivity and elegance of execution to deliver impactful ideas to a market (or many) with the power to cut through the noise. Entries should demonstrate how the innovation and optimisation of the customer journey led to scaled consumer engagement and commercial success. Judges will only refer to written entries during the evaluation process. No additional research will be undertaken, and for this reason, we recommend you give detailed and sharp answers.

Elevating every voice in the ecosystem is not just important for its collective success, industry development but also for the future growth. The entries should demonstrate ingenuity which leads to the creation of new products and services, through leadership, by elevating the internal culture and communities they serve. Judges will only refer to written entries during the evaluation process. No additional research will be undertaken, and for this reason, we recommend you give detailed and sharp answers.


Categories


  • Diverse Co.

    For nurturing an inclusive environment. This award recognises a workplace that has successfully and intentionally encouraged innovation among diverse employees.


  • Large team culture

    For fostering innovation. This award recognises a workplace with over 1000+ employees that has outpaced their cohort in fostering a culture of innovation.


  • Medium team culture

    For fostering innovation. This award recognises a workplace with 21-999 employees that has outpaced their cohort in fostering a culture of innovation.


  • Small team culture

    For fostering innovation. This award recognises a workplace with less than 20 employees that has outpaced their cohort in fostering a culture of innovation


  • Work sweet work

    For a great workplace culture. This award recognises a company that has managed to improve or attain outstanding levels of employee engagement, retention and satisfaction.


  • Company of the Year

    For the best company. This award recognises a company leadership, success, ambition to excel against all odds with the solid future development plans.


  • Defiant ones

    For new tech breakthroughs. This award recognises a company that defines the future of the industry they play in.


  • Hall of fame

    For a lifetime achievement. This award recognises a game-changer who paved the way by breaking new grounds and inventing new categories.


  • Hammer

    For nailing it. This award recognises a company's success – on their own terms – in the market.


  • I wish I'd done that

    For sheer brilliance. This award recognises a company's simple and clever idea in a niche market.


  • Indi

    For new and First Peoples. This award recognises a successful company with its founders from indigenous or ethnic heritage that gained success in the market.


  • On the rise

    For early stage mavericks. This award recognises an early stage startup that has done well in its first three years.


  • Prodigy

    For being exceptional. This award recognises a young person with exceptional qualities or abilities.


  • Women in business

    For breaking the mould. This award recognises a successful female leader and entrepreneur who is paving the way forward for the future generations.


  • B-Good

    For a good business. This award recognises a company that has done well to change our economic system to positively impact all stakeholders through their commercial practice.


  • Circular Pioneer

    For making a difference. This award category recognises a company that is pioneering their circular efforts.


  • Going green

    For delivering impact at scale. This award recognises a company that is actively leading and delivering impact and scale through sustainable efforts in clean energy, climate change, healthy environment, social and economic justice etc.


  • You've got ethics

    For the leadership in environmental social governance. This award category recognises a company that is promoting accountability, good governance, leadership in Corporate Social Responsibility and solving societal problems.


  • Design first

    For design lead products. This award recognises a company that is using design to drive product innovation with the entire company onboard.


  • Inception

    For visionary thinkers. This award recognises a person that came up with the transformative idea that can change the world for better.


  • Out of the garage

    For scaling globally. This award recognises a company's global growth, expansion, and success.


  • Unexpected twist

    For a great pivot. This award recognises a company that has taken an unexpected pivot in their business or career.


  • Wildfire

    For conquering a marketplace. This award recognises a company that has made a significant impact on the marketplace in the shortest amount of time.


  • Backbone

    For backing the future idea. This award recognises a VC firm with a portfolio of companies that have made a significant contribution to the growth and success of the AU economy.


  • Brave Angel

    For early stage support. This award recognises an angel investor that has garnered a portfolio of companies and has a good track record of helping founders succeed.


  • C-Suite

    For the best leadership. This award recognises the highest-ranking executive that has impeccable leadership, management and interpersonal skills.


  • Do you know who I am

    For the silent achiever. This award recognises a person that has been responsible for the success of their company from the backstage.


  • Future builder

    For grit to start a new venture. This award recognises a founder at any level and life stage who has decided to start jumping the hoops of their own business.


  • Hottest hub

    For the best community. This award recognises a co-working space that provides boutique experience, world class facilities with community management.


  • Launch pad

    For activating the support systems. This award recognises an accelerator that has a good reputation in providing the best startup program with industry connections.


  • Super connector

    For being the community champ. This award recognises a person for a significant contribution to the success of their clients or the community.

Pause Awards '23 is launching on 17 May
00d : 00h : 00m : 00s
Get notified
Pause Awards Night, Trophy
Signup to be reminded when the Pause Awards launch next in 2023.