Australia's largest 25 VC deals of the June quarter

The latest quarterly report from Cut Through Venture shows Australian startup funding remains "sluggish" compared to 2022 with deals taking longer to close, but there were a few shining lights including improved investor sentiment and more funding versus the March quarter, especially at the pre-seed level.

With $810 million raised through 90 deals in the June quarter, Australian startups raised more money through more deals than in the three months prior, amidst a drastic reduction in the portion of investors who thought funding conditions were unfavourable - down from 40 per cent to just 29 per cent.

"The fog of fear and uncertainty looming over local and global markets in the latter half of 2022 and Q1 2023 appears to have lifted," says Cut Through Angels founder Chris Gillings, who is also part of the venture capital team at Five V Capital.

"Rather than hurrying to rush through deals, emphasis has shifted to understanding and addressing the needs of all stakeholders.

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

The $1.5 billion raised in the first half of the year is just one third of the amount raised in the first six months of 2022, and unsurprisingly valuations have taken a hit in the past 12 months, most significantly for Series C+ companies, now worth 48 per cent less on average.

For most startups that have raised capital it appears the amount secured per round hasn't declined too much on the past year, as demonstrated by a huge divergence between the average and median declines per raise at the Series A and Series B+ levels.

This signifies a skewing effect from outliers that raised enormous sums of capital during 2021-22 highs, but now that upper boundary achievable for the select few has been substantially cut. For the quarter there was only one $100 million-plus deal (Saluda Medical), compared to an average of three per quarter throughout 2022.

For Series B+ companies, the average raise was down a whopping 46 per cent over the past year, yet the median raise declined just 8 per cent. For Series A there was a 29 percentage point gap between the average and the median decline, the latter being down 7 per cent.

A different dynamic has been at play for smaller startups. Angel and pre-seed companies bucked overall declines to record a 2.6x lift in the median raise to $1.8 million in the quarter, and most seed rounds trended lower with the average down 27 per cent at $2.2 million while the average was up 21 per cent at $4.6 million.

Meanwhile, more than half of investors were seeing a good or excellent quality of deal flow, and 64 per cent seemed undisturbed by a potential Australian recession and did not expect to change their investment approach due to this threat. Just under half (48 per cent) said their portfolios were in at least good shape.

In terms of the most popular sectors for investors when asked what they were most excited about, the top four remained unchanged as AI/big data, enterprise/business software, cyber/privacy/id, and deep tech.

Agriculture/agtech jumped five spots into fifth place over the quarter prior, followed by ed-tech which remained flat in sixth position but was up from 12th place in the last quarter of 2022.

Other sectors that rose several spots from the end of last year include design/publish/collab (from 20th to 9th) and devtech (10th to 7th).

In contrast, climate tech fell from 1st place to 11th, health-tech dropped from 5th place to 14th, while there were also fairly drastic falls for e-commerce (down five spots to 23rd) and blockchain/crypto-web 3 which fell from 15th to last place at 25th.

The decline in popularity for climate tech startups runs counter to the bullishness for the space as illustrated by the recent Climate Salad Industry Report, which included contributions from Cut Through Venture.

In the quarterly report itself, climate-tech came in fourth place for capital raised with $60 million across seven deals

Similarly, even though investors professed to be less excited about health-tech than before, the sector accounted for $82 million of the capital raised in the June quarter, and biotech/medtech was at $185 million.

In the three working days of July thus far there have already been two deals that would rank highly compared to the June quarter rounds - Pet Circle which raised $75 million, and Nomad Atomics which raised $12 million.

Australia's largest 25 deals of Q2, 2023, according to Cut Through Venture: