Startup funding increases in Australia but total deals decline significantly

Written on the 17 January 2018

Startup funding increases in Australia but total deals decline significantly
Australian startup funding in 2017 rose by 1.4 per cent on 2016 to hit US$555.63 million although the number of deals dropped significantly, according to a report on global venture capital investment.

In the fourth quarter of 2017, 17 deals were closed in Australia with a total investment of US$121.55 million which was an increase on the same period last year when US$105.15 million was invested.

Some of the major deals in the final quarter of 2017 included US$30 million invested in IR Exchange, US$25.72 million in Airtasker and US$19.5 million in Spaceship.

However, KPMG International's Venture Pulse quarterly report also showed that while the total amount of Australian venture capital invested rose, the number of deals fell significantly from 185 in 2016 to 135 in 2017.

"Australia's startup investment scene has rapidly matured, with professional VC firms raising and deploying increasing levels of capital over the past few years" says Amanda Price, Head of KPMG High Growth Ventures.

"The speed of growth has been coupled with an evolution in how investors approach startup ventures with a shift towards pre and post-series A funding.

"At the same time, we are seeing increasingly sophisticated Australian startups scaling on the global stage. With seed and angel funding still a vital part of our startup ecosystem, we are hopeful that the decline in deal number is a temporary shift rather than a major structural change in the VC market."

The report also revealed global VC investment rose from US$40.8 billion in Q317 to US$46billion in Q4 2017 with artificial intelligence and machine learning receiving a massive US$4.1billion in investment in Q4 2017, compared to US$3.1 billion in Q317.

Global median deal size rose for every deal stage in 2017, with the median deal size of angel and seed deals rising to US$1 million from US$800,000, early stage deals rising to US$5 million from US$3.7 million, and later stage deals rising to US$10.8 million from US$9.5 million.

Pharmaceuticals and biotechnology saw a massive year-over-year increase in VC investment, from US$12.2 billion in 2016 to US$16.6 billion in 2017.

The report concludes that looking ahead to Q1 2018 and beyond, there are many positive signs that the global VC market will continue to be strong in terms of investment, although the declining number of deals could create some challenges down the road.

Areas like healthtech, biotech and autotech are expected to continue to grow at a rapid pace, while artificial intelligence across industries will likely help drive significant investment rounds. Newer areas like foodtech and agtech are also expected to gain traction heading into 2018.

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