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While initial public offering (IPO) activity was low in 2018, the amount of venture capital (VC) invested in Australia surged upwards by 36 per cent last year to hit a record of US$899 million (A$1.25 billion).
This is the conclusion of KPMG in its latest VC trends report Venture Pulse Q4 2018, which highlighted growth from US$659.9 million in 2017.
Over the last quarter of 2018, US$147.1 million of startup investment was recorded in Australia.
Major funding deals included Deputy's US$81 million Series B round, Nura's US$21 million Series A round and Gilmour Space Technologies US$13.9 million Series B.
The number of deals, at 15, was down from the previous quarter's number of 41, when investment totaled US$325.16 million.
"2018 was the biggest year ever for VC investment into Australian startups. For the first time we are starting to see a steady flow of major funding rounds over US$10 mil aimed at helping locally founded businesses take on global markets," says KPMG head of high growth ventures Amanda Price.
"In Australia the diversity of the startups being funded is testament to the scale of the economy and opportunity."
Price highlights this needs to be viewed in the global context however, with global VC investment hitting $255 billion in the same period.
"In 2019 we expect a pricey climate and volatile market environment which will lead to increasing caution on the part of investors, even though there remains record capital to deploy," she says.
KPMG expects the total level of investment in 2018 will be tough to match worldwide in 2019 but there will likely still be substantial activity, particularly in late-stage deals.
Autotech whether autonomous vehicles, alternative energy vehicles, or ride hailing - is expected to see strong investment, in addition to healthtech and fintech. On the technology front, artificial intelligence is also expected to see strong growth.
The IPO market will be one area to watch as several massive unicorns, including Uber and Lyft, prepare for IPOs despite the unexpected turbulence in the capital markets at the end of 2018.
"In 2018, we saw the IPO door swing wide open globally with a number of significant IPOs across the world," says KPMG's head of technology Somekh Chaikin in Israel.
"While the last month of 2018 was highly tumultuous for the capital markets, if it settles down quickly in Q1'19, we may see a number of the aging unicorns looking to exit. If those companies do well, others will follow."
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