Venture capital is still pouring into Australian startups but the number of deals is shrinking.
Australian startup funding in venture capital was up 1.4% in 2017 to $US555.63 million ($A698.29 million), according to analysis by KPMG.
The professional services firm’s quarterly global report on venture capital investment, Venture Pulse, shows 17 deals closed in Australia in the fourth quarter of 2017 with a total investment of $US121.55 million ($A152.76 million).
Significant deals included $US30 million ($A37.70 million) invested in irexchange, $US25.72 million ($A32.32 million) in Airtasker and $US19.5 million ($A24.51 million) in Spaceship.
However, while the total amount of Australian venture capital invested rose over the year, the number of deals fell significantly to 135 in 2017 from 185 in 2016, as this chart shows.
“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.”
KPMG says 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 challenges.
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 such as foodtech and agtech are also expected to gain traction heading into 2018.
“The applicability of innovative technologies, whether AI and machine learning or blockchain, to different sectors will likely keep investors focused and investment high regardless of any pauses among specific industries,” says Price.
“With many Australian VCs continuing to deploy capital and more funds being raised, we expect 2018 to continue to see strong activity in startup funding.”
FinTech Australia CEO Danielle Szetho says the decline in angel and early stage seed deals is happening right across the world.
“For this reason, we’ll continue to advocate strongly in support of the expanded private company equity crowdfunding regime to be passed through the Australian Parliament as soon as possible this year,” she says.
Last week corporate regulator ASIC (Australian Securities and Investments Commission) licensed the first seven crowd-sourced funding companies.
Digital bank Xinja, one of the first crowdfunds to go live following the licence approvals last week, raised the $500,000 in less than a day through Equitise. The raise is currently sitting at $750,000.