The number of deals is shrinking but venture capital still hit a record in Australia

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  • Venture capital investment in Australia in the 2017-18 financial year hit a record $US630 million ($AU849 million).
  • The trend is for larger raises going to later stage startups.
  • KPMG says venture financing in Australia is keeping pace with global trends.

Venture capital in Australia hit a record $US630 million ($AU849 million) in the 2017-18 financial year, up 12% on the previous 12 months, despite a drop in the number of deals, according to Venture Pulse Q2 2018, a quarterly report by KPMG.

Over the three months to June, $US209.09 million of startup investment was recorded in Australia, up from the $US169.8 million the previous quarter.

However, the number of deals was 27, down from 31, continuing a trend for bigger raises to more mature startups.

“Venture financing continues to rise in Australia, keeping pace with worldwide trends,” says Amanda Price, Head of KPMG Australia High Growth Ventures.

“However, as the VC focus contines to shift towards larger raises for later stage startups, it raises questions as to where the funding for early stage ventures will come from.

“This is a real concern as we are not seeing an increase in angel investors or seed investment. If we want to Australia to have a successful and growing startup eco-system we need capital at every stage of the pipeline.”

Here’s how venture capital has been tracking in Australia:

Source: KPMG

Global venture capital investment hit a record high in the quarter, reaching $US69.8 billion across 3,108 deals.

As the number of deals fell, the median deal size globally remained above last year’s totals across all deal stages, reaching $US1.4 million for angel and seed stage rounds, $US7 million for early stage rounds, and $US13.5 million (2018 YTD) for late-stage rounds.

Chinese companies represented eight of the top 10 deals globally, led by $US14 billion to Ant Financial.

Shanghai-based unicorns Weltmeister and Pinduoduo each raised more than $US3 billion. Other top 10 deals included Manbang Group ($US1.9 billion), Ubtech ($US820 million), Hellobike ($US700 million) and SenseTime (US$620 million and $US600 million).

Agtech investment was a blockbuster year for VC investment in the year, with more than $US1.7 billion total invested on the power of a series of mega-deals late in the year, including Ginkgo Bioworks, Indigo Agriand Farmers Business Network.

And there’s more on the way.

“As governments and NGOs strive to ensure they have sufficient food and water for their people, and meet their environmental stewardship obligations, we expect to see interest in Agtech grow significantly and more VC activity,” says Ben van Delden, Partner, Head of AgTech & Markets, KPMG Australia.

“The rise of AgTech activity and accelerators in Australia is creating more local AgTech investment opportunity, which we expect to lead to more deal activity in the second half of 2018 and beyond.”

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