Venture capital deals stagnate for Australian start-ups

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“But, cyclically, we are in the early stages of what will be a significant market correction, so we could well see the numbers go down before they go up.”

May’s funding figures further demonstrate the meteoric growth of the local ecosystem in recent years.

Even with the sale, the month’s deal value nearly matched the $465 million raised by Australian start-ups in all of 2016.

The first five months of 2022 are also comfortably up from 2021 ($4.4 billion vs. $2.7 billion), thanks to a strong first quarter of deals, in which $3.6 billion in capital has been deployed.

“The reality is we’ve been through a really good cycle, and now we’re in a tougher time, but the story isn’t whether the cycle is tough this year…that’s what we’re seeing. more and more incredible companies,” said Mr. Bassat.

Statistics from Cut Through Venture revealed that once again, male founders attracted the majority of funds, with only 12 of the 52 companies that raised capital having a mixed founding team or all-female founders.

The bulk of deals were seed, angel or crowdfunding rounds, with only 14 deals over $10 million.

Just seven days into the month, June appears to be a healthier month for VC-backed companies, with Go1 and Edrolo already closing substantial new rounds.

Paul Bassat of Square Peg Capital says structural and cyclical forces are at play in the tech market. Arsineh Houspian

Main Sequence Ventures partner Mike Nicholls said he believed the effects of the tech crash would be felt less in Australia than in the United States.

“I don’t think Australia has gotten so carried away by valuations as the US market has been,” he said.

“Yes, there was still competition, but it wasn’t as fierce. Over the past 12 months we’ve seen American funds flow into Australia because it seemed like good value for money. I think it’s always the same.

“[The valuation crunch] doesn’t seem as sharp or as mean as the United States.

At the end of 2021, Tiger Global was involved in nearly every major Australian start-up funding deal, while funds like Index Ventures and Insight Partners were also active.

Fintech Zai CEO Paul Byrne said strong companies continued to attract interest, but there had been a marked slowdown in the market.

“The U.S. market sets valuation benchmarks for the rest of the world in general, so non-U.S. investors will be watching how valuation multiples move,” he said.

“This focus on lower risk generally means that US investors are reducing their foreign investments – which they perceive as higher risk than the US domestic market.

“Founders will focus more on the underlying economics, as they will be less interested in business models, which do not have a high gross margin and a path to profitability. Profit does not need to be very short term if you’re growing fast, but investors will need to understand the economics of the unit, so founders should expect a higher level of due diligence in funding rounds.

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