Aussie VC investment hits new high

Oksana Patron

1 February 2023

Despite global slowdown in venture capital activity and a lower number of Australian VC deals struck last year, Australian startups attracted record numbers of investment with US$5.84 billion being invested in local firms.

The amount of VC investment in Australia in 2022 was 2% higher compared to a prior year even though global venture capital fell from $730.5 billion to $493.6 billion counting year on year.

According to KPMG Venture Pulse data, the number of local VC deals also slipped from 735 in 2021 to 623 in 2022 but the country saw multiple startups raise over US$100 million in 2022, including Immutable, Scala Pay and Airwallex.

However, as VC investment globally are expected to remain subdued in Q1, with consumer-focused businesses being most affected, the startups will need to be able to demonstrate their efficiency and being smart with money.

“As we move into 2023, VCs are increasingly looking for startups that are efficient, responsible with capital, and focused on revenue,” KPMG’s head of high growth ventures, Amanda price, said.

“When they find them, they’re willing to invest just as much as they have before, if not more.”

The data also showed that Australia’s VC performance contrasted with global VC investment dropping for the fourth consecutive quarter in Q4 2022 as it declined from $102.2 billion on 9,767 deals to $75.6 billion on 7,641 deals meaning that global investment had fallen to its lowest levels since Q2’2019.

The Americas and Asia secured the largest deals during the quarter accounting for the largest share of VC investment globally during Q4’22.

According to data, the US recorded the largest proportion of investment with Asia second, despite attracting three $500 million + megadeals across the quarter.

Top deals from China included GAC Aion ($2.56 billion) and SHEIN ($1 billion) with the largest US deals including Anduril ($1.48 billion) and TerraPower ($830 million).

Going forward, Price said that the IPO (initial public offering) window, particularly in the US would likely remain closed well in 2023, with “little to suggest it will reopen fully in the first half of the year”.

Also, the market is going to see an increasing number of down rounds and an increase in M&A (mergers and acquisitions) activity as companies would be running out of cash.

“Globally, we continue to see downward pressure on valuations in early 2023, leading many companies to postpone fundraising efforts in hopes of better times ahead,” Price added.

“However, these companies can only hold off so long and we anticipate an increase in down[1]rounds during the first half of 2023 as companies begin to exhaust cash reserves.”