Startup funding off to fastest start since 2022 in Q1 despite softness in mid-sized rounds

A clear rise in megadeals worth more than $20 million helped push Australian startup funding close to $1 billion in the first quarter with the biotech/medtech sector leading the charge, according to the Cut Through Quarterly report released today. 

Big data/AI companies led the deal count by number, accounting for 12 of the 100 rounds reported in the quarter, but the biotech-medtech sector brought in the largest share of capital at $437 million out of the $993 million total. 

Some $350 million, or more than a third of the total, came from just two companies - AI-driven pathology and radiology technology scale-up Harrison.ai and novel cancer therapeutics developer AdvanCell.

"Q1 2025 got off to the fastest start since 2022, with total funding nudging toward $1 billion and the announcement of 100 deals across both venture rounds and accelerator programs," Cut Through Ventures wrote in its report.

"This momentum carried over from the encouraging activity in late 2024, fuelling strong results at every stage, from Pre-Seed to Series B+.

"Notably, segments beyond pure software accounted for a significant share of announcements, reflecting an increasingly diverse market."

The report's authors noted the only notable softness appeared in the $5–20 million range - typically Series A and B rounds - where announced deals dropped to their lowest level since mid-2023.

"Investor sentiment is high, but so too is global market and geopolitical volatility," Cut Through Ventures stated.

"If steady macro conditions play out, we expect the positive trends to continue - if they don't, it's anyone's guess how the local startup funding market will react."

The share of capital raised by companies with at least one female founder was down two percentage points to 15 per cent - a portion that would be considerably lower if not for the inclusion of clinical-stage biotech Aravax, which raised $66 million in early 2024 to further its studies into treating peanut allergies.

Business News Australia has sought clarification from Cut Through Ventures as to why Aravax's $66 million was included in the Q1 2025 report, representing the third-largest raise.

Other leading sectors for attracting funding included climate-tech/clean-tech ($108 million), health-tech ($80 million), e-commerce/retail ($68 million), hardware/robotics/IoT ($53 million) and prop-tech/real-tech/construction ($44 million).

Regarding valuations, from the report's survey of 112 investors it was found that Series A had the highest proportion of quarter-on-quarter valuation increases, at 52 per cent. This compared to 35 per cent for seed rounds, 33 per cent for pre-seed, 30 per cent for Series B, and 20 per cent for Series C+.

Also of note was the revelation from Tractor Ventures, in describing the evolution of Australian startups in recent years, had for the first time seen the profit margins of the startups in its lending portfolio enter positive territory in the year to date at 2 per cent, versus negative levels of 9 per cent and 16 per cent in 2024 and 2023 respectively.

Seven of the top raises in the quarter included founders who were featured in the Australia's Top 100 Young Entrepreneurs list published in March - Harrison.ai, Upcover, Instant, Lorikeet, Lawpath, Rosterfy, and Convergence Medical.

Two of the largest raises in the report, for Harrison.ai and Quantum Brilliance, were supported by the Federal Government-backed National Reconstruction Fund Corporation (NRFC).

Cut Through Ventures' Top 20 raises of Q1, 2025

1. Harrison.ai ($179 million)
2. AdvanCell ($171 million)
3. Aravax ($66 million)
4. Qsic ($40 million)
5. Sonder ($40 million)
6. Koloma ($38 million)
7. Quantum Brilliance ($32 million)
8. Carma ($30 million)
9. ElectraLith ($28 million)
10. Heidi Health ($27 million)
11. PropHero ($25 million)
12. BetterFleet ($24 million)
13. AMP ($20 million)
14. Upcover ($19 million)
15. Instant ($18 million)
16. Reshop ($17 million)
17. EcoJoule Energy ($15 million)
18. Coposit ($14 million)
19. Lorikeet ($14 million)
20. FairSupply ($12 million)