A record US$5.84 billion was invested in Australian startups in 2022, up 2 percent from 2021, according to newly released data from KPMG Australia.

The latest numbers from the KPMG Private Enterprise Venture Pulse report shows that, despite global venture capital falling from $730.5 billion to $493.6 billion in 2022 – Australian startups continued to attract record amounts of investment.

KPMG Venture Pulse data tracked 623 Australian VC deals in 2022, down from 735 in 2021. Australia saw multiple startups raise over US $100 million in 2022, including Airwallex, Immutable and Scala Pay.

Amanda Price, Head of High Growth Ventures, KPMG, commented: “It was another record year for VC investment in Australia. Despite the economic cooldown, deal value maintained its momentum in what was a standout result in 2021, although the volume of deals has decreased. This shows that dry powder is still being deployed – what’s changing is the way it’s being invested.

“To put this into context, overall investment in Australia startups has leapt 194 percent since 2019 – and has delivered year-on-year growth every year since 2014. As we move into 2023, VCs are increasingly looking for startups that are efficient, responsible with capital, and focused on revenue. When they find them, they’re willing to invest just as much as they have before, if not more.”

Global slowdown in Q4 2022

Australia’s VC performance contrasts with global venture capital investment dropping for the fourth consecutive quarter in Q4’2022 – falling from $102.2 billion on 9,767 deals to $75.6 billion on 7,641 deals. Global investment has fallen to its lowest levels since Q2’2019.

The decline comes despite large deals in the energy sector, including alternative energy vehicles, battery technologies, and alternative power generation and distribution technologies as governments seek to secure energy independence and meet their climate obligation.

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

Dry powder expected to help keep VC market stable despite growing uncertainty

Looking ahead to Q1’23, venture capital investment globally is expected to remain subdued, with consumer-focused businesses seeing the most strain. The IPO window, particularly in the US will likely remain closed well into 2023, with little to suggest it will reopen fully in the first half of the year. As companies run out of cash, there will likely be an increasing number of down rounds and an in increase in M&A activity.

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

For further information

Ash Pritchard
+61 411 020 680