The fifth annual State of Australian Startup Funding report, published by Cut Through Venture and Folklore Ventures, confirms what many in the ecosystem felt throughout 2025. Confidence returned. Capital started moving again. And the headline numbers look strong.
Australian startups raised $5.48 billion across 390 deals in 2025. That is a 31% increase on 2024 and the third-largest funding year on record. The final quarter alone delivered over $2 billion, the strongest quarterly result since the 2021 peak.
But the headline masks a more complex story underneath. Deal count dropped 20% from 2024. The top 20 deals captured 58% of all capital raised. And the gap between well-funded AI companies and everyone else widened throughout the year.
This article breaks down the full report across funding totals, state-by-state performance, sector allocation, deal sizes, founder sentiment, and what it all signals for Australian businesses entering 2026.
Total funding reached $5.48 billion, up from $4.18 billion in 2024. This 31% year-on-year increase marks the strongest recovery since the post-2021 correction that brought the market down from its $10 billion high.
The 390 deals announced in 2025 represent a 20% decline from 2024's 470 deals. More money went to fewer companies. Median deal sizes rose across most stages, and one new unicorn emerged during the year.
Q4 2025 was the standout quarter, with over $2 billion raised. This was the strongest single quarter since Q4 2021, and it pushed the full-year total well above initial forecasts. Much of the Q4 surge was driven by large late-stage rounds closing before year-end.
For the first time in the history of this report, Victoria overtook New South Wales as the top-funded state.
Victoria attracted $2.2 billion across 134 deals. This was driven heavily by Airwallex's two mega-rounds ($498 million Series G and $232 million Series F) and strong performance from Melbourne-based scale-ups like Roller and others in fintech and enterprise software. Melbourne's growing cluster of later-stage companies is pulling capital that previously defaulted to Sydney.
New South Wales brought in $1.7 billion across 160 deals. While it lost the top funding spot, NSW still led on deal count, reflecting its strength in early and mid-stage activity. The state's breadth of seed and Series A deals remains the deepest in the country.
Queensland crossed the half-billion mark for the first time, raising $504 million across 61 deals. This represents meaningful growth and reflects the maturation of Brisbane's startup ecosystem, particularly in climate tech, biotech, and defence-adjacent sectors.
The remaining states and territories collectively accounted for approximately 9% of total funding, with pockets of activity in South Australia (defence tech, space) and Western Australia (resources technology, climate).
AI dominated the funding landscape in 2025, but not just as a standalone sector. The report found that 61% of every dollar invested went to companies using AI somewhere in their technology stack, whether as the core product or as embedded capability.
The AI category was heavily influenced by Firmus Technologies, which raised $500 million and then $330 million across two strategic rounds for AI data centre infrastructure. Beyond Firmus, AI funding spread across vertical applications in legal tech, customer service, healthcare diagnostics, and enterprise automation. Investors increasingly demanded defensible moats, proprietary data advantages, and clear unit economics rather than just an AI label.
Fintech remained the second-largest category, led by Airwallex's combined $730 million across two rounds. The sector continues to produce Australia's largest scale-ups, with cross-border payments, embedded finance, and B2B financial infrastructure attracting the bulk of capital.
This sector produced several of the year's largest individual raises. Synchron ($303 million Series D for brain-computer interface technology), Harrison.ai ($179 million Series C for medical imaging AI), and AdvanCell ($177 million Series C for drug delivery technology) all closed substantial rounds. Australia's strength in life sciences research continues to translate into venture-fundable companies.
Climate tech maintained its position as a major funding category, with particular strength in energy storage, carbon capture, green hydrogen, and sustainable agriculture. Many of these deals involved government co-investment or support, reflecting the capital-intensive nature of deep climate technology.
Hardware and robotics companies saw increasing investor interest throughout 2025, particularly in defence-adjacent technologies, autonomous systems, and industrial automation. This sector topped both funding and deal counts in Q3 2025 for the first time in the current cycle.
Digital health, telehealth platforms, and health data analytics companies continued to attract capital, though at lower levels than during the pandemic-driven surge of 2020 to 2022.
The concentration of capital at the top of the market was pronounced in 2025. The five largest raises accounted for a substantial share of total funding.
Firmus Technologies raised $500 million followed by an additional $330 million, both strategic rounds focused on AI data centre infrastructure. These were the largest raises of the year by a significant margin.
Airwallex raised $498 million in a Series G round and $232 million in a Series F round, bringing its total 2025 fundraising to $730 million. The cross-border payments company remains one of Australia's most valuable private technology businesses.
Synchron raised $303 million in a Series D round for its brain-computer interface technology, reflecting growing global investor appetite for neurotechnology.
Harrison.ai raised $179 million in a Series C round for AI-powered medical imaging and diagnostics.
AdvanCell raised $177 million in a Series C round for advanced drug delivery technology.
Median deal sizes rose across most stages in 2025, reflecting both increased investor confidence and higher capital requirements, particularly for AI-native companies.
At the angel and pre-seed stage, the median round reached $1.0 million. Seed rounds landed at a median of $2.5 million. Series A rounds hit $11.0 million. Series B and above reached a median of $30.0 million.
These figures represent increases from 2024 across most stages except seed, which held roughly steady. The upward trend in early-stage round sizes reflects both increased competition for promising deals (59% of pre-seed and seed deals were competitive in 2025, up from 30% the prior year) and the higher upfront capital requirements of AI-native businesses.
The most consistent theme across the entire report is the widening gap between two types of companies in the market.
On one side, AI-native or AI-powered startups with strong early metrics experienced fast, competitive fundraising rounds. They attracted international investor interest, commanded valuation premiums, and closed rounds quickly. These companies benefited from what the report describes as AI compressing time, allowing teams to ship, iterate, and prove value faster, which pulled more companies into a fundable position earlier.
On the other side, startups outside the AI wave faced longer due diligence timelines, higher scrutiny on unit economics, and difficulty finding lead investors. For these companies, the recovery was real but far more measured. Fundraising timelines continued to stretch, and the bar for proof of traction remained higher than in pre-2022 years.
This two-speed dynamic is not unique to Australia. Global venture capital markets showed similar patterns throughout 2025. But the effect was amplified in Australia's smaller market, where a handful of mega-rounds can significantly shift headline figures.
The report found that 66% of all deals in 2025 included at least one international investor, up from 57% in 2024. At Series A and beyond, offshore participation has become the norm rather than the exception.
Global firms including Andreessen Horowitz, Bessemer Venture Partners, and Lightspeed Venture Partners all backed Australian-founded companies during 2025. Founders cited larger cheque sizes, deeper follow-on capacity, and global expansion support as the primary reasons for seeking international capital.
This shift reflects a structural change in how Australian startups fund their growth. Domestic venture capital and superannuation fund allocations remain important, particularly at early stages. But they are no longer sufficient to fully fund the later-stage rounds that scaling companies require. The internationalisation of Australia's capital base is a sign of ecosystem maturity, even as it raises questions about long-term value capture for domestic investors.
The 2025 report shows mixed results for female founders.
On the positive side, the share of equity capital raised by teams with at least one female founder jumped to 24%, up from 15% in 2024. This is the strongest result on record and reflects several large rounds involving mixed-gender founding teams.
However, deal participation for female-founded teams fell to 24%, down from 28% in 2024. This means fewer companies with female founders received funding, even as the total dollars going to those who did increased. The gains were concentrated in a handful of larger rounds rather than spread broadly across the ecosystem.
All-women founding teams still captured just 2% of total capital, virtually unchanged from prior years. The report flags this as both a gender equity issue and a capital efficiency problem. Research consistently shows that diverse founding teams generate stronger risk-adjusted returns, and the ecosystem is leaving performance on the table by not addressing participation barriers at scale.
The report dedicates an entire chapter to the liquidity challenge facing Australian venture capital, and it is worth paying attention to.
Traditional exit routes, including IPOs and large M&A transactions, remained slow throughout 2025. Without exits, capital does not flow back to limited partners, and without capital returning to LPs, future fund formation becomes more difficult. This creates a compounding problem where strong investment activity today does not guarantee strong investment activity in future years.
Secondary transactions and continuation vehicles are growing fast as a pressure valve, providing partial liquidity to early investors and employees without forcing companies into premature exits. Many funds are also quietly extending their fund lives toward 15 years, well beyond the traditional 10-year venture capital fund lifecycle.
The report is direct about the stakes. If capital does not flow freely back to investors through exits and secondaries, less capital will flow to future VC fund vintages. 2026 will be the first meaningful test of whether the liquidity flywheel can start turning through a combination of secondaries, some IPOs, and strategic M&A.
Despite the improving headline numbers, the report reveals that portfolio-level stress remained elevated in 2025.
46% of investors surveyed saw at least one portfolio company shut down during the year. 77% saw layoffs across their portfolio. Bridge rounds remained common as companies extended runway rather than raising full priced rounds.
These figures reflect the delayed effects of the 2022 to 2023 funding contraction. Companies that raised at elevated valuations during the boom and then struggled to grow into those valuations continued to face difficult choices throughout 2025. Investors describe ongoing portfolio triage, with increased focus on capital efficiency and path to profitability for companies that may not be able to raise follow-on funding at acceptable terms.
Founder confidence improved meaningfully in 2025. 76% of founders plan to raise capital in the next 12 months, and 86% are confident they will successfully close their round.
On the investor side, 51% predicted even higher activity in 2026. Roughly half described current market conditions as favourable, with a small uplift in those describing conditions as highly favourable compared to 2024.
The report notes that while optimism is welcome, it should be tempered by the structural constraints around liquidity, the ongoing concentration of capital in a narrow band of companies, and the continued challenges around diversity and geographic breadth. The ecosystem is healthier than it was in 2023, but it is not yet back to the broad-based growth that characterised the 2020 to 2021 period.
The startup funding data carries implications well beyond the venture capital ecosystem.
390 companies raised capital in 2025, many of them scaling rapidly through the $2 million to $10 million revenue band. These businesses face a common set of operational challenges: building finance infrastructure, managing payroll and compliance obligations, implementing board reporting, and handling the cash flow complexity that comes with rapid growth.
Many of these companies are hiring their first finance staff. The report shows that the median Series A round is now $11 million, which means post-raise companies typically have 18 to 24 months of runway and immediate pressure to demonstrate capital efficiency to their investors. Getting finance operations right from the start is not optional for these businesses.
At the same time, the 46% portfolio shutdown rate and 77% layoff rate tell a cautionary story about companies that did not build the financial discipline and operational rigour required to survive a tightening funding environment. The companies that made it through the 2022 to 2024 correction and into the 2025 recovery typically had clear visibility over their cash position, tight control of their burn rate, and reporting that gave their investors confidence.
For businesses outside the startup ecosystem, the broader signal is clear. Capital is flowing into Australian technology businesses at scale, AI is reshaping every sector, and the companies best positioned to grow are those with strong financial foundations and operational discipline.
Australian startups raised $5.48 billion across 390 deals in 2025, according to the State of Australian Startup Funding report by Cut Through Venture and Folklore Ventures. This represents a 31% increase on 2024 and makes 2025 the third-largest funding year on record for Australian startups.
Victoria received the most startup funding in 2025 with $2.2 billion across 134 deals, overtaking New South Wales for the first time. NSW raised $1.7 billion across 160 deals (still leading on deal count), while Queensland crossed $504 million across 61 deals.
The largest raises were Firmus Technologies ($500 million and $330 million for AI data centre infrastructure), Airwallex ($498 million Series G and $232 million Series F in fintech), Synchron ($303 million Series D in brain-computer interfaces), Harrison.ai ($179 million Series C in medical AI), and AdvanCell ($177 million Series C in drug delivery).
$1.0 billion went directly to companies classified as artificial intelligence. More broadly, 61% of all capital invested in 2025 went to startups using AI somewhere in their technology stack, whether as the core product or as embedded capability.
The median Series A round in Australia was $11.0 million in 2025. Median round sizes across other stages were $1.0 million at angel and pre-seed, $2.5 million at seed, and $30.0 million at Series B and above.
Teams with at least one female founder raised 24% of total equity capital in 2025, up from 15% in 2024. However, deal participation for female-founded teams fell to 24% from 28%, and all-women founding teams still captured just 2% of total capital.
66% of all deals in 2025 included at least one international investor, up from 57% in 2024. At Series A and beyond, offshore investor participation has become the norm. Global firms such as Andreessen Horowitz, Bessemer Venture Partners, and Lightspeed backed Australian-founded companies during the year.
76% of founders plan to raise capital in the next 12 months, and 86% are confident they will close their round. 51% of investors predicted even higher activity in 2026. However, the report highlights liquidity constraints, capital concentration, and diversity challenges as structural risks to sustained growth.
46% of investors surveyed saw at least one portfolio company shut down during 2025, and 77% reported layoffs across their portfolio. Bridge rounds remained common as companies extended runway rather than raising full priced rounds during the recovery period.
The top-funded sectors were Artificial Intelligence ($1.0 billion), Fintech ($868 million), Biotech and Medtech ($829 million), Climate Tech and Cleantech ($585 million), Hardware, Robotics and IoT ($297 million), and Healthtech ($271 million).
This article draws on the following sources:
State of Australian Startup Funding 2025 (Full Report), Cut Through Venture and Folklore Ventures, published at australianstartupfunding.com and 2025.australianstartupfunding.com
Capital Brief, "Aussie startups in 2025 had strongest funding quarter in years: report," capitalbrief.com
SmartCompany, "$5.1 billion funding year masks sharp fall in Australian startup deals," smartcompany.com.au
Folklore Ventures, "2025 State of Australian Startup Funding Report," folklore.vc
Australian Investment Council, "State of Australian Startup Funding 2025," investmentcouncil.com.au
Cut Through Venture Quarterly Reports (Q1-Q3 2025), cutthrough.com
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