Venture capital in Australia reaches $630 million, early stage start-ups losing steam

08 August 2018 4 min. read
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Investments by venture capitalists hit US$630 million in Australia over the 2017/18 financial year according to data released by Big Four professional services firm KPMG.

The venture capital scene in Australia grew by 12% over the past year to its highest point ever whilst there was a drop in the overall number of deals. Data published by KPMG in its quarterly report ‘Venture Pulse Q2 2018’ highlighted the growing trend of Venture capitalists investing higher sums in more developed start-ups in Australia.

Venture capital in Australia is up to a record high this quarter, globally reaching a total of $69.8 billion. Australia’s slice of the Venture capital pie was $209 million across 27 deals throughout Q2 2018. 

The largest deals across the country were for Australian online graphic designer platform Canva and for SafetyCulture, an Australian occupational health and safety company with a well known inspection app, iAuditor. 

Canva sold for $40 million in Series C funding which according to Business Insider puts the start-up’s company value at around $1 billion. SafetyCulture was the start-up which received the most in 2018 however with a staggering $60 million capital injection.

“Australia has a huge future in technology and we are proud to be able to play a role in developing that. Such a significant injection of overseas capital allows us to further grow and invest in our local talent,” said the founder and CEO of SafetyCulture Luke Anear. 

Amanda Price, Head of KPMG Australia High Growth Ventures said that she was excited to see interest in Australian start-ups. “Venture financing continues to raise in Australia, keeping pace with worldwide trends. It is encouraging to see Australian startups gaining access to the capital they need to develop into global companies.”

Venture Capital in Australia reaches a record US$630 million but investors are shying away from early stage start-ups

The number of deals in Australia however declined, with the second quarter of 2018 down four to 27 over last year. In this regard, Australia is experiencing a phenomenon which is on par with the rest of the world. “As the VC focus continues to shift towards larger raises for later-stage startups, it raises questions as to where the funding for early stage ventures will come from,” said Price. 

This concern is growing, with early stage Australian entrepreneurs who are looking abroad for Venture capital investors getting increasingly shut down. Price is worried that the decline in seed and angel investments may begin to see the Australian start-up scene be put on hold.

“This is a real concern as we are not seeing an increase in angel investors or seed investment. If we want Australia to have a successful and growing startup eco-system we need capital at every stage of the pipeline,” she said. This is due to investors being more selective on where they put their money and not to be the ones who give out the first cheques.

Globally, venture financing has peaked in Q2 2018 to reach over $70 billion in investments, the highest on record. This includes one gigantic $14 billion round for Ant Financial. Without this one transaction, the quarter would have still been the second largest in history, only being beaten by the first quarter of 2018. The number of transactions worldwide however has dropped by just under a half, taking the number from 5,500 at its peak in 2015 to roughly 3,000 today.

“Recent fundraising by Australian venture capital funds means there is more money on the table than ever before for our startup founders,” Price said. “With larger investment rounds reflecting the ambitions and capability of these start-ups to expand into global businesses.”

“Venture capital investors continue to pour money into late-stage companies, in part because of the number of aging unicorns that have remained private,” adds Brian Hughes, National Co-Lead Partner, KPMG Venture Capital Practice, and a partner for KPMG in the US.

Meanwhile in Asia, venture capital topped $14 billion for the fourth consecutive quarter. Funding for start-ups across the continent reached $14.6 billion in 317 deals in the region. The largest deals were in Singapore and Indonesia, with China, India and Japan also taking considerable shares of the venture capital investment space.