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The State of Australian Startup Funding 2025 is Cut Through Venture and Folklore Ventures’ annual review of capital flows, investor behaviour, and market conditions across the local startup ecosystem. In 2025, funding rebounded sharply, but the recovery was selective, with a small number of mega rounds lifting headline totals while median deal sizes rose, confidence improved, and AI played a central role in reigniting momentum.
Based on 390 announced deals and $5.4B in funding, 2025 was the third-largest funding year on record, with capital up 31% year-on-year. The report captures funding and deal trends, sector and state outcomes, founder and investor survey insights, valuation and term dynamics, international capital behaviour, LP sentiment, and gender equity outcomes.
The Australian Funding Landscape in 2025
Overall Market Conditions
Australian startups announced $5.4B across 390 deals in 2025, a 31% increase year-on-year, making 2025 the third-largest funding year on record.
The market moved into a more stable, more selective phase, with capital rising even as total funded deals slipped below 2024 levels, and Q4 2025 becoming the strongest quarter since 2021 at above $2.0B raised.
Funding remained concentrated at the top, with the 20 largest deals accounting for 58% of total capital, while 77% of investors saw a portfolio company conduct layoffs and 46% saw a company shut down.
Deal Size and Round Trends
Median deal size in 2025 was $1.0M at Angel + Pre-Seed, $2.5M at Seed, $11.0M at Series A, and $30.0M at Series B+.
Median round sizes rose across all funding stages except Seed, which remained in line with 2024, and the spread of deal sizes widened at all stages except Seed.
Competitive tension increased most at the early stages, with 59% of investors saying Pre-Seed and Seed deals became more competitive in 2025 vs 2024, compared with 43% for Series A and B and 18% for Series C+.
Founders continued to structure rounds deliberately, prioritising efficiency and right-sized raises over headline scale, particularly as investors stayed selective outside the strongest opportunities.
Large rounds returned selectively, with 15 deals above $50M in 2025, down from 21 in 2024, but still enough to lift overall funding and reinforce a two-speed market.
Sectoral Leaders and Shifts
Top Funded Sectors
Artificial Intelligence was the top funded sector in 2025 at $1.0B.
Fintech ranked second with $868m in funding.
Biotech / Medtech ranked third with $829m in funding, and led sector deal count with 49 deals.
Sector Trends
AI influenced funding outcomes well beyond a single category, with 61% of total capital flowing to startups with an AI offering, and investors placing more weight on workflow integration, differentiation, and defensibility than standalone AI branding.
Outside AI, Biotech / Medtech led activity by deal count, Fintech continued to attract substantial capital, and Hardware / Robotics / IoT showed resilience despite a narrower investor base.
Funding breadth remained uneven across sectors, with 15 of 25 sectors seeing a fall in capital raised compared to 2024, while later rounds in deep tech and climate often still required government support, signalling a gap in private capital at scale.
Founder & Investor Dynamics
Gender Equity and Team Composition
Startups with at least one female founder captured 24% of total capital in 2025, rebounding from 15% in 2024, while deal share eased to 24% after 28% in 2024.
Participation by women founders remained strongest at the earliest stages in 2025, with 32% of Angel + Pre-Seed deals and 23% of Seed deals involving women founders.
Representation was lower in growth rounds, with 14% of Series A deals and 21% of Series B+ deals involving women founders.
International Capital and LP Sentiment
International investor participation continued to climb in 2025, becoming embedded across the majority of deals, with founders increasingly going offshore as local cheque depth narrowed sharply from Series A onwards, especially for $5M+ and $10M+ rounds.
Founder behaviour reflected that shift, with 59% pursuing both local and international investors, 11% pursuing only international investors, and 30% pursuing only local investors. The top reasons for seeking international capital included cheque size, risk appetite, global expansion support, and more favourable valuation and deal terms.
LP conditions remained selective and uneven, with 45% of firms completing a fundraise in 2025 and 30% currently raising, while 35% of investors who raised finished below target and only 30% raised more than targeted.
Investor Sentiment and Outlook
Valuation Stability and Deal Structuring
Investors described a bifurcated valuation market in 2025, with an upward reset from late 2024 to early 2025 followed by steady pricing through the rest of the year.
AI-at-the-core companies continued to command valuation premiums and sharper competition, while non-AI deals were priced within tighter, more disciplined bands.
Looking ahead, investor expectations on pricing and terms were balanced, with 44% expecting valuations to rise in 2026, 46% expecting them to stay the same, and 10% expecting a fall, while 43% expected deal terms to remain the same and 36% expected them to become more founder-friendly.
2026 Outlook
The report’s outlook for 2026 is measured but positive, with investors expecting more continuity than reset, and continued discipline and selectivity even as confidence improves.
43% of investors expect ecosystem startup investment activity to increase in 2026, 51% expect their own firm’s deal activity to increase, and 79% expect deal terms to stay steady or become more founder friendly.
The most cited sectors to watch in 2026 were Artificial Intelligence (71%), Hardware/Robotics/IoT (35%), and Deep Tech (33%), with Enterprise/B2B Software also featuring strongly (31%).
2025 was a genuine rebound year for Australian startup funding, with stronger capital deployment, improving confidence, and a clear return of competitive tension in the best opportunities. At the same time, the report shows a market that is still highly selective, concentrated at the top, and constrained by liquidity, local later-stage cheque depth, and uneven progression into scaled funding for many founders. The strongest signal is that the ecosystem is maturing, but the next phase depends on broader capital recycling and more consistent access to growth capital.
Explore the full report to gain:
State-by-state funding breakdowns and sector-level investment patterns
Expert commentary from leading investors and fund managers
Benchmark data for founders and startup operators
