Bookended by Canva’s $51 million unicorn-making round in January and Deputy’s $111 million Series B at the end of November, Australia saw venture capital investment in local startups reach $1.25 billion (US$899 million) in 2018.
According to the latest Venture Pulse report from KPMG, the record funding was up 36 percent on 2017, during which local startups raised $920 million (US$659 million).
Globally, overall investment reached $355 billion (US$255 billion) in 2018, up from $244 billion (US$175 billion) in 2017. Over $132 billion (US$95 billion) in 2018 funding went to Asia-based startups alone.
Amanda Price, Head of KPMG High Growth Ventures, said that Australia is, for the first time, starting to see a steady flow of major funding rounds over US$10 million.
“In Australia the diversity of the startups being funded is testament to the scale of the economy and opportunity,” she said.
The size of funding rounds helped push the year’s growth despite a sharp decrease in the number of deals between Q3 and Q4: US$325.16 million was raised across 41 Australian deals in the third quarter of 2018, down to $147.1 million across just 15 deals in the last quarter.
Joining Deputy in raising significant funding in Q4 were nura, which raised $21 million, and Gilmour Space Technologies, which raised $19 million. Brisbane’s RedEye also announced a $10.4 million raise, while insuretech startup Huddle has raised $19.25 million in a round led by AirTree Ventures.
Despite the growth, Price warned of shifting investor attitudes and risk appetites in 2019.
“In 2019 we expect a pricey climate and volatile market environment which will lead to increasing caution on the part of investors, even though there remains record capital to deploy,” she said.
It will be an interesting year for Australian investors, with 2018 seeing significant capital come from new places.
Blackbird Ventures last April announced the closing of its third fund, having raised $225 million from industry super fund Hostplus, its cornerstone investor, First State Super, the government’s Future Fund, and 100 high net worth individuals.
The interest from the Future Fund, the country’s sovereign wealth fund founded in 2006 and worth $139 billion, is particularly interesting.
Its investment into Blackbird is the first time the fund has looked to the startup sector. Dr Raphael Arndt, Chief Investment Officer at the Future Fund, told an event last year that venture capital was something the organisation had been exploring for some time.
“There is no shortage of growing small and medium Australian businesses requiring capital. Their success is important to the development and diversification of the Australian economy, including ultimately our listed market should they go on to IPO,” Dr Arndt said.
“Given the large size of the Future Fund, and our model, which involves a relatively small investment team, it has always been challenging for us to find an efficient way to invest in these types of businesses.
“We believe there are attractive investment opportunities in this sector in which the Future Fund can invest. This will have the added benefit of supporting small and medium Australian businesses to realise their growth potential.”