According to the latest report from Cut Through Venture, investments plummeted from $1.5 billion in the June quarter to $695 million. This downturn has been largely attributed to a lack of transactions exceeding $100 million, with capital raises above $50 million also reaching multi-year lows.
In response to these challenges, there is a noticeable shift among venture capitalists towards a greater emphasis on profitability and timely exits. The report indicates that nearly half of the surveyed VC firms are now more frequently discussing exits compared to the previous year, highlighting a growing urgency to deliver returns to investors. This focus on cash returns marks a departure from past trends, where discussions surrounding liquidity were often overlooked in favour of growth.
Despite the overall decline in capital raised, the report notes a promising increase in deal activity, particularly at the early stages. Seed-stage investments accounted for a significant portion of all announced non-accelerator deals, demonstrating ongoing investor interest in emerging startups. Additionally, accelerator announcements approached an all-time high, indicating a robust engagement in fostering new ventures.
The total investment of $695 million in the September quarter included 92 venture deals and 39 accelerator rounds. Among the most notable transactions, SafetyCulture led with a $75 million primary capital raise, alongside $90 million for existing investors. Fintech companies showed strong performance, with notable raises including Grow Inc at $60 million and InDebted at $50 million.
Interestingly, while artificial intelligence and big data deals previously dominated the landscape, their volume has decreased, allowing Climate Tech to take the lead in deal count. However, it’s important to note that a significant portion of these Climate Tech deals were accelerator rounds.
A positive development for diversity in funding emerged as well, with female-founded teams rebounding in participation. Pre-seed and seed-stage funding saw substantial involvement from teams with female founders, aligning with broader trends toward inclusivity in the investment landscape.
Looking ahead, Cut Through Venture remains cautiously optimistic about the final quarter of 2024. The report points to a backlog of startups that have raised at least $20 million but have yet to secure further funding since 2021 or 2022, suggesting potential for larger deal announcements in the near future. To surpass last year’s total, the Australian startup ecosystem needs just under $500 million in the final quarter, positioning 2024 to potentially be the third-largest funding year on record, despite the current downturn.
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