Startup funding has fallen from Q1 highs with the lack of “mega-deals” to blame

New funding for Australian startups has tumbled from the record highs of Q1 2022, according to the latest Cut Through Venture report, but the influential publication says the local investment appetite “does not yet reflect the doom and gloom” shrouding global tech valuations.

In its May report, released Tuesday, Cut Through Venture tallied $452 million of new investment towards Australian and New Zealand startups and scale-ups.

While the figure represents a notable uptick from April’s total of $369 million, it represents a shortfall from the funding bonanza which made Q1 2022 the richest in Australian startup history.

Funding has also fallen from the lofty highs of September 2021, where investors committed $1.6 billion in funding in one week alone.

The May downturn is partly due to a lack of mega-deals, Cut Through Venture noted.

Some 52 deals were announced in May, putting deal count back in “normal range”, but May was the first month since October 2021 in which no deals valued at $100 million or more were made public.

Three deals were announced in the $50 million to $99.9 million range, with another three valued between $20 million and $49.9 million range.

The bulk of the confirmed deals fell in the $1 million to $19.9 million range, with the remaining 16 either valued at under $1 million, or with an undisclosed value.

June edition of CTV just hit inboxes. Check your spam and promotions inboxes… we’re running the gauntlet with a new email alias. Enjoy! pic.twitter.com/5kcPcwbap3

— Cut Through (@cutthroughvc) June 6, 2022

Falling deal size coincides with tumbling market valuation for listed tech companies and speculation over the worth of private firms, as inflationary risks ward off investors chasing growth-focused companies.

However, Cut Through Venture stopped short of catastrophising, pointing out that funding so far in 2022 has outpaced funding by this point in 2021.

It also steered clear of outsized predictions about the remainder of 2022, declaring: “What’s important is that great Australian founders continue to receive the funding they need to attract and retain excellent talent, and to build and sell amazing products.”

Beyond the pages of the influential newsletter, there is also evidence that major funding still exists for the right project.

On Tuesday, Australian ed-tech unicorn Go1 revealed it has secured another $US100 million ($AU139.5 million) in funding, helping entrench its efforts in overseas markets.

That funding injection is sure to make the next Cut Through Venture rundown, adding a big $100 million+ tick to the June tally.