Cut Through’s latest funding report says international investment in Aussie startups isn’t as bad as it seems

The latest Cut Through Quarterly report is out, and with it comes a total of $739 million raised across 77 deals during Q3 in Australia. But what caught our eye was its analysis regarding international investors during the period.

Chris Gillings, founder of Cut Through Venture, said that despite some of the chatter out in market – the Australian startup ecosystem is still attracting international investors.

“A closer look at the data reveals a more nuanced situation, indicating sustained and possibly even intensified (in the scheme of things) international interest in Australian startups,” Gillings said in the report.

According to Cut Through’s research, the percentage of deals that included an international investor reached “an unprecedented high across all funding rounds” during 2023.

“While this represents a relatively lower total investment in Australian startups (given the overall slowdown), the data challenges the perception that global investors have retreated any more than their domestic counterparts,” Gillings said.

Cut Through’s most recent Australian VC survey found that 46% of respondents engaged in co-investment from international partners over the past six months. And 51% are expecting an increase in international participation over the next six months.

“Only a quarter noted witnessing an international investor bypassing a follow-on investment opportunity in a jointly owned portfolio company,” Gillings said.

However, Gillings did acquiesce that the Australian ecosystem has seen previously active funds such as Tiger Global, Seqoia, January Capital and A16z fail to announce any deal participation this year.

“Many Series B and later rounds in 2021-22 were spearheaded by global funds boasting eye watering FUM. Among the international investors that have temporarily halted local activities, these mega funds are most prevalent,” Gillings said.

“The question that now looms large is whether the post-Zoom-deal-doing world will provide fertile terrain for overseas investors with minimal local presence to allocate substantial capital on foreign soil.”

Some other notable tidbits also came out of the report. Climate and cleantech startups were the funded sector during Q3, and had the highest deal count. This echoes KPMG’s Q2 Venture Pulse report, which found that found that climate tech continued to see strong investment in an otherwise sluggish funding environment.

The report also found that no mega deals over $100 million tool place during Q3.

And as always, it was a mixed bag when it came to investment into women-founded startups. For the first time since Cut Through started up, median sized deals for women-led startups performed better than all-male teams during Q3.

And while women-only founding teams saw their highest share of funding since Q4 2020 — 80% of the $152 million raised by startups with at least one female founder went to just two startups – Secure Code Warrior ($72 million) and Silicon Quantum Computing ($50 million).

As we’ve discussed previously,  a few big raises for a handful of women-led startups does not change the ongoing systematic problem we have in the ecosystem.