2025 State of Australian Startup Funding Report

The 2025 State of Australian Startup Funding Report marks Folklore Ventures’ 5th year supporting our startup ecosystem.  Drawing together 1,000 contributors from our technology industry, a community of founders, venture capital firms, investors, operators, Universities, service providers and Governments; it’s our ambition that this Report sheds light on an industry and the people rapidly shaping Australia’s economy and our global influence.

At the centre of this patchwork community are innovative founders, committed operators and investors willing to commit capital over long durations in a cycle of funding supporting Australia’s most ambitious people and their big ideas.  Over the last 5 years, Australian startup investment has swung from a high tide of $10 billion in 2021, to a lamented ‘low point’ of $3.5 billion in 2023.  The $5.1 billion invested in 2025 points to a funding environment that is healthy and vibrant.

The big numbers, however, are merely a window dressing for underlying investment activity that contributes to the future health of this industry.  To the relief of many, valuations in 2025 remained robust.  Whilst weight of capital typically distributes to larger, later rounds with the top 20 investments representing 58% of invested capital, investment activity was broadly distributed across staging and sectors.  Funding flowed to AI at an increasing rate, yet the bar rose for AI startups receiving that capital throughout the year.  Whilst we have seen AI companies growing many times faster than historical SaaS counterparts, reality has met hype and the need for sustainable economics questions the defensibility of some vertical AI applications, especially as SaaS succession plays out and the operating ability of teams and their go to market capability is tested.

Alongside positive investment activity, this year’s Report also highlighted a diversity of capital flowing at early stages through the Australian technology ecosystem that is not merely domestic and super fund sourced, but international and at scale.  Venerated global venture capital funds Andreessen Horowitz, Bessemer and Lightspeed allocated to Australian founded companies, whilst private equity and secondary transactions started to deliver much needed liquidity to investors.  Yet many of the later rounds for Australian deep tech and climate companies required Government support, signalling a gap yet to be filled by private capital. 

However there is a cautionary tale to 2025.  Despite the overwhelming benefits of superannuation allocations, private capital, larger funds, Government policy and more venture capital firms, liquidity and the recycling of capital from venture funds appears well below the future needs of Australian startups.  The well is not being replenished. Whilst low liquidity is not merely an Australian phenomenon, in the context of this Report, we must steel ourselves for the fact that if capital does not flow freely back to investors, less capital will flow to future VC fund vintages.  This dynamic risks the gains we have made as an industry, and its impact on our future economy.

As we cast our minds back to the heart of this industry, we must not concede our support or optimism for Australian founders and their big ideas, to those that malign technological progress, ambition and have-a-go effort.  We must remember that to be successful, one must be preoccupied with the vision, rather than the approval.  Asking our future-selves what our current self should do, it should be obvious that investing in areas of rapid change, technical advancement, and ambition is a choice not to be ignored.  This is where the greatest gains will be made for all, and where the greatest technological impact and advancement will be made for Australia.

There is much work to be done, many more big ideas to be supported, and a community that will only gain (in every sense of the word) from continued support.  We hope you enjoy and learn from this 2025 State of Australian Startup Funding Report.

Access the Report