Australia’s startup sector pulled in $5.1 billion in venture capital funding in 2025, marking its strongest year since the post-2022 market correction and the third-largest total on record. But there’s a catch.
New figures from the State of Australian Startup Funding report, compiled by Cut Through Venture and Folklore Ventures, show overall capital deployed jumped 24% year-on-year, rebounding from $4.1 billion in 2024.
On the surface, it looks like a clear return to form. But this uptick in funding was highly concentrated.
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According to the same report, while more money flowed into Australian startups last year, it wasn’t shared around as much. Total announced deals dropped from 470 in 2024 to just 390 in 2025, marking a 17% decline.
The report also revealed that the 20 largest deals accounted for 58% of all capital raised, up from both 2023 and 2024.
A small number of late-stage rounds did most of the heavy lifting, pushing totals higher while leaving the broader market relatively constrained.
These include AI infrastructure startup Firmus Technologies closing two massive raises — a $330 million round in September that was closely followed by a further $500 million in November
Fintech heavyweight Airwallex also secured two blockbuster rounds with $466 million in May and a further $498 million in December.
Outside those mega-deals, other sizeable raises included Synchron’s $305 million Series D and healthcare AI company Harrison.ai’s $179 million Series C.
Together, a handful of companies accounted for a disproportionate share of the headline total.
But despite the $5.1 billion overall, for the majority of startups, conditions remained tight.
Investor surveys included in the report describe a “two-speed market”. 2025 was a competitive, fast-moving year for a narrow group of high-growth companies.
But what others experienced were longer and more deliberate processes. Lead investors were still scarce, due diligence remained heavier than in pre-2022 years, and fundraising timelines continued to stretch.
“Investors are writing cheques again, but with sharper intent and a higher bar for proof,” the report notes. “For most startups, the recovery was real but far more measured.”
That pressure was compounded by a structural shift in where the money was coming from. The report also points to a growing reliance on offshore capital, finding that 66% of all deals in 2025 included at least one international investor, up from 57% the year before.
At Series A and beyond, overseas participation is increasingly the rule rather than the exception as founders chase larger cheques and deeper follow-on capacity.
The trend reflects both growing global interest in Australian startups and the limits of the local capital pool. Many founders simply found that to raise at scale, they had to look abroad.
AI topped the tables, but the numbers are slippery
Unsurprisingly, AI reigned supreme when it came to 2025 sector funding, de-throning the usual reigning champion — fintech. But it’s worth diving a little deeper here as well.
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According to the report, 61% of all capital (around $3.1 billion) flowed to startups that cited AI in their product offerings. Investors surveyed ranked AI the most exciting sector for the third year running, and the report credits it with “reigniting momentum” across local venture markets.
But as SmartCompany has reported previously, those eye-catching numbers don’t tell the full story.
Back in April 2025, Cut Through Venture’s quarterly data showed AI leading deal counts for the first time, with 62% of announced rounds referencing AI-related benefits.
At the time, we noted an important caveat: generative AI had become so ubiquitous that many startups were describing themselves as AI-powered, whether or not AI was genuinely central to their product.
And that trend continued through the rest of the year.
The latest annual report acknowledges the same issue, noting that AI has become embedded across almost every sector. Healthtech, fintech, enterprise software and even logistics startups increasingly position themselves as AI companies.
This significantly blurred the line between genuine AI-first businesses and traditional software firms with an AI feature bolted on.
And this matters because it’s also affecting funding overall.
AI as a funding filter, not just a category
“AI reshaped how companies were evaluated, not just what sector they sat in,” the report says.
What changed in 2025 was not just which startups got funded, but how they were judged. Investors placed increasing emphasis on AI integration, defensibility, and workflow impact.
Companies with AI capabilities attracted valuation premiums and faster processes. Those without them often struggled to stand out.
Investor sentiment captured in the report suggests AI has effectively become a baseline expectation for many sectors. Having an AI angle no longer guarantees attention – but lacking one can quickly become a liability.
This also helps explain why deal counts fell even as overall capital rose: funding flowed toward a narrower cohort of businesses able to demonstrate clear AI-driven growth.
Women founders: More capital, fewer chances
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The year also delivered a familiar story regarding gender equity.
According to the report, startups with at least one female founder captured 24% of total capital in 2025, up from 15% the year before. On the surface, that’s a notable improvement.
However, the share of total deals involving women founders fell from 27% to 23%, meaning fewer women-led teams were funded overall.
As SmartCompany reported in mid-2025, headline capital gains have been heavily driven by a small number of large rounds where a woman founder was on the team, such as Airwallex’s two mega-deals. In reality, startup funding for women hit a record low in 2025.
Meanwhile, deal participation continues to decline as companies move beyond the earliest stages.
The annual data shows all-women founding teams still captured just 2% of total capital – virtually unchanged from previous years.
The report concludes that while progress at the top end is welcome, “persistent challenges in participation and breadth” remain entrenched.
In other words, it’s the same old story.
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