Insights From The Experts: The State of The Australian VC Market
What’s Inside?
- The Current State of The AU Market
- How Is Next Year Shaping Up?
- Key Takeaways
- The Powerhouse Panel
- What’s Next?
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Understatement of the century: it’s been a tough couple of years. Aussie founders like you (and us!) are rightly wondering what’s around the corner. To help keep you motivated we have some ‘light at the end of the tunnel’ insight for you. Standard Ledger recently held an online event where we gathered an expert panel (see below) to discuss the Australian VC market as it looks now, and what could be on the cards next year.
So let’s delve into the intel we gained, and get you ready for the year ahead!
1. The Current State of The AU Market
First things first – the current environment. If you’ve made it through the covid era and stayed afloat to this point – congratulations! You now have the chance to poke your head up and take a look around to see how the investor landscape as a whole has been doing. We’ve dug through information from various sources including insights from our panel and stats from the ‘Cut Through Venture report’ to compare Q3 2023, to Q3 2024.
In a nutshell:
- Up:
- Number of deals
- Exits
- M&A
- Down:
- Capital raised
- Cheque sizes (small but still healthy)
- Valuations falling (but likely to stabilise)
A mixed bag, but assuring news from investors – they are now actively looking again for new startups to invest in. Phew.
While last year was all about making sure we stayed alive (including lots of bridge rounds and alternative non-dilutive funding), as we look forward to next year the majority of investors are now saying to go ahead and raise as normal (although you will likely need to adjust expectations on valuations if you haven’t already).
Most portfolio companies cut their costs and downsized teams, but despite that the conversations around growth are finally starting to happen again. There has been a tentative shift back towards profitable growth after the volatility we’ve faced over the last couple of years, and while 2023 saw a big gap between investor and founder expectations (whiplash, am I right!?), this year there has been some stabilisation, and even some uplift in certain sectors – like AI as you’d expect.
2. How is Next Year Shaping Up?
The overarching mood is what we’d describe as ‘cautious optimism’, with the caveat that investors want to see startups doing more than just surviving/breaking even.
Expand cautiously but faster, if you like. Sounds great in theory, but if we aren’t involved in that rocketship sector of AI, is next year going to be bleak, too?
Not necessarily, investors say they remain interested in other sectors as long as there is acceleration within the business. The trick here of course is how, now, do you start to show growth already so you can pitch for future capital, and perhaps where non-equity funding alternatives can play a part. The expectation of growth always remains regardless of the sector you are in, and the hesitation to invest will linger if that isn’t seen. Perhaps a chance to dust off and pop that innovation hat back on next year?
January is a great time to plan for the year – what’s coming up and where could you go? Any exciting directions to head towards? It’s also the time to get ready to raise – look at your narrative/metrics, identify and prepare for conversations with investors.
A quick glance across to the US to see how they are tracking (all the while keeping an eye on how things may change with the recent election) we can see bigger dollar values (billions rather than millions), flat rounds and M&A is picking up. We are likely looking forward to interest rate cuts similar to what the US had, and while we were secretly hoping for an Xmas present, we now believe the tea leaves are telling us it’s much more likely in Q1, or potentially even middle of next year at this stage.
3. Key Takeaways
We all know the time between Christmas and Australia Day rarely heralds results, so it’s a great time to get prepared!
Here are the key aspects that we think are crucial to make sure you get those successes you deserve:
- Prepare for a raise BEFORE you need it. Think beyond the next round – plan and have an idea how that round fits into the whole journey. Get yourself ready when you don’t need to raise, so that when you are ready you can go quickly
- Founders already executing well, with demonstrable metrics and that have a plan are ideal to invest in. Talk to investors, be upfront and keep them in the loop – then things can move quickly when it’s the right time to invest
- BUILD RELATIONSHIPS (we can’t emphasise this enough!)
- Utilising funding such as the R&D tax incentive is useful for some early stage startups, and alternative funding providers’ can be a helpful tool. We know founders sometimes wonder if having debt on their balance sheet might deter investors later, but used effectively these funds mean you can manage your cash flow to the next point of growth – which is better for everyone involved. Utilise different types of capital at different times – don’t wait until it’s too late!
- Investors like to see people trying something different – how could you do things differently next year that might get results?
4. The Powerhouse Panel
Thanks to the ‘dream team’ of experts who shared their wisdom and experience with us and make sure to check them out, we’ve got their word they’re all directly approachable!
Aussie Angels CEO, Cheryl Mack
Five V / Capital Investment Manager, Shaina Brown
Rampersand Investment Manager, Abhi Maran (checkout this blog for more insights)
Tractor Ventures Co-founder/CEO, Jodie Imam
And our very own Co-founder/CEO, Remco Marcelis from Standard Ledger.
Hot tip: make sure you don’t use a broker to make initial/cold contact, the initial reach out should be directly from the founder!
What’s Next?
At Standard Ledger we know exactly what you’re going through, working with founders at each stage from startup to scale up. If you need some advice, or want to check out our handy free resources, get in touch to chat to us, we’d love to help with that next step of your journey.
Events coming up
Financial Confidence: Prepare Your Startup for Investment
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