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Introduction and Overview
Despite a decline in overall funding for Australian startups during the first half of 2023, the climate tech and AI sectors have demonstrated remarkable resilience. KPMG‘s Q2 Venture Pulse Report reveals that total investment fell to US$1.1 billion compared to US$3.64 billion in the same period last year. This article explores the factors contributing to the funding drop, the challenges faced by startups, and the flourishing landscape of climate tech and AI ventures in Australia.
Funding Decline in Australian Startup Ecosystem
The Australian startup ecosystem experienced a significant funding downturn during the first half of 2023. Smaller funding rounds became more common as KPMG’s data shows a stark contrast of only $1.1 billion raised compared to $3.64 billion in the same period last year. Cut Through Ventures’ quarterly report confirms the trend, highlighting a revenue of $1.5 billion for H1 2023, considerably lower than the previous year.
Global Impact on Venture Capital Funding
The global VC funding also witnessed a decline from US$86.2 billion across 10,121 deals in Q1 2023 to US$77.4 billion across 7,783 deals in Q2. Various factors contributed to this drop, including inflation, interest rate rises, geopolitical tensions like the war in Ukraine, and instability in the global banking system.
Climate Tech and AI Startups Defy the Downtrend
Amid the overall funding decline, climate tech and AI startups in Australia have stood out as beacons of hope. Noteworthy deals in the sector include Loam Bio securing $105 million for its innovative microbial seed coating that helps sequester carbon in soil, and Till Payments raising $70 million. These successes highlight the growing interest in addressing climate challenges and the transformative potential of AI technologies.
The Rise of AI Startups
The success of OpenAI’s ChatGPT and widespread adoption of AI by tech giants like Google, Microsoft, and AWS have spurred increased funding for Australian AI startups like Fivecast and Eyetelligence. Venture capitalists are now seeking startups that effectively integrate AI into existing processes to improve efficiency, in addition to AI-specific startups.
Cleantech Ventures Tackle Environmental Concerns
Cleantech startups in Australia have gained significant attention due to escalating climate concerns and rising energy costs. This has translated into substantial deals for companies like Loam Bio and Silicon Quantum Computing. The recent announcement of CSIRO’s Main Sequence launching a new $450 million fund focusing on clean and deep tech funding further indicates the ongoing interest in the cleantech sector.