Deep tech report shows growth in startup numbers but not local funding

The news: Australia's leading deep tech incubator Cicada Innovations has released a report showing strong growth in local deep tech startups, but it warns the sector faces significant barriers to scaling due to limited support from venture capital, industry and government procurement.

The numbers: The Cicada x Tech23 Insights Report 2024 revealed 72% of deep tech startups were founded in the last five years, with 78% having raised some funding. However, venture capital accounts for just 17% of funding compared to 20-30% in overseas markets. Government grants represent 38% of early-stage funding, while Australian corporates (58 collaborations) barely matched international corporates (57 collaborations) in industry partnerships.

The context: The report, which analysed data from 141 deep tech applicants, found most startups aligned with Australia's critical technologies list across artificial intelligence, hardware, advanced manufacturing, clean energy and biotechnology. While government grants and early-stage funding sources like friends and family (34%) and accelerator programs (34%) are supporting initial development, the sector struggles to secure later-stage capital and local procurement opportunities. Many startups reported securing international government contracts before gaining domestic traction, suggesting overseas markets recognise their value earlier than local players.

What they said: "Australia has a strong foundation of deep tech talent, but startups are still struggling to scale. So we have to ask ourselves, why are international companies and governments seeing the value in Australian deep tech before our own local corporates and government do?" said Sally-Ann Williams, chief executive officer of Cicada Innovations