VC funding lifts as AI leads and sovereign risk weighs on investors' minds
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The news: Q1 2025 saw the strongest opening quarter since 2022 for venture capital funding in Australia, according to research from Cut Through Venture, with $993 million raised across 100 deals.
The numbers: Biotech, climate tech, and hardware startups collectively outpaced enterprise software, signalling a broader investor appetite and a maturing ecosystem.
In terms of deal count, AI-first companies topped the charts and of all companies that announced a raise, 62% referenced an AI-related product benefit on their website – a sign of how embedded AI has become across sectors, or at least how keen founders are to say it has.
AI is also seeing a concentration of SAFE (typically sub $500k) investments. SAFEs often involve one or two founders building in stealth, with no ASIC filing and little or no public disclosure.
The context: It comes after 2024 saw $4 billion raised across 414 deals, with global funds driving late-stage rounds while local funds struggled to raise capital.
A key takeaway is that sovereign risk is no longer just about currency or compliance – Australia's exposure to foreign capital, hardware and AI training data is sharpening investor focus.
The firm’s latest investor sentiment survey captures growing awareness of sovereign risk among Australian VCs, including concerns over tariffs, supply chains and reliance on US-backed research funding.
What they said: HSBC tech sector and venture lead in Australia, Alan Watters, said the innovation economy faces both benefits and challenges under the new Trump administration. While lower regulatory hurdles could support startup growth and attract investment, renewed focus on tariffs is creating uncertainty with key trading partners, making capital investment decisions more difficult.
The source: Cut Through Venture
