While 2024 was a difficult year for many Australian startups — characterised by down rounds, layoffs and closures — 2025 could be the year of reckoning for the local venture capital funds that invest in them.
As we reported on Monday, the threat of ‘zombie VCs’ — the kind of shops that can't raise new funds yet continue to limp forward, with fewer staff managing existing investments — is on the rise.
It's an especially cruel fate for those newer Australian VC outfits that followed industry standard practice by raising smaller first funds ($20-50 million) during the market euphoria of 2020 and 2021. The expectation was that they would graduate to larger, more sustainable funds after proving their investment chops.
But that pathway has become increasingly uncertain, with tough economic conditions leading to lower valuations and portfolio markdowns.
