Seed Funding Report — Australia — For Founders Apr-21

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The Aussie Startup Capital Nerd

7 min readApr 27, 2021

**2024 Update: I now publish Aussie capital raising content on Substack here **

Welcome to the third early-stage startup funding report for Australian founders. This report is designed to deliver some clarity to time poor founders raising Seed stage equity capital in Australia.

Whilst this report is reasonably comprehensive, it is only a summary of publicly sourced data from Crunchbase and therefore has many pitfalls and should only be used as one data point during your capital raising journey.

To strategically search for startup investors and lenders jump onto Startup-Funding.com.au. If you are wanting to learn more about capital raising then here is a great list of resources and you should definitely read Venture Deals by Brad Feld.

If you’d like to read any of my previously published reports, then see below:

This article has been proudly supported by the Wade Institute of Entrepreneurship and Cake Equity through a donation to the Children of Cambodia Foundation, a cause that is close to my heart and who do wonderful work supporting kids education.

Deal Count FY YTD

Seed stage is on track for another lacklustre year with only 87 transactions completed from Q1 to Q3 for FY21 which is well behind the peak of 191 transaction for the first three quarters in FY17.

Deal Count FY by Quarter

However, there is a glimer of hope as there were 43 deals completed in Q3 FY21 which is the largest since Q4 FY18.

Deal Count FY Quarter by Tech

This is where it gets concerning, out of the 320 Seed stage deals completed since 1-July-2018 (FY19 Q1), only 36 (11%) have funded non-software companies. Of which, only 10 deals (3.1%) were for deep tech and bio related ventures with 5% (17) pure hardware plays.

To note: There was 1,167 reported Seed stage deals since FY15, of which 839 reported the monetary size of the transaction. Also, F&B = food and beverage.

Wade Institute of Entrepreneurship is a leading centre for entrepreneurial training based at Ormond College, the University of Melbourne. We deliver immersive education programs to accelerate learning, creation and connection. This includes VC Catalyst — an immersive executive education program designed to give investors the knowledge, skills, and networks to invest in startups.

Deal Size Reporting

Before we get into the subsequent analysis, it is important to note that on average 74% of deals have reported transaction $ size. However, in Q3 FY21 only 33% of transactions had a reported dollar value which heavily influences the following sections.

Deal $ Value FY YTD

Total reported Seed stage funding year-to-date is hovering around FY18 and FY19 levels at $110m but is well behind the first three quarters of FY20’s record $126m. However, this is heavily influenced by the very low deal $ value reporting in Q3 FY21.

Total Deal $ Value FY by Tech

84% ($355m) of all Seed funds raised since Q1 FY19 were for software companies with just 5% allocation to biotech ($20m), 1% deep tech ($2.4m), 7% to F&B ($28m) and 4% for hardware ($17m).

What is more concerning, since COVID, Australia is attempting to ramp up advanced manufacturing and biotech capabilities however for FY21 to-date only 0.3% went to hardware, 1% to deep tech and 5% to biotech but 22% F&B and 72% software. Interestingly, since a peak of 99% funding allocated to software in Q1 FY20, software’s share of funding has consistently fallen every quarter to hit a low of 70% in Q3 FY21.

Cake makes it easy to setup employee option plans and manage your raise, with simple workflows and dashboards to keep things on track and give you peace of mind. You can easily keep your investors and employees up to date, and stay on top of your compliance. The Cake platform is designed to replace the spreadsheets, emails, PDFs and other loose documents that otherwise make equity management difficult. Cake is based in Queensland and just graduated the Startmate accelerator.

Deal IQR by Quarter

The Seed median deal size has continued to grow consistently year-on-year, hitting its highest level ever in FY21 YTD of $1.53m. In Q2 FY21, the 25th percentile also hit its highest level of $1m. In Q3 FY21, the median deal size was $1.34m which is down from the highs of Q1 FY20 and Q1 FY21 of ~$1.65m.

Software Median Deal Size

The software median deal size for FY21 YTD sits at $1.55m which is slightly above the $1.51m median for FY20. In Q3 FY21, the median continued it’s second quarter of falls, dropping to $1.32m.

Company Age

Whilst company age at Seed investment dipped during the last 2 periods of FY20 (peak COVID uncertainty) to 1.8 years old, it has recovered to continue to trend upwards with the mean company age at 3.14 years in Q3 FY21.

FY21 year-to-date, has seen average company age increase significantly from 2.6 years in FY20 to 3.3 years old.

This rapid acceleration in company age freaked me out a bit so I indexed the change over time against the median deal size to see if they have both increased proportionally. To my surprise, the Seed stage deal median size (up 453%) has significantly outgrown company age (up 304%) since Q1 FY15. In the next article, I hope to explore this further.

The Children of Cambodia Foundation was formed in 2010. Its aim is to provide educational opportunities and support for school children in rural northern Cambodia. The focus of the Foundation’s work is a group of ten primary schools located in the Provence of Siem Reap. The main aim of the foundation is to work with community leaders in providing financial support to families. The foundation is based in Melbourne.

Seed Time Between Rounds

Average time from last round to the current Seed round has remained reasonably stable since FY17, it bounces between 1 year to 1.5 years

Series A Time Between Rounds

Whilst I was planning to write this article on Series A, I decided to explore Seed again as it appears to be in the highest demand amongst founders. However, when founders are raising their Seed round, they must consider their next round. Much to my surprise, time to Series A has fallen off a cliff from record highs in Q1 FY21 at 2.6 years to just 0.6 years in Q3 FY21. I suspect COVID and the current environment is heavily influencing this but I will explore this in my next article (sorry!).

A special thanks to Cake Equity and Wade Institute of Entrepreneurship for supporting this article through their donations that support educating children in rural Cambodia with The Children of Cambodia Foundation.

I’m the Aussie Startup Capital Nerd… My name is Warwick Donaldson and I specialise in Australian DeepTech and FinTech Seed and Series A capital raisings. To date I’ve worked on over 150 Pre-seed, Seed, and Series A fundraises. Hit me up if you’d like to chat.

Analysis Notes

All data sourced from Crunchbase
Data period from 1-Jan-2015 to 31-March-2021 of companies with headquarters in Australia
A total of 1,167 publicly announced transactions make up this analysis with 839 stating dollar amount raised for each round
All $ figures are AUD
Tech type classification: The classifications are determined by the type of risk carried by the company. If the company is taking on a large amount of tech risk in hardware, bio and deep tech then they are classified as such. For example, if a company uses white labelled hardware then they aren’t classified as hardware as they don’t carry the tech risk.
Produced using Python/Jupyter Lab