Australia’s startup sector raised $5.1 billion in venture capital funding in 2025, marking its best year since the post-2022 market correction and the third-largest total on record. But there is a catch.
New figures from Australian State Startup Funding A report, compiled by Cut Through Venture and Folklore Ventures, shows that overall capital deployed jumped 24% year over year, rebounding from 2024’s $4.1 billion.
On the surface, this looks like a clear return to form. But this increase in funding was very concentrated.
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According to the same reportwhile more money flowed into Australian startups last year, it wasn’t shared as much. The total number of announced transactions fell from 470 in 2024 to just 390 in 2025, a drop of 17%.
The report also reveals that the 20 largest deals accounted for 58% of all capital raised, up from 2023 and 2024.
A small number of late trading cycles did most of the work, pushing totals higher while leaving the market as a whole relatively constrained.
These include AI infrastructure startup Firmus Technologies closing two massive raises – a $330 million funding round in September which was closely followed by another $500 million in November
Fintech heavyweight Airwallex also secured two blockbuster rounds with $466 million in May and another $498 million in December.
Apart from these mega-deals, other significant increases included that of Synchron. $305 million, Series D and healthcare AI company Harrison.ai’s $179 million Series C round.
Together, a handful of companies accounted for a disproportionate share of the overall total.
But despite the $5.1 billion in total, for the majority of startups, conditions remain tight.
Investor surveys included in the report describe a “two-speed market.” 2025 has been a competitive and rapidly evolving year for a select group of high-growth companies.
But others experienced longer, more deliberate processes. Lead investors were still rare, due diligence remained more burdensome than in years before 2022, and fundraising timelines continued to lengthen.
“Investors are writing checks again, but with sharper intent and a higher bar of proof,” the report notes. “For most startups, the recovery has been real but much more measured. »
This pressure has been compounded by a structural change in where money comes from. The report also highlights a growing reliance on offshore capital, revealing that 66% of all deals completed in 2025 included at least one international investor, up from 57% the previous year.
In Series A and beyond, foreign ownership is increasingly the rule rather than the exception as founders seek larger checks and greater follow-on capacity.
This trend reflects both the growing global interest in Australian startups and the limits of the local capital pool. Many founders simply discovered that to raise their capital at scale, they had to look overseas.
AI leads the way, but the numbers are slippery
Unsurprisingly, AI has reigned supreme in sector financing in 2025, dethroning the usual reigning champion: fintech. But here too it is worth diving a little deeper.
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According to the report, 61% of all capital (around $3.1 billion) was directed to startups that cite AI in their product offerings. Surveyed investors ranked AI as the most exciting sector for the third year in a row, and the report credits it with “reviving momentum” in local venture capital markets.
But like Intelligent Society previously reportedthese eye-catching numbers don’t tell the whole story.
In April 2025, Cut Through Venture quarterly data showed the number of leading AI deals for the first time, with 62% of announced rounds referencing AI-related benefits.
At the time, we are notI issued an important caveat: Generative AI had become so ubiquitous that many startups described themselves as AI-based, whether AI was truly at the heart of their product or not.
And this trend continued throughout the year.
The latest annual report acknowledges the same problem, noting that AI is now integrated into almost every sector. Startups in healthtech, fintech, enterprise software, and even logistics are increasingly positioning themselves as AI companies.
This has significantly blurred the line between true AI-driven companies and traditional software companies with built-in AI functionality.
And this is important because it also affects financing in general.
AI as a funding filter, not just a category
“AI reshaped the way companies were valued, not just the industry they were in,” the report said.
What changed in 2025 was not only which startups were funded, but also how they were judged. Investors have increasingly focused on AI integration, defensibility and workflow impact.
Companies with AI capabilities have attracted valuation premiums and faster processes. Those who didn’t wear one often had difficulty standing out.
Investor sentiment reflected in the report suggests that AI has indeed become a baseline expectation for many industries. Having an AI approach no longer guarantees attention – but lacking it can quickly become a liability.
This also helps explain why the number of deals declined even as overall capital increased: funding was directed to a smaller cohort of companies capable of demonstrating clearly AI-driven growth.
Female founders: more capital, fewer opportunities
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The year also brought a familiar story when it came to gender equity.
According to the report, startups with at least one female founder captured 24% of total capital in 2025, up from 15% the previous year. On the surface, this is a notable improvement.
However, the share of total deals involving female founders fell from 27% to 23%, meaning fewer female-led teams were funded overall.
As Intelligent Society reported mid-2025overall capital gains were strongly boosted by a small number of large rounds in which a female founder was part of the team, such as Airwallex’s two mega-deals. In fact, funding for female-focused startups hit an all-time high in 2025.
Meanwhile, deal participation continues to decline as companies move past the early stages.
Annual data shows that all-female founding teams capture just 2% of total capital – virtually unchanged from previous years.
The report concludes that while progress at the summit is welcome, “persistent challenges in participation and scale” remain entrenched.
In other words, it’s the same old story.