Updated: 2021 was a record breaking year for Australia. 2022 is gearing up up for hopefully another record breaking year for VC and tech in Australia – At Galileo, we’re already seeing more founders applying for seed funding then this time last year.
Over this year I’m going set a bit of blogging editorial ‘challenge’ to focus on couple of topic areas. 1) ‘Demystifying VC’, what things mean and whats happening in seed/AU context, and 2) Thoughts on big tech trends – especially for what it means for early-stage founders and investors. Subscribe here.
Kicking things off I thought it was curious how little commentary there is on the rise of Aussie VC, various seed funds in Australia and what we’re seeing a seed stage valuations.
This is an abridged version of our latest post on the Galileo blog about how to make your seed rounds count. Check it out!
Record breaking year
2021 was a record year for venture funding in Australia. Investment per month cracked the $1b mark for 4 months of the year bringing us to an estimated total of $9.6 BILLION into local companies in 2021.
- 2021 saw
$9.6bA$10.1b+ in total venture funding (hat tip to Cut Through Venture for compiling) - Similarly, previous FY 20-21 saw A$3.4b in venture funding, up from A$2.7b previous FY
- NSW is still very much the centre of venture funding as most deals reported are often in NSW, in Dec alone just over $1b was invested in this state with the rest represented mostly in VIC
- QLD also gets special break-out mention with a couple of the biggest deals this year such as SimPro $US350m
- NSW also has the most VC funds registered in the state, by my count has over 60% of VCs are based here
- Most of this is driven by big growth deals into companies like Canva, Airwallex, Rokt, SiteMinder, Milkrun, Dovetail etc – so a mix of ‘Aussie-founded’ companies with many that have non-AU customer focus e.g. Canva (US/Asia), Scalapay (Europe) and Rokt (US)
Seed funding still underrepresented
If we’re seeing so much local investment into growth companies, why aren’t we seeing more seed investing activity, typically where investors make big returns?
The short answer is that we are seeing a growth in total activity but often seed and pre-seed rounds go unreported (Crunchbase is incomplete for AU, most AU media won’t report it, and VC funds rarely publicly report all of their deals).
Also, specialised seed funds in AU is still underserved in my opinion – there’s really only a few that focus on just pre-seed and seed (Galileo Ventures!) with majority of VC still focussed on SeriesA+
But given the trends and new funds entering the market I predict the total amount of funding at seed will go up in 2022 as investors chase better (more realistic) valuations, better returns and newer opportunities.
My observation so far (14 pre-seed/seed investments so far) is that:
- Seed rounds are local, and need more local investors – investors often need an affinity and understanding of the local market, founders pitching to international investors is a waste of time, but we’re still seeing lots of investors want to focus on later-stage rounds
- More founders are looking for specialised seed investors – setup to support you at pre-seed and seed e.g. they have a program, they have focus, or experience in this stage of company building.
- Good seed investors should open doors e.g. angel investors that have had an successful exit in your industry, can help win key customers, influence the market, give legitimacy to your startup.
Seed funds in Australia to watch 2022
Fun fact: most specialty seed funds launched in 2021 in Australia. AU VC is definitely expanding.
- Galileo Ventures (of course) – Launched fund in Dec 2020
- BlackNova – Launched their first fund last year, very active now investing across SaaS sectors
- Alberts Capital – Officially launched their VC fund last year but have been active venture investor for a while in AU market.
- AfterWork VC – Started off as more of angel syndicate but launched their venture funding in 2021
- Jelix Ventures – Started off as a syndicate but now launched a seed fund in 2021
- Artesian (Climate, AgTech and AI) – doing more later-stage investing too but has a pre-seed and seed focus for Climate, Agtech and AI
- Tidal Ventures – Mostly does ‘later seed’ to Series A+ but still very active!
- EVP – B2B SaaS, same as above
- Folklore – later-seed to SeriesA+ as well
- UniSeed – One of the few active seed fund focussed on research commercialisation
- And accelerators too that take up most of the pre-seed such as StartMate and INCUBATE etc.
Seed round size and and venture/seed valuations (in Australia)
What constitutes a pre-seed or seed round is a bit arbitrary and up to what the founder and investor wants to call the round and attached terms. See more here.
According to Cut Through newsletter, the average Seed round size in Australia has remained steady over the course of 2021, averaging between $2.5-4M each quarter. I would say that is a little high but again you can label a bigger round ‘seed’ if you want as it often generates more PR buzz.
What I’m seeing is (all dependant on what you’re raising!):
- Pre-seed/angel being below $500k with valuation ranges between $1m-4m pre-money
- Seed rounds are between A$500k-$4m with valuation ranges between $3m-$20m pre-money
- Late-seed (my new term!) to Series A rounds at A$4m-10m+ with valuation ranges of $15m-$40m+++ pre-money
- NB Series A rounds have really sky rocketed in 2021 but we’re seeing reports of them crashing down in 2022 US rounds with the dive of public markets tech stocks…(who knows what will happen rest of 2022. Founders, have fun with 2.5x liquidation preferences for that ‘great valuation’.
