The Cut Through Ventures report arrived this week, all 165 pages of graphs, quotes and data. I’ve trawled through the deck to find signals that piqued my interest.

Special thanks to the Cut Through Venture and Folkore Ventures Teams for putting together such a detailed report. Check it out in full here.

The Aussie venture market recorded $5.1 billion in funding across 390 deals, with one new unicorn (Firmus). While total capital raised is trending upward relative to 2023 and 2024, the ecosystem remains volatile: 77% of investors reported layoffs among portfolio companies, and 46% reported shutdowns. 

Investment is heavily concentrated in Victoria (37%) and New South Wales (33%), accounting for the majority of funding, whereas other regions, such as Western Australia and South Australia, hold significantly smaller shares.

If you raised capital last year, there was a good chance you had an Artificial Intelligence offering that attracted $1.0 billion in funding and accounted for 61% of total capital flow. We saw plenty of fresh AI startups emerge, while later-stage companies pivoted to be AI-adjacent. 

Fintech ($868m) and Biotech/Medtech ($829m) followed as top-funded sectors. The data on female founders presents a mixed narrative: while the equity capital raised by female founders jumped significantly to 24% (up from 15% in 2024), their overall deal participation decreased to 24%. Meanwhile, median deal sizes ranged from $1.0M for Angel/Pre-Seed rounds to $11.0M for Series A.

If there is a single defining tension in Australian venture capital right now, it is the shift from celebrating paper valuations to demanding actual returns. The report identifies liquidity as the "core constraint" for the ecosystem, with Distributed to Paid-In Capital (DPI) pressure forcing funds to prioritise "realisations over marks." 

The days of riding high on 2020–2022 valuations are effectively over; a stubborn bid-ask gap remains (wide price difference between what buyers are willing to pay and what sellers demand), and with the ASX tech IPO window largely shut, the market is getting creative. 

2025 saw a maturation of the secondary market, moving from emergency relief to standard "infrastructure" that offers periodic liquidity without forcing full exits, while M&A and Private Equity buyouts are stepping in to absorb the "venture exit backlog" that public markets won't touch. Both founders and investors view acquisition by another company as the most likely exit strategy for their ventures. 

For LPs, patience with opacity has worn thin; the new mandate is discipline and transparency, where keeping investors in the dark now carries a "real allocation cost”.

It appears VCs are struggling to reach true conviction to lead early-stage deals despite seeing plenty of quality deals. 

Kylie Gerrard of Purpose Ventures identifies the core friction point: despite strong deal flow, there are "fewer early-stage VCs willing to lead," with many preferring to follow or reserve capital for existing portfolios. She warns that "the bottleneck is finding the lead, and that single missing piece is extending otherwise high-quality rounds." 

This competitive environment demands more from investors as well; Leigh Ford of UniQuest Extension Fund highlights a "dramatic spike in quality deal flow" where it is "no longer enough to just show up at the round." To win allocation, investors must now demonstrate value "well before a term sheet" by actively helping founders solve immediate headaches and complete their syndicates pre-cheque.

At the end of 2024, Climate & CleanTech was the 5th most heavily invested sector, surpassing DeepTech, FinTech, and SpaceTech. A year late, it’s dropped to the 19th spot. A drop larger than that seen in Crypto and Web3 at the end of 2023. 

On the other hand, Hardware, robotics, and IoT saw a significant increase from 13th in 2023. To 9th in 2024 and, finally, the second-most-funded sector in Australia last year. Clearly, AI has been a huge unlock for the sector. 

Startups with at least one female founder captured 24% of total capital in 2025, a sharp rebound from 15% the year prior. But dig deeper, and the celebration ends abruptly. This "recovery" is a statistical mirage driven by extreme concentration; the top five female founders broke out, and they hoovered up 79% of that capital, and within that, a large proportion was hoovered up by Airwallex. 

The remaining 87 startups were competing for a combined $257 million, while all-female teams accounted for a negligible 2% of total capital. 

The data paint a picture of a "leaky pipeline" in which early-stage momentum vanishes by Series B+, widening the disconnect between capital statistics and the "lived fundraising experience," with only 18% of female founders reporting feeling supported by their investors.

Victoria overtook New South Wales as the top-funded state is a story of concentration versus breadth. While Victoria secured the top spot with $1.9 billion in total capital compared to NSW's $1.7 billion, it explicitly attributes this to a "handful of mega rounds" from major scale-ups like Airwallex and Roller, rather than a uniform rise in activity. That being said, I’m not sure if you can really count Airwallex as being from Victoria any more. But as a Victorian, we’ll take it!

NSW actually maintained its lead in total activity with 160 deals versus Victoria's 134. Victoria's median Series B+ deal size was $40.0 million, significantly higher than NSW's $30.0 million. 

Two-person founding teams remained the most likely configuration to be funded, accounting for the largest share of deals at every investment stage. 

This ubiquity was most visible at the Pre-Seed, Series A, and Series B stages, where duo-founded companies represented the majority of all activity (52%, 54%, and 52%, respectively). 

Solo founders sat around the ~30% mark across all stages, while 3+ founders clinched the smallest median round size.

In terms of capital attraction, these teams showed particular strength at the Series A stage, commanding a median round size of $14.5 million—significantly outperforming both solo founders ($10.0 million) and larger teams of three or more ($6.8 million). While they are the most common structure at the earliest stage (Pre-Seed), their median raise of $1.0 million was considerably lower than the $2.3 million secured by teams of three or more, suggesting that while pairs are the volume leaders, larger teams may initially command higher capital injections.

Australia's venture capital landscape is experiencing a significant transformation, with AI-related deals becoming the dominant force. The report indicates that $3.1 billion in total capital was invested across 214 AI-related deals last year.

However, the "AI company" label can be misleading, as many established startups have strategically pivoted to incorporate AI heavily to maintain relevance. A key question is: where in the AI technology stack are these companies receiving funding?

While global players with massive resources still control the capital-intensive infrastructure and foundational model layers, Australian founders are successfully applying their traditional "software playbook" to the Application Layer. This "SaaS 2.0" segment saw the majority of activity, securing $1.9 billion across 198 deals.

Infrastructure still attracted a substantial $871 million, driven by a few major investments (like Firmus and Syenta). Nevertheless, the highest volume of deals is found in orchestration and applications. Companies such as Lorikeet and Heidi are demonstrating that Australia's competitive edge lies in building innovative solutions on top of existing foundational models, rather than attempting to outspend global giants in raw computing power. The model layer is also a growing area, with companies including Harrison.AI, Maincode, and Isaacus focused on developing their own models.

Angel investors have officially re-entered the chat in 2025, but the era of "spray and pray" indiscriminate deal-making is dead. 

In 2025, there appears to have been a pivot from the hesitation of 2024 to a new "cautious optimism," where deployment momentum has returned with a heavy dose of discipline.

Specialist syndicates have supplanted the lone wolf, becoming the ecosystem's defining unit and increasingly resembling micro-VCs that leverage deep domain expertise to underwrite risk. 

This professionalised class of "operator angels" is highly sensitive to valuations, views many 2025 deals as overpriced, and uses AI tools to conduct deeper diligence, often favouring post-revenue startups over the traditional pre-seed moonshot. 

In 2025, 85% of respondents said the cost of living and access to capital were the biggest limitations to doing more new angel investments, up from 60% the year previously.

What was your biggest takeaway from the report?