Glimmers of hope for startups with capital raises in 2024 up 30%

Earlier this year, we took a pulse check on the startup ecosystem, and detected early signs that a (slight) increase in women-led startup raises in 2024 pointed to a possible inflection point for better gender diversity in the funding landscape.

How much have startups raised in 2024?

This week the latest data from Cut Through Venture showed that all-male founding teams claimed 85% of the $1.7 billion raised by local start-ups in the first five months of the year so far. We’ve calculated a further $292 million raised this month, giving this half a total of $1.9 billion (not including the federal and Queensland government’s gargantuan investment in PsiQuantum).

All-women teams raised 5% of the capital, and startups with at least one woman founder claimed an additional 10%. Not great numbers, but definitely an improvement on previous years.

Last year Aussie startups banked $3.5 billion in total.

Data analysis of the year so far reveals glimmers of hope for fundraising startups, with total capital raised in the first half of 2024 up 30% on the same period last year.

Whichever way you look at it, it’s been a challenging six months, after a challenging few years. Not exactly the Roaring Twenties so far – unless you were a company raising capital in the frothy madness of 2021 ($10.6 billion) and 2022 ($7.4 billion) when startups banked colossal cheques in the confused exuberance of the post-Covid/dying days of zero interest rates end times.

Anyway today, with the last working day of FY24 in the rearview mirror, at the mid-point of another tumultuous year, some of Australia’s funding leaders tell us how they’re feeling about 2024 so far.

State of startup funding at halftime

How are Australia’s startup funding leaders feeling about 2024? What do they think about the (slightly) improving landscape for women-led startups?

Holly Brooks, Startmate’s chief storyteller and Ladymates’ co-lead

Startmate has been full steam ahead in 2024. Two clear themes for us so far are women and founders.

We kicked off the year with a 60% women co-founded accelerator cohort, launched a brand new strategy called Ladymates that supports women from pre-career right up to founders and exec leadership, had a pre-Accelerator cohort made up of 50% women co-founders and saw 10/11 companies who placed in the final pre-Accelerator pitches night – as women founders.

We’re making a concerted effort to a) invest in women and b) play a role in creating and inspiring the next gen of women founders through our offerings (Student Fellowship, Women Fellowship, Ladymates Collective, Ladymates Leadership, Launch Club).

James Alexander, Galileo Ventures’ co-founder and partner

With the advent of generative AI and super-intelligent AI, more markets are now reachable with software and hardware products and it’s changing the game.

For seed-stage startups, there are continuously shifting goal posts from larger investors who now may want to see $1m in recurring revenue before raising again, where previously they were interested in investing at earlier stages.

Regardless, being capital efficient and having real traction and revenues is key in this market. Unfortunately, the risk appetite is lower as a result and that will hurt some sectors. 

I think the intense interest in AI is warranted but the valuation exuberance in some early and late-stage deals will end in disaster. We are experiencing possibly the largest technological platform shift of our lives, and it will take time to play out. Investors need to realise that early winners are not indicative of long-term opportunities. Early leaders might not be the ultimate victors, history tells us they often aren’t. The impact and development of super-intelligence will take time to play out as the AI technologies stack matures and what this means in terms of investment opportunities is evolving.

We’re taking a deliberate and strategic approach with our AI investments over the next three years, and as a result, we are choosing to back companies that we believe are helping create the new product categories and thus markets of the future.

At Galileo, we are very focussed on backing more exceptional and ambitious women founders and CEOs. We’re currently at 35% women founders backed to date, which while higher than most of the largest VCs in Australia, can still be better.

What we’re doing about it is launching new programs to increase the size of the pipeline with the first being Jupiter – a program for pre-funded women founders who want to build large tech businesses.

While this is small, we know every little thing counts when solving this challenge of increasing founder diversity which, as one of the few queer VCs, means a lot to us.

Andrew Poesaste, partner at Rampersand

2024 at Rampersand is all about focus and acceleration. We have officially set in motion our strategy for the next ten years, which is set to be the most critical decade for value-additive seed capital. This kickstarted earlier this year when Taryn Pieterse and I came on as fund partners.

Our portfolio companies are making impressive strides and we continue to be energised by the quality of the founders we work with. We closed a recent investment in AI job-matching platform Hatch and are doubling down on our focussed investment approach, with portfolio companies having increased 8x in value, including Goterra, JigSpace and Expert360.

Rampersand is looking beyond the AI market hype and focusing on the core capabilities that the platform shift that AI is bringing. We are bullish on vertical software and services and believe both are ripe for AI disruption.

For the first time, domain experts can build workflows and automation on unstructured data that offer users real value in largely ignored areas of the economy — from agriculture to health services. AI also makes it possible to offer near-end-to-end services, by understanding the user’s intention and taping into voice and video.

The AI bull market has been running for a couple of years, but 2024 is the year AI moves past the demo and into production. The question is now whether AI startups translate early promise into long-term success.

The recent excitement around AI bears an uncanny resemblance to the ‘Peak of Inflated Expectations’ stage in Gartner’s Hype Cycle, where we expect we are now on the precipice of the ‘Trough of Disillusionment’.

It is now more important than ever for founders to align with investors and partners with the right abilities and motivations to navigate this next stage.

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