Startup funding topped $1 billion within the third quarter of 2025, with buyers wanting to again knowledge centres and AI with enthusiasm that recollects the mid-pandemic valuation bubble of 2021-2022
Traders threw cash at AI startups like followers tossing underwear on stage at a Tom Jones live performance in Q3, based on the most recent Reduce By way of Enterprise September quarter report.
A 3rd of the funding complete got here from six-year-old, Singapore-based knowledge centre infrastructure enterprise, Firmus Technologies, which raised $330 million in a round backed by US chip giant Nvidia in mid-September. The corporate is constructing a knowledge centre in Tasmania.
Nonetheless, {hardware} and biotech startups led complete funding for the primary time, supported by sustained curiosity in local weather tech. It appears broader political sentiment round deep tech and manufacturing is now beginning to stream by to investor mindset, maybe pushed by the massive investments the Nationwide Reconstruction Fund can also be making alongside VC.
All up, there have been 116 rounds within the quarter, with greater than 1 / 4 (31) from accelerators investments. Firmus was the one elevate to hit 9 figures, with the opposite high 5 raises by IoT chip maker Morse Micro ($88m Series C), adopted by scorching AI startup Lorikeet ($54m Series A), vaccination biotech Vaxxas ($49m Series D) and eCommerce fulfilment startup Skutopia’s $38 million, which was notable because the elevate was eschewed by VC companies.
The Australian Venture Capital Funding quarterly report didn’t embody Blackbird-backed PsiQuantum’s $1.5bn Series E. Whereas the startup has expat Australian founders, and is building a quantum computer in Brisbane, it’s primarily based and registered within the US.
Valuations moved larger throughout the board in Q3, with probably the most pronounced raise at pre-seed, Seed, and Collection A. Later levels had been steadier, and AI-first firms priced at a premium, elevating quicker and infrequently at costs paying homage to 2021.
Most buyers anticipate to do extra offers than in 2024, and in the event that they tip greater than $1.3 billion into startups within the December quarter, 2025 will rank third behind 2021 and 2022 for probably the most capital deployed yearly in Australia.
The CTV report notes that after a mushy Q2, female-only-led startups rebounded with their strongest exhibiting since early 2023, although the general share of capital to feminine and blended groups fell to 11%, the bottom funding in six quarters. Accelerator packages had been accountable for a lot of the backing for feminine founders.
Enterprise funding and offers 2019-2025. Supply: Reduce By way of Enterprise
Bottlenecks and bubbles
Report writer and CTV founder Chris Gillings famous {that a} Collection B bottleneck persists and inflated valuations throughout 2021–22 could also be guilty.
“Low cost capital and an inflow of latest funds led to unusually giant rounds at extraordinary valuations. Founders who may beforehand have raised $8 million at a $40 million post-money valuation had been instantly elevating $25 million at $150 million,” he wrote.
“Traders justified the pricing primarily based on progress assumptions that relied available on the market remaining open indefinitely. The issue is that valuations are guarantees concerning the future. When the market reset in late 2022, many firms couldn’t develop quick sufficient to satisfy these guarantees. That overhang has outlined the years since.
“Startups with inflated A-round valuations discovered themselves boxed in: too costly to boost an up-round, too early for an exit, and rising too gradual to satisfy the brand new effectivity benchmarks anticipated by buyers.
Some responded by tightening burn and pushing for profitability. Others turned to quiet insider extensions, down rounds, or just waited for circumstances to enhance. The result’s the plateau… These firms haven’t failed, however they aren’t advancing on the price that their Collection A buyers in all probability thought they might.”
Gillings says that by late 2023, a lot of these firms had accepted the brand new actuality and the market recalibrated fairly than collapsed, whereas founders did extra with much less, and funds narrowed their focus.
He says the 2024 cohort is at present monitoring forward of latest years.
That may be a constructive signal. It suggests a more healthy pipeline constructed on extra practical valuations, cleaner metrics, and stronger cohort high quality. Traders are backing firms which have gone on to have earned their A, not simply pitched it properly,” he argues.
Gillings stated investor self-discipline goes to water when the AI carrot is dangled.
“Among the largest AI rounds over the previous 12 months have been achieved quietly at valuations paying homage to 2021,” he stated
“The tone is acquainted: the expertise is totally different, however the psychology is similar. It’s too early to name this a bubble. The distinction this time is that the exuberance is concentrated, not widespread. Nevertheless it’s price remembering that bubbles don’t appear like bubbles once they begin.
“Whether or not this subsequent section turns into a disciplined growth or a repeat of previous errors is determined by how buyers and founders deal with their euphoria this time.”
You possibly can learn the The Australian Enterprise Capital Funding Q3 2025 report here.
Investor insights from the CTV Q3 ’25 report. Supply: Reduce By way of Enterprise
