According to the KPMG International’s Venture Pulse quarterly report on global venture capital investment, start-up funding in Australia 2017 was up from US$105.15 million in 2016.
Significant deals recorded in Australia in the final quarter of 2017 included US$30 million invested in IR Exchange, US$25.72m in Airtasker and US$19.5 in Spaceship.
However, while the total amount of Australian venture capital invested rose, KPMG says the number of deals fell significantly from 185 in 2016 to 135 in 2017.
“The speed of growth has been coupled with an evolution in how investors approach start-up ventures – with a shift towards pre- and post-series A funding. At the same time, we are seeing increasingly sophisticated Australian startups scaling on the global stage. With seed and angel funding still a vital part of our start-up ecosystem, we are hopeful that the decline in deal number is a temporary shift rather than a major structural change in the VC market.”
Key global highlights included:
- Global VC investment rose from US$40.8 billion in Q3’17 to US$46 billion in Q4 2017.
- Artificial intelligence and machine learning saw a massive US$4.1 billion in investment in Q4 2017, compared to US$3.1 billion in Q3 ’17.
- Corporate participation in global VC deals reached a record high of 18.7% in Q4 2017, with US$26.5 billion invested in associated deals – the second highest quarter of corporate venture capital ever.
- Global median deal size rose for every deal stage in 2017, with the median deal size of angel and seed deals rising to US$1 million from US$800,000, early stage deals rising to US$5 million from US$3.7 million, and later stage deals rising to US$10.8 million from US$9.5million.
- Pharmaceuticals and biotechnology saw a massive year-over-year increase in VC investment, from US$12.2 billion in 2016 to US$16.6 billion in 2017.
- VC investment in artificial intelligence and machine learning doubled from US$6 billion in 2016 to US$12 billion in 2017.
- Global first-time VC financing fell for the third straight year – to US$13 billion across 3813 deals.
KPMG says Asia-based VC investment reached an annual high of more than US$48 billion in 2017, propelled by three US$1 billion+ deals in China during Q4 2017, including US$1 billion to electric car company Nio in addition to the US$4 billion raised by Didi Chuxing and Meituan-Dianping. Q4 2017 saw a strong increase over the previous quarter, with US$15.6 billion invested. CVC participation in Asia reached 32.2% in Q4 2017 – a high by a significant margin. CVC-affiliated investment was the third-highest quarter on record at US$12.5 billion.
According to KPMG, China dominated the Asian VC market during the quarter, accounting for US$13.9 billion in investment during Q4 2017. India saw a quarter-over-quarter drop to US$523 million. However, 2017 as a whole was reasonably robust in the country with seven US$100 million deals during the year.
Looking ahead to Q1 2018 and beyond, KPMG says there are many positive signs that the global VC market will continue to be strong in terms of investment, although the “declining number of deals could create some challenges down the road”.
According to KPMG, VC fundraising could see an uptick in 2018 as VC firms globally look to create larger global funds than they have in the past in order to compete with the US$100B Softbank Vision Fund.
And, KPMG points out that areas like healthtech, biotech and autotech are expected to continue to grow at a rapid pace, while artificial intelligence across industries will likely help drive significant investment rounds. Newer areas like foodtech and agtech are also expected to gain traction heading into 2018.
“The applicability of innovative technologies, whether AI and machine learning or blockchain, to different sectors will likely keep investors focused and investment high regardless of any pauses among specific industries. With many Australian VCs continuing to deploy capital and more funds being raised, we expect 2018 to continue to see strong activity in start-up funding,” Price concluded.