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
Buyers threw cash at AI startups like followers tossing underwear on stage at a Tom Jones live performance in Q3, based on the newest Lower 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 Applied sciences, which raised $330 million in a spherical backed by US chip large Nvidia in mid-September. The corporate is constructing an information 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 movement by to investor mindset, maybe pushed by the big investments the Nationwide Reconstruction Fund can 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 increase to hit 9 figures, with the opposite high 5 raises by IoT chip maker Morse Micro ($88m Sequence C), adopted by scorching AI startup Lorikeet ($54m Sequence A), vaccination biotech Vaxxas ($49m Sequence D) and eCommerce fulfilment startup Skutopia’s $38 million, which was notable because the increase was eschewed by VC companies.
The Australian Enterprise Capital Funding quarterly report didn’t embrace Blackbird-backed PsiQuantum’s $1.5bn Sequence E. Whereas the startup has expat Australian founders, and is constructing a quantum laptop in Brisbane, it’s primarily based and registered within the US.
Valuations moved greater throughout the board in Q3, with probably the most pronounced elevate at pre-seed, Seed, and Sequence 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 tender Q2, female-only-led startups rebounded with their strongest displaying since early 2023, although the general share of capital to feminine and combined 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: Lower By way of Enterprise
Bottlenecks and bubbles
Report creator and CTV founder Chris Gillings famous {that a} Sequence B bottleneck persists and inflated valuations throughout 2021–22 could also be accountable.
“Low-cost capital and an inflow of latest funds led to unusually giant rounds at extraordinary valuations. Founders who would possibly beforehand have raised $8 million at a $40 million post-money valuation had been all of the sudden elevating $25 million at $150 million,” he wrote.
“Buyers justified the pricing primarily based on progress assumptions that relied in the marketplace 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 lift an up-round, too early for an exit, and rising too sluggish 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 Sequence 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 somewhat 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 current years.
That could be a optimistic signal. It suggests a more healthy pipeline constructed on extra sensible valuations, cleaner metrics, and stronger cohort high quality. Buyers 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.
“A few of the largest AI rounds over the previous yr have been performed quietly at valuations paying homage to 2021,” he stated
“The tone is acquainted: the know-how is completely different, however the psychology is identical. It’s too early to name this a bubble. The distinction this time is that the exuberance is concentrated, not widespread. But it surely’s value remembering that bubbles don’t appear to be bubbles once they begin.
“Whether or not this subsequent part turns into a disciplined enlargement or a repeat of previous errors depends upon how buyers and founders deal with their euphoria this time.”
You’ll be able to learn the The Australian Enterprise Capital Funding Q3 2025 report right here.
Investor insights from the CTV Q3 ’25 report. Supply: Lower By way of Enterprise
