The report showed 24 per cent of Australian deals had at least one international investor, and Tiger did the most Australian deals of the foreign funds.
About 75 per cent of investors surveyed said increased competition had led to valuation inflation, more than 45 per cent believing it had contributed to faster fundraising cycles and 30 per cent said it had led to short due diligence periods for investments.
“There has been a lot of competition in larger rounds, and it’s been building for a few years. The VC story in Australia isn’t about three firms, ”Folklore managing partner Alister Coleman said.
“The competition gives founders a lot more choice, which is healthy … and VCs that can scale over time have an advantage both from a funding level and team size because they can cover the market better.
“If the capital is there, the companies will be created.”
The rise of international investors in Australia, particularly in later stage deals, helped propel the country to more than $ 10 billion of start-up investments in 2021.
Compared to 2020, there were twice as many sub- $ 20 million rounds (up 236 year-on-year to 489), three times as many $ 20 million to $ 99 million raises (70 deals) and four times the number of deals over $ 100 million (47).
“While everyone talks about the mega deals, the smaller deals have also grown massively in terms of the number being done,” Cut Through Venture’s Chris Gillings said.
“The deal value and average size of those pre-seed, seed and angel rounds have also gone up significantly … which is super encouraging.”
While companies like SimPro, ROKT, Octopus Deploy, Go1, Canva, Pet Circle and Airwallex raised more than $ 100 million, seed rounds such as All G Foods’ $ 16 million raise and Mr Yum’s $ 11 million post-seed round also broke new ground.
The report showed that of the $ 10 billion-plus invested, 48 per cent of capital flowed to start-ups in New South Wales, 30 per cent to start-ups in Victoria and 16 per cent to those in Queensland.
It also showed that just 22 per cent of funding went to founding teams with at least one female, and more than 80 per cent of women surveyed believed their gender had impacted their ability to raise funds.
While 22 per cent was ahead of international levels, Mr Coleman acknowledged there was a lot of room for improvement.
“As the diversity of investment teams improve, we’ll find the consequence of that diversity is diversity in the investments themselves. But, female founders also need to be encouraged to start companies, as do people from minority backgrounds, ”he said.
In a good sign for seed stage start-ups, the number of start-up investors leapt from 476 to at least 890 in 2021, up 87 per cent, with more angels participating in the ecosystem. These numbers exclude angels who invested via crowdfunding platforms or syndicates.
More than 80 per cent of early stage investors were male, with the bulk aged between 35 and 44. Most deploy less than $ 20,000 per investment.
Despite the listed tech sell-off, which had already begun when the survey was conducted, investors expected the rivers of capital to keep growing stronger, with more than 60 per cent tipping start-up investment activity would “increase significantly” in 2022.
Merger and acquisition activity also boomed in 2021, partly thanks to the $ 2 billion acquisition of A Cloud Guru, the $ US700 million purchase of XM Cyber and the $ 845 million Invoice2Go deal. In total, local tech M&A volumes hit $ 10.8 billion.
“The report confirms there is a lot of late stage capital available for Australian companies, locally and internationally, and it puts a floor under the investment decisions we make,” Mr Coleman said.
“It should give limited partners confidence that this ecosystem is not inherently fragile, and the number of quality companies being created is at a very high global level.”