Funding the planet's future

Australia's startup ecosystem saw 414 funding deals worth a combined $4 billion in 2024 – an 11 per cent improvement on 2023.

This marks the third-highest year in Australian venture capital history, according to the 2024 State of Australian Startup Funding report by Cut Through Venture and Folklore Ventures which was released last week.

The report revealed that Climate Tech & Cleantech, despite a slight decline compared to 2023, remained the second most-funded sector after FinTech, securing $609 million across 55 deals. Moreover, for the second consecutive year, it recorded the highest number of deals across all sectors.

Among the 22 startup funding deals that exceeded $50 million in 2024, five were in climate tech and cleantech. These included Hysata ($172m), Samsara Eco ($100m), Jet Charge ($72m), and Raygen ($51m).

"By 2035, Australia could be recognised globally as a small-but-mighty powerhouse in software, renewable energy, and medical technology, propelled by our talent, continuous research and robust venture funding."

Other notable deals surpassing $20 million included Jet Zero ($30m) and Amber ($29m). Climate tech and cleantech were also well-represented among female-founded startups, with Water & Carbon Group ($15m), Earthodic ($6m), Great Wrap ($5m), and Sumday ($5m) among the top 20 funding rounds.

Virescent Ventures managing partner Kristin Vaughan noted that climate tech is maturing: “2024 saw a healthy return to commercial focus in the Australian climate tech sector.

“Globally, the boom of 2021 and 2022 brought a tendency to overemphasise impact and altruistic drivers. In 2023, the global sector started to focus more on commercial fundamentals and measurable traction. This shift accelerated in Australia in 2024.”

Wollemi Capital directors Michael Perak and Penny Wang pointed out that while the need for large-scale climate solutions has never been more urgent, the issue has also become more politicised.

“Faltering political resolve has thrown into sharper focus the need for clear commercial as well as climate rationale.

“That’s seen growth-focused investors like Wollemi rewarding those startups who prioritised use of their VC funding in proving both the technological and commercial readiness of their solutions.”

Winds of change

Now in its fourth year, the report draws on insights from Australian funds, founders, and contributors to "highlight the scale and breadth of an industry that barely existed only 10 years ago".

The Australian startup funding landscape showed signs of renewed energy in the latter half of 2024, the authors wrote.

“This uptick, coupled with stabilising valuations, suggested a shift away from the heightened caution of 2023. However, investors remain wary of lingering macroeconomic headwinds, a lack of local M&A and IPO activity, and mixed portfolio health.

“Entering 2025, there is cautious optimism that improving conditions will drive further momentum.”

Optimism prevails

Folklore Ventures founder & managing partner Alister Coleman observed that seed-stage investment typically weathers VC market downturns best, and Australian seed-stage allocations have bounced back from their 2023 lows.

“If this last year of recovery rhymes with history, and if one considers history a marker for the future, there is good reason to be optimistic about 2024 vintage companies.”

The rise in $50m-plus funding rounds, he added, signals that “we have good reason to be optimistic about a cohort of startup teams more efficient in operation, battle-scarred from challenge, and primed to build globally.”

However, change is needed as other countries recalibrate their investment priorities to foster innovation and emerging technologies, noted Cut Through Venture’s Chris Gillings.

“By 2035, Australia could be recognised globally as a small-but-mighty powerhouse in software, renewable energy, and medical technology, propelled by our talent, continuous research and robust venture funding.

“Achieving this future requires transforming our regulatory environment and tax incentives while, as a culture, reframing setbacks as stepping stones to success.”

Scaling the mountain

When it comes to climate tech, HSBC Corporate Banking Australia and New Zealand’s Director, Tech Sector & Venture Lead Alan Watters, highlighted that despite increased investment, a significant funding gap persists for companies scaling beyond early stages.

“This ‘missing middle’ presents a challenge for companies seeking to commercialise and deploy breakthrough technologies,” he said.

“This is a real issue for startups in Australia: climate tech topped the number of deals recorded by Cut Through in the first nine months of 2024, but a large proportion were accelerator rounds.

“At later stages, the sector depends heavily on international investment, although we have recently seen new government funding being deployed via the National Reconstruction Fund (NRF).

“Climate tech companies can help their chances of scaling successfully by engaging with overseas investors at a relatively early stage.”