AI startups in Australia have taken the lead in venture funding for Q1 2025, with AI-first companies driving impressive deal volume. As generative AI continues to revolutionize various sectors, AI startups in Australia are securing significant investments, reshaping the country’s startup ecosystem and positioning themselves at the forefront of innovation.
AI Startups Australia Surge in Deal Volume, But Hidden Factors Drive Growth
The first quarter of 2025 has seen AI startups in Australia leading the venture funding scene, marking a historic milestone for the sector. According to new data from Cut Through Venture, AI-first startups accounted for 62% of the 100 announced venture and accelerator deals tracked for the quarter. However, while these figures are impressive, there are underlying factors that may be obscuring the true scale of activity in the sector.
A significant portion of the deals involves early-stage AI investments under $500,000, many of which are happening via SAFE (Simple Agreement for Future Equity) rounds. These rounds typically involve one or two founders operating in stealth mode, with minimal public exposure. As a result, the actual volume of AI investment may be higher than reported.
Generative AI Powers the Surge in Investment
Generative AI is now a key part of AI startups in Australia, especially in SaaS, where it’s often a core feature. This widespread adoption is driving investment across various sectors, from health tech to fintech, with many startups branding themselves as “AI-powered,” fueling the rise in AI investment.
AI Startups Australia Outpace Climate Tech and Fintech in Deal Volume
While AI startups in Australia have dominated deal volume, the largest capital raises still belong to biotech and medtech sectors. Major rounds, such as Harrison.ai’s $179 million raise and AdvanCell’s $178.6 million funding for cancer treatments, highlight ongoing interest in health tech.
However, in terms of deal count, AI startups in Australia surpassed both climate tech and fintech. The growth in AI deals reflects a surge in smaller, early-stage investments in AI, which has helped position the sector at the forefront of the Australian startup ecosystem for 2025.
A Robust Start to 2025, Yet Caution Prevails in Larger Deals
Beyond AI startups in Australia, Q1 2025 saw an overall strong performance in venture funding, with $993 million raised across 100 deals. This marks the best Q1 since 2022, with median deal sizes reaching record highs. Series A rounds experienced the sharpest increase in deal size, reflecting strong investor confidence, particularly in AI-first startups.
Despite this momentum, caution remains in certain segments of the market, particularly in the $5–$20 million deal range, which typically includes Series A and B rounds. Investors are continuing to favor safer bets on proven ventures rather than taking on high-risk early-stage investments in scale-ups.
Emerging Sectors and the Persistent Gender Funding Gap
There’s also been a noticeable shift away from traditional SaaS ventures toward industries such as biotech, climate tech, and hardware, which have outpaced enterprise software in both volume and capital raised. Despite this, a concerning trend persists in the funding disparity between male and female founders. Women-led startups received just 2% of the total capital raised in Q1, with mixed-gender teams securing only 15%.
This ongoing gap highlights the challenges women face in securing venture capital, particularly in the highly competitive environment surrounding AI startups in Australia.
Global Uncertainty: A Growing Concern for Investors
Looking forward, global uncertainty remains a significant concern for investors, particularly in sectors like AI that rely heavily on international funding and supply chains. Issues like tariffs, supply chain disruptions, and shortages in hardware necessary for AI model training could undermine the momentum of AI startups in Australia.
As one investor noted, sovereign risk is becoming a more prominent consideration for VCs, with Australian startups increasingly exposed to global economic factors that could impact growth, particularly in the AI startup sector.
