Startup funding topped $1 billion within the third quarter of 2025, with traders desirous 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, in accordance with the most recent Lower By means of Enterprise September quarter report.
A 3rd of the funding whole 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 big Nvidia in mid-September. The corporate is constructing a knowledge centre in Tasmania.
Nonetheless, {hardware} and biotech startups led whole 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 circulate by way of to investor mindset, maybe pushed by the big investments the Nationwide Reconstruction Fund can also 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 Collection C), adopted by sizzling AI startup Lorikeet ($54m Collection A), vaccination biotech Vaxxas ($49m Collection D) and eCommerce fulfilment startup Skutopia’s $38 million, which was notable because the increase was eschewed by VC corporations.
The Australian Enterprise Capital Funding quarterly report didn’t embrace Blackbird-backed PsiQuantum’s $1.5bn Collection E. Whereas the startup has expat Australian founders, and is constructing a quantum pc in Brisbane, it’s primarily based and registered within the US.
Valuations moved larger throughout the board in Q3, with essentially the most pronounced carry at pre-seed, Seed, and Collection A. Later levels have been steadier, and AI-first firms priced at a premium, elevating sooner and infrequently at costs harking back to 2021.
Most traders count on 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 essentially the most capital deployed yearly in Australia.
The CTV report notes that after a comfortable Q2, female-only-led startups rebounded with their strongest exhibiting 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 have been chargeable for many of the backing for feminine founders.
Enterprise funding and offers 2019-2025. Supply: Lower By means of Enterprise
Bottlenecks and bubbles
Report creator and CTV founder Chris Gillings famous {that a} Collection B bottleneck persists and inflated valuations throughout 2021–22 could also be guilty.
“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 have been instantly 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 fulfill 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 fulfill the brand new effectivity benchmarks anticipated by traders.
Some responded by tightening burn and pushing for profitability. Others turned to quiet insider extensions, down rounds, or just waited for situations to enhance. The result’s the plateau… These firms haven’t failed, however they aren’t advancing on the charge that their Collection A traders in all probability thought they’d.”
Gillings says that by late 2023, a lot of these firms had accepted the brand new actuality and the market recalibrated quite than collapsed, whereas founders did extra with much less, and funds narrowed their focus.
He says the 2024 cohort is presently monitoring forward of current years.
That could be a optimistic signal. It suggests a more healthy pipeline constructed on extra real looking 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 effectively,” he argues.
Gillings mentioned investor self-discipline goes to water when the AI carrot is dangled.
“A number of the largest AI rounds over the previous 12 months have been achieved quietly at valuations harking back to 2021,” he mentioned
“The tone is acquainted: the expertise is totally 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 section turns into a disciplined growth or a repeat of previous errors relies on how traders and founders deal with their euphoria this time.”
You may learn the The Australian Enterprise Capital Funding Q3 2025 report right here.
Investor insights from the CTV Q3 ’25 report. Supply: Lower By means of Enterprise
Keep forward of the curve with NextBusiness 24. Discover extra tales, subscribe to our e-newsletter, and be a part of our rising neighborhood at nextbusiness24.com