Fig 1. My company intends to raise in the next 12 months
Strongly agree
Neutral (incl I don't know)
Disagree
Agree
100
80
60
40
20
0
38%
38%
10%
13%
ADDITIONAL OBSERVATIONS FROM OUR WORK WITH VC-BACKED COMPANIES IN 2022
For companies with a comfortable cash runway, it is largely business as usual. Start-ups are taking operational steps to stabilise and/or extend cash runways but are not anxious about the next raise.
Opportunistic acquisitions/consolidations being looked at internally as part of strategic direction.
Greater focus on pre-IPO financing for companies contemplating a longer pathway to IPO or other exit.
Australian funds have significant dry powder and are continuing to deploy it, especially in early stage raises (company’s first round with financial investors), noting that while 2022 equity deployment is down on 2021, deployment in 2021 was anomalously high.
We are seeing Australian regulatory limits on the number of shareholders create challenges as it makes it harder to do smaller, raises over a more distributed investor intake (eg high net worth).
The complexity involved in offering tax concessional employee equity in Australia means many companies have to choose between offering employee equity with more attractive tax treatment and a broader employee equity offering that is less financially attractive over the longer term. At a time when companies are focussed on stabilising and extending cash runways and have less ability to increase salaries or pay cash bonuses, this reduces the ability for start-ups to reward employees through equity that will deliver if the company does well.
Overall the survey points to a picture of resilience in Australian start-ups and a belief in the long term prospects for companies and the ecosystem.
While times are currently challenging, most respondents expect their own companies to raise in the next 12 months and to do so at a higher valuation than the last round, probably through a priced round.
The current environment is driving strategic decision making, in particular a much stronger focus on profitability or cash burn reduction and a pivot from growth to profit.
But despite a challenging 2022, Australian start-ups remain positive about their prospects and future with solid but measured optimism about long term Australian start-up prospects.
Most respondents not expecting early exits and are in two minds about whether bridging funding will be required.
Overall respondents recognise and appreciate the support received from Australian VC investors and would like to see more depth in the Australian VC investor sector.
However respondents believe the picture could be improved particularly by a reduction of regulation making it easier to raise capital from more people and reward staff with equity and clearer / streamlined government programs aimed at supporting VC investment.
Key findings at a glance
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Strongly disagree
0%
Fig 2. My company is confident our next raise will be above its last post-money valuation
Strongly agree
Neutral (incl I don't know)
Agree
Disagree
31%
54%
13%
0%
100
80
60
40
20
0
Strongly disagree
3%
Fig 3. The current fundraising environment is impacting strategic decision making by Australian start-ups
Strongly agree
Neutral (incl I don't know)
Agree
Disagree
47%
50%
3%
0%
100
80
60
40
20
0
Strongly disagree
0%
Strongly agree
Neutral (incl I don't know)
Agree
Disagree
41%
31%
26%
0%
100
80
60
40
20
0
Strongly disagree
3%
Fig 4. Australian start-ups will need to reach profitability earlier because of current market conditions
Fig 5. Overall, I am optimistic about the long term prospects for Australian start-ups
Strongly agree
Neutral (incl I don't know)
Agree
Disagree
26%
50%
21%
3%
100
80
60
40
20
0
Strongly disagree
0%
Strongly agree
Neutral (incl I don't know)
Agree
Disagree
0%
5%
17%
41%
100
80
60
40
20
0
Strongly disagree
37%
Fig 7. My company intends to pursue a liquidity event (eg, IPO or trade sale) in the next 12 months
Fig 6. My company will look at a bridging round before its next series or priced round
Strongly agree
Neutral (incl I don't know)
Agree
Disagree
3%
24%
50%
16%
100
80
60
40
20
0
Strongly disagree
8%
Fig 8. We value the contribution and/or support from our major investors
Strongly agree
Neutral (incl I don't know)
Agree
Disagree
37%
39%
18%
5%
100
80
60
40
20
0
Strongly disagree
0%
Fig 9. Governments can do more to support Australian start-ups
Strongly agree
Neutral (incl I don't know)
Agree
Disagree
56%
36%
8%
0%
100
0%
80
60
40
20
0
Strongly disagree
Overall the survey points to a picture of resilience in Australian start-ups and a belief in the long term prospects for companies and the ecosystem.
While times are currently challenging, most respondents expect their own companies to raise in the next 12 months and to do so at a higher valuation than the last round, probably through a priced round.
The current environment is driving strategic decision making, in particular a much stronger focus on profitability or cash burn reduction and a pivot from growth to profit.
But despite a challenging 2022, Australian start-ups remain positive about their prospects and future with solid but measured optimism about long term Australian start-up prospects.
Most respondents not expecting early exits and are in two minds about whether bridging funding will be required.
Overall respondents recognise and appreciate the support received from Australian VC investors and would like to see more depth in the Australian VC investor sector.
However respondents believe the picture could be improved particularly by a reduction of regulation making it easier to raise capital from more people and reward staff with equity and clearer / streamlined government programs aimed at supporting VC investment.
See Figure 1 and 2
See Figure 9
See Figure 3 and 4
See Figure 6 and 7
See Figure 5
See Figure 8
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