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Money is a moat (until it isn’t)

The money: Australia & New Zealand

The number: 93%. That’s how much of Q3’s venture capital went to just ten deals, per Cut Through Venture. Rounds under $10 million shared $162 million between them. The power law isn’t a theory anymore. It’s the operating environment.

The five that matter

1. Square Peg raises more than $1 billion. The biggest raise in its 14-year history, split roughly 40/60 between Fund 6 (early stage) and Opportunities Fund 3 (larger cheques, inside and outside the portfolio). It has returned more than $1.4 billion to investors since 2012. Why it matters: the big three now have more dry powder than ever, and it’s flowing to fewer, bigger bets.

2. Metacognition’s $15 million pre-seed. Main Sequence put in $10 million, then AirTree added $5 million a month later. Anton van den Hengel’s Adelaide lab is building the operating system for AI agents and robots, with no revenue model yet. His line to Capital Brief: “We’re at the point now where money is a moat.” Why it matters: in frontier AI, pre-seed is the new Series A.

3. MP Space’s $23 million seed. Blackbird led the round for the spacecraft battery maker, and UK space investor Seraphim made its first Australian investment. Why it matters: offshore specialists are now writing local seed cheques in sovereign tech.

4. Cuttable’s $20 million Series A. AirTree led, with Square Peg, Rampersand and Glitch following, valuing the Melbourne ad-tech north of $100 million. Founder Sam Kroonenburg sold A Cloud Guru for US$2 billion. Cuttable already earns 40% of revenue in the US, a year after landing there. Why it matters: second-time founders are raising on reputation and moving fast offshore.

5. Coherence Neuro’s US$45 million Series A. Peter Thiel’s Founders Fund and the OpenAI Startup Fund co-led the round for the brain implant designed to help treat brain cancer, co-founded by Australian Elise Jenkins. Blackbird, which led the pre-seed, came back in. Why it matters: the best Australian-founded deep tech is being priced by the world’s top funds.

And the one that didn’t happen. Firmus pulled its $7.9 billion ASX float, which would have valued it at $44 billion, after demand evaporated within two days. It’s now chasing private money and eyeing Nasdaq. Worth remembering: none of the big local VCs is on its register. This was never an Australian venture story. But it will cool the IPO window for everyone who is.

Quick fire

  • Archa — $11m equity plus a $50m debt facility for business cards, five years after pivoting from neobank
  • Skopos Bio — $12m seed from Tenmile, Tin Alley and Reed Jobs’ Yosemite to take Peter Mac’s radiopharmaceuticals into human trials
  • Willed — just under $10m at a $100m valuation, half from Equity Trustees
  • Kinoxis Therapeutics — $6.75m, with $5m from Main Sequence, for its Phase 2 dementia agitation drug
  • Trendspek — $6m led by OIF Ventures to take 3D infrastructure inspection to North America and Europe
  • RedOwl — $5.3m seed led by Tidal at close to $40m, using AI agents to stop businesses overpaying suppliers
  • RentBetter — $5m from EVP for AI tools for landlords who skip the agent
  • Kura Dynamics (NZ) — NZ$4.65m pre-seed, GD1 and Motion Capital, to steer hydrogen formation underground
  • Syncrowin — $3m pre-seed led by New York’s Collide Capital for an AI operating system for heavy industry
  • SupaHuman (NZ) — NZ$2.6m Series A led by Movac for AI vocational training
  • Memobottle — $2m at $10m from the founders of July
  • Copy Geek — $2m pre-seed from Sydney private investors
  • UNSW Founders — $1.6m in first cheques across 16 startups
  • Dryflow Magnetics — $34m ARENA grant for a magnetite processing plant
  • Diraq — US$51m from DARPA, with up to US$300m on milestones, as it reaches the final stage of the Quantum Benchmarking Initiative

Funds and vehicles

  • Blackbird deployed a record $297m across 16 companies in the September quarter and expects to invest more than $1b this year. 42% of its early-stage dollars went to AI infrastructure.
  • Antler launched its third Australian fund, targeting at least $70m, with Nicola Forrest’s Coaxial Foundation as cornerstone through a $30m partnership to back women founders.
  • Main Sequence is targeting $400m for Fund IV; CSIRO quadrupled its commitment to the Atmosphere pre-seed fund to $20m.
  • Icehouse Ventures’ Growth Fund III passed NZ$180m, $30m above target.
  • Eastend Ventures closed its debut $30m fund in Adelaide. Scale Investors is raising a $50m second fund.
  • AustralianSuper has now committed more than $1.5b to Australian VC.
  • NAB Ventures staff have been offered redundancies. Commonwealth Bank’s x15ventures is now close to the last bank VC standing.

Exits and liquidity

  • Five V Capital agreed terms for a majority stake in First AML, a payday for Blackbird
  • Neara acquired Canberra’s Zepben
  • Luxury Escapes secondary values Adam Schwab’s company at $525m
  • Ampol is buying Evie Networks for $225m
  • Seek’s Growth Fund is weighing a sale of about $1b in startup stakes
  • In the pipeline: Nearmap relisting at more than US$4b, Swipejobs testing a ~$2b float, Morse Micro converted to a public company

The money: US AI

The number: US$32 million. The median seed round led or joined by the top US firms in our deal tracker in October. RedOwl’s $5.3 million was one of Australia’s healthier seeds this month. That gap is the market Australian founders are now competing in.

The five that matter

1. Anthropic files to go public. Its S-1 dropped in late October, with a Nasdaq listing slated for the week of 16 November and a raise reported at around US$100 billion. Third-quarter revenue was US$17 billion. Australians can buy in: eight local brokers will handle a retail offer, with CommSec expected to lead it, and Macquarie is one of 22 underwriters. Why it matters: the first frontier lab on a public market sets the price for every private AI company, including the ones raising here.

2. Flapping Airplanes — US$1 billion Series A at US$6 billion. GV, Index, Kleiner Perkins and Sequoia backed a research lab building models that need far less data and compute. A billion-dollar Series A. Read that again.

3. TypeSafe AI — US$870 million Series A at US$7.5 billion. a16z led, Sequoia followed, for a model that doesn’t generate text at all. It makes typed yes/no decisions inside agent pipelines. Why it matters: the money is moving from chatbots to the plumbing that makes agents reliable.

4. Modal — US$750 million Series D at US$15.75 billion. Accel led, with Redpoint, Menlo, Kleiner and General Catalyst. Serverless compute for AI workloads, more than tripling its last valuation.

5. Bedrock Robotics — US$600 million at US$4.1 billion. Retrofitting excavators to drive themselves on paid job sites. Why it matters: physical AI was the busiest category in our tracker in late October, and it’s where Australian investors already over-index.

The one with an Australian hook: AirTree-backed Legora raised US$550 million at US$8.8 billion, up 57% since March.

And the one going the other way: OpenAI cut its latest private funding target by US$10 billion to US$20 billion and lowered its target valuation to US$1.25 trillion, as October’s AI stock sell-off dampened appetite.

Quick fire

  • fal — US$1.3b at US$16b for AI inference infrastructure
  • Nooks — US$500m in non-dilutive growth capital from General Catalyst’s Customer Value Fund, the same structure behind Heidi’s facility
  • Upwind — US$400m Series C at US$3.8b for cloud and AI security
  • EliseAI — US$350m at US$4b for property and healthcare front-office agents
  • Air Space Intelligence — US$325m at US$3b for critical-infrastructure operations AI
  • Armadin — US$255.5m Series B at US$2.5b, from Mandiant founder Kevin Mandia, for agentic offensive security
  • Warp Sciences — US$215m Series A led by Lightspeed, from former OpenAI executive Kevin Weil
  • Arena (LMArena) — US$200m at US$3.1b for model evaluation
  • Arda — US$160m Series A at US$1.5b, turning CAD files into assembly lines
  • Serval — US$150m Series C at US$3b, tripling in value, for AI service-desk agents
  • Dulo — US$130m seed from Sebastian Thrun for AI engineering models
  • Town — US$108m Series B at US$1b for team AI assistants
  • Foundry Robotics — US$100m for autonomous factories
  • Wabi — US$55m at US$1.25b for a group-chat personal assistant

From the tracker. We logged 58 AI rounds backed by the top 20 US firms in October, worth about US$8.5 billion. The ten biggest took 64% of it. Same power law, bigger numbers. Even the winners are restructuring: Sequoia closed its London office and cut its general partners from ten to seven.

Four questions October answered

Capital: how do you fund it?

Money is getting bigger and narrower at the same time. Australian startups raised a record $4.2 billion in Q3. Strip out Firmus and quarterly funding has fallen three quarters in a row, down 30% to $1.31 billion. Female-founded teams won 32% of deals and 2.7% of the capital. And 71% of investors surveyed say their funds haven’t had a single exit this year.

Compute is becoming currency. Heidi Health signed a heads of agreement with Innovation Victoria to receive AI compute in exchange for equity, believed to be the first deal of its kind in Australia. Relevance AI’s Jacky Koh expects more to follow.

The call for founders: if your next round depends on the middle of the market, plan for it not being there. Raise for longer, or raise from somewhere else.

Talent: who builds it?

Canva is refounding itself. Melanie Perkins announced the biggest shake-up in the company’s history, affecting 1,271 people, or 22% of its workforce, through redundancies, role changes and relocations to Sydney. It’s consolidating into smaller, more autonomous teams while building its own AI models. Culture Amp cut around 30 product roles in its fourth round of cuts in three years.

Meanwhile, the smallest teams are getting bigger results. Stripe says solo founders made up 63% of companies incorporated through its Atlas platform in the second quarter. Superdesign’s Jason Zhou runs a 300,000-user product with six people and plans to stop at 20. His metric: revenue per head.

The call for founders: the question is no longer how many people you can hire. It’s how many you can afford not to.

Growth: how does it scale?

The public market door creaked shut, then Anthropic walked through it. Firmus pulled its float. AirTrunk paused its Singapore listing. NextDC lost about $3 billion in market value in 40 minutes after locals in West Footscray stalled power works for its Melbourne data centre. The ASX’s new CEO has promised to fix a shrinking exchange. Then Anthropic lined up Australian brokers for a retail offer of its own.

And the founders are moving the parent company. Lawyers and investors told SmartCompany that Australian founders are flipping to the US earlier to manage CGT exposure. Airwallex made a UK company its new global parent, with its CEO and CFO now in London.

The call for founders: where your company lives is now a strategic decision, not an admin one. Make it on purpose.

Product: what are you actually making?

Every winner this month built AI into the core, not the menu. Canva launched its own image model, Craft. Heidi launched Heidi II, moving from writing notes to completing tasks. Every AFR BOSS Most Innovative Companies winner except one used AI. The exception was an oil filter.

And the US money says what matters next. Look at the US top five: decision models, compute, physical AI. Not wrappers. Plumbing.

The call for founders: if a competitor can rebuild your product with an agent over a weekend, the moat was never the product. It’s the data, the distribution and the customer you already own.

The policy whiplash

Advocacy news: The policy whiplash, in one box

The startup CGT carve-out is in parliament. Treasury scrapped the $10m lifetime cap, cut the holding period to three years and widened the 15-year window. The bill was rushed to a lower house vote barely a day after it was tabled. The fight now is the “predominant activity test”, which the Australian Investment Council says could exclude more than half the companies in some of the largest VC portfolios.

Carry is getting taxed harder. From July 2027, fund managers’ carried interest will be taxed at up to 47%, up from 23.5%, including on investments made a decade ago. Expect managers to bring exits forward.

The R&D Tax Incentive fight continues, with an 18-member coalition led by AusBiotech writing to the Treasurer a second time over age limits.

Two elections, two threats. Victoria’s Opposition would sell Innovation Victoria’s startup portfolio if it wins on 28 November. The federal Coalition has vowed to unwind the National Reconstruction Fund.

And the RBA lifted rates for a fifth straight time on Melbourne Cup day, pointing in part to data centre investment.