Market Update and Crystal Ball from Cut Through Venture 🔮

2024 is flying by! As we enter a new financial year we invited Chris Gillings, Founder of Cut Through Venture, Investor at Five V Capital and Aurora Community Member (who became a bit of a celebrity at Inspire for those who were there on Day 2!), to give us an overview of where things stand in the markets. Enjoy the insights below

The first half of 2024 told a tale of two quarters: the year began sluggishly with deal and funding announcements hitting lows not seen since 2019, but the second quarter witnessed a notable surge in activity. Q2 saw a significant increase in the number of deals announced and a substantial rise in funding for local startups.

Rather than deep diving into the highlights, the crucial figures were as follows: the first half of the year concluded with 167 deals announced, totalling $2.3 billion dollars in funding. This performance ranks as the sixth-best half-year for funding to Australian startups since the beginning of 2018. You can deep dive into the full report here for all the the details.

At Cut Through, we avoid making predictions (lesson learned!), but when Ian and Phaedon ask for them, we break our own rules. When they say jump, we say how high. Here are a few personal predictions for the second half of 2024, based on Cut Through’s data and takeaways at Five V from recent conversations with lawyers, local investors, international investors, and, of course, founders.

• Pre-seed and seed investments will remain the only bright spot for female-founded teams. Pre-seed participation by female founders is at an all-time high, and we expect this bright spot to continue. Unfortunately, this trend is unlikely to extend to larger funding rounds. There are just 38 female-led startups who raised $10M+ rounds in 2020-22 who’ve yet to announce a raise since, so realistically, the pool of female-led startups positioning themselves for a mega raise in the second half of 2024 remains small.
• Complex deal structuring will become more prevalent. As runways end and the desire to avoid down rounds persists, some scale-ups will accept investment terms that trade-off investors protecting their downside for maintaining their previously set valuations.
• Small to medium exits will hit a high. We predict a large number of $50-$150 million exits will be achieved by Australian startups in the second half of the year or early 2025. While these won’t necessarily ‘return the fund’ for their VCs, they will still be a valuable proof point that the Australian VC asset class can deliver cash returns to LPs.
• Intra-ecosystem M&A activity, a la Mr Yum and Me&U, will become more commonplace. Situations where either both or one party is in a strong position for growth but would be better off not competing for market share will result in companies joining forces. This will be funded by venture capital and venture debt dollars, as well as a scrip component.
• The lines between private equity and venture capital will blur, with new types of investors entering and competing with VCs on their home turf. Australian and international investors who’ve delivered strong returns investing in larger and usually profitable businesses will come to market with mandates allowing them to invest earlier and, in some instances, take minority stakes in scale-ups that show a solid opportunity to deliver an outcome within a five-year window.

Finally, those startups who’ve survived and thrived over the past 18 months will stop playing for runway and begin playing for growth again – a dynamic we’re super relieved and excited about.

Chris Gillings is an Aurora member, the founder of Cut Through Venture, and investor at Five V Capital. Five V invests in B2B Software at the Series A and B.
Contact Chris at [email protected]

More Innovation Bay content

Podcast Insights News

Join the Innovation Bay community

Founders Investors