As someone who is into startups, I like reading up on what is actually happening in the ecosystem. Recently I went through Cut Through Venture’s Q2 2025 report and thought it gave a very real look into the current state of things in Australia. Here are a few points that stood out and some reflections that might be helpful for others who are starting to build.
To begin with, funding has slowed down. A total of $812 million was raised across 76 deals, which makes it one of the weakest quarters in recent years. The number of deals hit a two-year low, and just $4.5 million was enough to make it into the top 30 largest raises. Only two companies raised more than $50 million. This is a noticeable shift from the bounce-back energy we saw at the start of the year.
That said, investors are not necessarily spooked. Most still rated current deal flow as good or excellent, and more than half said they expect to do more deals this year than in 2024. Pre-seed activity remains healthy, with some rounds reportedly closing in under two weeks, often with very minimal materials.
The rise of AI has gone from being a trend to becoming a standard. More than half of the software companies that raised capital this quarter referenced AI directly on their websites. It seems that investors are no longer treating AI as a differentiator, but rather as something expected. If you are building in this space, it is worth asking whether your use of AI is actually core to your product or just a feature.
Another surprising insight was around Australia’s performance at the early stage. Between Q3 2021 and Q1 2024, Australian startups consistently outperformed their US counterparts in moving from Seed to Series A. This challenges the idea that companies need to go overseas early in order to grow or raise capital. The local ecosystem is maturing faster than many people realise.
Still, cost remains a challenge. Building a startup in Australia is expensive, especially when it comes to hiring technical talent. For many early-stage teams, it might make sense to keep strategy and customer-facing work local, but move labour-intensive parts of product development to trusted partners in countries like India or Vietnam. Doing so could dramatically reduce burn and allow teams to test more without constantly raising capital.
Overall, this quarter felt like a reminder that the market is still very real, but changing. There is plenty of interest and activity, but it is more focused, more selective and more global. For student founders and early operators, that means thinking long term, building lean and staying sharp about how resources are used.
