State of Australian Fundraising 2025

Cut Through Venture (CTV), in partnership with Corrs, recently released its annual State of Australian Startup Funding Report for 2025. The report highlighted that 2025 saw a sharp rebound in funding across the Australian venture capital market, driven by increased deal scale and renewed investor conviction.

Key capital raising statistics

The Australian startup capital raising statistics in the report show:

• A$5.1 billion was raised across 390 deals in 2025;
• total capital raised in 2025 represents a 24% increase on 2024, making 2025 the third-largest funding year on record behind 2021 and 2022;
• 15 deals with a raising value above A$50 million were announced in 2025, down from 21 in 2024;
• concentration of capital continues to increase, with the 20 largest deals accounting for 58% of total capital raised, up from 50% in 2024;
• international investors continue to support the Australian ecosystem, with 66% of 2025 deals including at least one international investor, up from 57% in 2024; and
• 24% of total capital invested in 2025 involved at least one female founder, which is up from 15% in 2024, however, female founder share of total deals fell from 27% to 23%.

Sector perspectives

In terms of sector specific data, the CTV report shows that for Q3 2025:

• Artificial Intelligence was the leading sector for total capital raised, with a total of A$1 billion raised;
• Biotech / Medtech was the leading sector by deal count, with 49 announced deals, overtaking Climate Tech / CleanTech which had led for the previous two years;
• 15 of 25 sectors saw a fall in total funding compared to 2024; and
• 61% of all capital raised flowed to startups with an AI offering – the majority of this went to companies using AI at the application layer, comprising 198 deals and total capital raised of A$1.9 billion.

Investor sentiment and outlook

CTV's investor sentiment survey indicates cautious optimism in the state of the Australian start-up funding market. The survey found that:

• 89% of investors rated their portfolios as being in 'good' or 'excellent' health;
• 68% of investors found the state of startup funding market was better than 2024, while only 10% felt that the funding market was less favourable compared to 2024;
• 59% of investors participated in a down round (compared to 65% in 2024);
• 44% of investors reported a failed portfolio company (down from 55% in 2024);
• 77% of investors saw a portfolio company conduct layoffs (down from 93% in 2024);
• 79% of investors expect deal terms to remain steady or become more founder friendly in 2026 (up from 78% in 2025); and
• investor expectations for 2026 are generally positive, with 64% of investors expecting to see an increase in startup investment compared to 2025.

More details are available in the full State of Australian Startup Funding Report.

Corrs submission in CTV report: key legal due diligence when investing in AI

The CTV Report featured a Corrs article titled: "Key legal due diligence risk when investing in AI."

As investor appetite for AI continues to surge, startups across a wide range of sectors are increasingly weaving AI into their fundraising narratives. AI can genuinely unlock growth – for example, a fintech platform might use AI to deliver faster lending assessments, or a Medtech service might improve diagnosis times, while also lowering costs by automating compliance and operational processes. However, investors are sharpening their due diligence to distinguish between startups with a genuine, sustainable AI-driven competitive advantage and those that are simply riding the hype.

Evaluating an AI business means looking under the bonnet of its technology to assess the authenticity of its claims, alongside a careful review of intellectual property (IP) and regulatory risks.

Key diligence priorities:

• AI washing and substantiation: one of the most prominent risks is "AI washing", which is the practice of exaggerating or misrepresenting a business's use of AI. This can range from claiming a chatbot is AI-powered when it actually relies on simple keyword matching, to concealing that a supposedly AI-driven service is in fact operated by human contractors behind the scenes. Global regulators have already begun imposing significant fines for AI washing, and the Australian Competition and Consumer Commission (ACCC) has flagged it as a priority, particularly where consumers are being misled about AI functionality in products or services.
• IP ownership and infringement: IP risks are another critical area of focus. Many AI startups rely on third-party AI models, which exposes them to licensing risks, including the possibility that the third-party provider changes functionality or terms as the technology evolves. Some open-source models come with specific licensing requirements that must be carefully managed. For startups that have developed their own proprietary models, investors need to confirm that the company owns the relevant IP and that the training data used to build its models does not infringe third-party copyright. There are also risks associated with AI-generated outputs, which could themselves infringe existing IP rights. A robust IP review should form a core part of any AI-focused due diligence exercise.
• Regulatory compliance: investors should be alert to a range of regulatory risks. There may be competition and consumer law issues arising from 'agentic' AI services as they continue to become more prominent, which will be a key focus for the ACCC in 2026 in relation to risks such as AI agents colluding to fix prices. Privacy obligations under the Privacy Act 1988 must be carefully considered, particularly where personal information is collected, used or disclosed by AI systems. Certain AI products, such as companion chatbots, may trigger compliance requirements under the Online Safety Act 2021, and industry-specific regimes may also apply. Investors should also assess startups against the Australian Government's Guidance for AI Adoption, which sets out six essential practices for responsible AI governance and can help identify ethical, reputational and governance risks.

The practical takeaway is that investors should substantiate AI capability to avoid "AI washing", confirm that the business has sufficient IP rights, and assess regulatory exposure across competition and consumer law, privacy, online safety and relevant sectoral regimes, with reference to responsible AI principles.

Read the full Corrs article on page 44 of the State of Australian Fundraising 2025 CTV Report.

TMT trends 2026: digital infrastructure and emerging technology regulation

Australia's technology, media and telecommunications sector faces a wave of regulatory reform in 2026, with significant implications for technology companies, start-ups and their investors. As part of these reforms, there are four key areas of change: artificial intelligence, data centres, telecommunications infrastructure, and blockchain and digital assets.

Artificial Intelligence (AI)

On AI, Australia will not introduce a standalone "AI Act". Instead, the government intends to regulate AI through existing legal frameworks, supplemented by targeted interventions focused on specific harms and high-impact use cases. The National AI Plan (published December 2025) sets three priorities: AI infrastructure, economy-wide adoption and skills, and proportionate risk management.

For start-ups deploying AI, the practical takeaway is to assess current AI use against existing consumer protection, privacy and workplace safety laws rather than waiting for broad legislation. In particular, the new transparency obligations under the Privacy Act 1988 (Cth) for automated decision-making take effect on 10 December 2026, requiring disclosure of AI-driven decisions that significantly affect individuals. Organisations should align their AI governance with the National AI Centre's new Guidance for AI Adoption, which is now the core reference for responsible use of AI in Australia.

Data centres

Data centres represent a major investment opportunity, now ranking as the second most preferred alternative asset class in Australia. However, AI is driving a sharp increase in energy demand – AI-ready racks can require up to 80 kW each, compared with around 15 kW for traditional facilities. The Australian Government is developing a national data centre strategy expected to set clear sustainability expectations, including integration of renewable energy and efficient cooling technologies. Operators and investors should prepare for a rapidly evolving regulatory environment prioritising energy efficiency and alignment with national interests.

Blockchain and digital assets

On blockchain and digital assets, the Corporations Amendment (Digital Assets Framework) Bill 2025 introduced in November 2025 is the centrepiece reform. Key features include:

• new definitions for "digital tokens", "digital asset platforms" and "tokenised custody platforms" bringing clarity to the regulatory perimeter;
• operators of digital asset and tokenised custody platforms will be required to hold an Australian Financial Services Licence (AFSL);
• an exemption for total transaction values that do not exceed A$10 million over 12 months, which may be relevant for early-stage ventures; and
• stablecoin issuers will also need an AFSL, with interim ASIC relief currently available for distributors.

The Bill has a 12-month commencement period after Royal Assent to allow industry transition. Startups and VCs active in digital assets should review their business models to assess whether they fall within the new regime and monitor the Bill's progress through Parliament.

Read the full Corrs insight article on digital infrastructure and emerging technology regulatory trends.

High Court decision on software patents

On 5 February 2026, the High Court of Australia unanimously refused to hear an appeal in a landmark case between Aristocrat Technologies and the Commissioner of Patents, effectively settling a years-long legal battle over whether software inventions can be patented in Australia. For technology companies and their investors, the outcome is a significant positive signal: it is now clearly established law that computer-implemented inventions can qualify for patent protection, even if they use conventional, off-the-shelf computer hardware.

The dispute centred on the legal test that should be applied when deciding whether a software invention is patentable. Previously, Australian courts had required applicants to demonstrate an "advance in computer technology", a high bar that effectively excluded many software-based innovations from patent protection. In 2025, the Full Federal Court rejected that requirement and replaced it with a more flexible test: whether the invention produces an "artificial state of affairs and a useful result". In practical terms, this means that a novel idea implemented on a computer to achieve something useful can be patentable, even if the underlying technology is standard.

This is good news for startups building software-driven products. A broader scope for software patents means founders can more confidently pursue IP protection for their innovations, strengthening their competitive position and making their businesses more attractive to investors. For VC investors conducting due diligence, it clarifies the legal landscape and reduces uncertainty around the enforceability of software patent portfolios in Australia.

However, there is an important practical caveat. Despite the court's clear ruling, IP Australia – the government body that actually examines and grants patents – has been slow to fully embrace the new test. Its internal guidelines (the Patent Manual of Practice and Procedure) continue to reference factors from older case law, including whether there is an "improvement in the functioning of a computer" or "ingenuity in the way in which a computer is utilised". While IP Australia has acknowledged the decision and called for stakeholder feedback on updating its Manual, its current practice may still make it harder than it should be to secure a software patent.

In practice, this means that patent applicants may face pushback from IP Australia during the examination process, even where their claims should comfortably satisfy the new legal test. In the worst case, applicants may need to challenge IP Australia's interpretation before the Federal Court. Founders and investors should therefore be prepared for a period of transition and should ensure they have experienced patent advisers who understand both the new legal position and how IP Australia is applying it on the ground.

Read the full Corrs insight article on the High Court decision.

Tech M&A themes and SaaS in the spotlight

Platform Advisory Partners' analysis of Australia and New Zealand (ANZ) technology M&A deals from Q4 2025 highlights that:

• The take-private thematic has continued to dominate ASX technology dealmaking, with the three largest deals of Q4 being prominent listed groups as follows:
  1. Advent International's take private of RegTech company Automic Group for $725 million;
  2. Automotive SaaS provider Infomedia being taken private for $651 million by TPG Capital (not to be confused with TPG Telecom, a major Australian telecommunications company that operates mobile and internet networks); and
  3. Accel-KKR's take-private of business intelligence group Phocas for a valuation exceeding A$500 million.
  These deals demonstrate continued offshore sponsor interest in local tech groups given attractive relative valuations for high-quality businesses of scale.
• While Q4 2025 was a relatively uneventful period for SaaS valuations, the same cannot be said for recent weeks. The release of Claude Cowork (specifically its legal plug-in capabilities) caused a significant sell-off in SaaS companies globally, and a subsequent Substack blog post by Citrini Research forecasting a gloomy three-year outlook for 2028 caused another sell-off.
• There is significant uncertainty in public software markets – highlighted by near 10% price drops in companies such as Atlassian. Time will tell if this is a market overreaction or a significant structural change in SaaS models caused by rapid advancements in AI technology.

Platform Advisory Partners is a Melbourne based advisory firm specialising in providing M&A and capital raising advisory services to high-growth and technology companies.

About Corrs

Corrs is a leading Australian independent law firm, with a cross-disciplinary team which has a deep understanding of the needs of startups and high growth companies. We act for both startups and a range of investors, including local and international venture capital funds, strategic investors and universities.

Some examples of venture capital and technology deals we've acted on in recent months include advising Accel on its investment in Fluency, CoAct Capital on its investment in EatClub, At One Ventures on its investments in Provectus Algae and Relectrify, Gates Frontier on its investment in Koloma Australia, Stake on its A$90 million capital raise, Five V on its investments in Attekus and 1Breadcrumb, Macquarie on its investment in Next Payments, Arrowroot Capital in relation to the sale of HammerTech to Riverwood Capital and realestate.com.au on its acquisition of Realtair. Corrs has also recently advised Burda Principal Investments on their investment in biomaterials start-up Uluu and Coinbase on the tax and employment matters associated with their investment in Echo.

Corrs has also developed CorrsEdge, a cutting-edge online platform which gives startups the legal support they need at the early stage of their growth cycle. The platform offers access to over 30 intelligent legal documents with dynamic automation capabilities which enables users to generate bespoke documents and tailor them for their business. The Corrs Edge platform saves time and money, allowing startups to ensure that they have high quality legal documents without the typical costs of using a top tier law firm.

This publication does not constitute legal advice and should not be relied on as such. You should seek individualised advice about your specific circumstances.