Investors are shifting the focus from fintech to climate startups in 2022

The age of fintech for investors is shifting to climate tech startups in 2022, a landmark report into Australia’s startup ecosystem reveals.

The inaugural State of Australian Startup Funding report, from Folklore Ventures and Cut Through Venture, has analysed data from more than 800 Australian founders and startup investors for a comprehensive look into the key insights, trends and issues shaping the local funding landscape.

While fintech flourished in 2021, investors interest has now shifted to climate tech this year.

The report found that fintech investments accounted for nearly 25% of all investment made last year, followed by SaaS (software-as-a-service) at 10% and property/real estate/construction tech accounting for 7% of 2021’s deal pie.

And while there’s growing interest in cryptocurrencies and Web3, investors say they’re most excited by climate and clean tech, followed by fintech; AI/Big Data; SaaS; and then Blockchain, Crypto and Web3.

Folklore Ventures founder Alister Coleman

Folklore Ventures founder Alister Coleman said the local startup sector is entering a new age as a hub for global success stories, talent and category leaders.

“As more funding goes into our startup ecosystem, it’s important that we have a resource like the State of Australian Startup Funding to understand and highlight how far we’ve come and where the biggest opportunities lie in the years ahead,” he said.

Unsurprisingly, the sector remains positive about the year ahead in the wake of two years of pandemic interruptions, with 60% of founders saying they plan to raise capital in 2022, and 88% saying they feel confident of success.

Underpinning that optimism, the State of Funding report found that startups banked a record $10 billion worth of investment in 2021, a 300% increase on 2020.

Interestingly, 75% of Australian professional startup investors believe overseas investors were more active in the local market in 2021.

Bright spots

The good news for diversity is that Australian investors are ahead of the curve compared to their global counterparts when it comes to being more inclusive, however the report points out there’s still significant work to be done.

Teams with at least one female founder received less than 25% of total funding that went into startups in 2021, with 82% of female founders claim their gender has played a role in their ability to raise capital.

In other good news, early-stage investment is buzzing, filling the seed-stage gap. Average funding round sizes increased at all stages, but the biggest increases were seen in Seed rounds, up 114% and Series A, increasing by 49%, suggesting the notorious funding “valley of death” is no longer as steep and long as previously seen.

And angel investors are are busy bees.  While 52% of angels reported they have not yet returned the total of their investments, more than three-quarters of those surveyed expect to invest in the same or more number of startups in 2022.

But with a federal election looming, the sector wants to see better regulation to support startups and innovation. The good news for politicians, however, is that both founders (82%) and investors (83%) believe government regulation in Australia makes it easy for startups to succeed.

Chris Gillings, editor of Cut Through Venture, a monthly newsletter covering Australian and New Zealand startup funding, which launched last year, said the data his organisation collects shows the local sector is thriving

“We’re excited to partner with so many key ecosystem participants to tell the story about what’s really going on in Australian startup funding,” he said.

“The lack of free and reliable Australian startup funding data has frustrated the ecosystem for a long time, so we hope the transparency provided by this report helps to ease that frustration.”

The annual report is free and will look to benchmark areas for improvement, such as diversity and inclusion.

You can download the State of Australian Startup Funding report here.