The State of Startup Funding 2025: What Startup Founders and CFOs Should Know
Alex Simmons — Co-Founder & CEO, Kashcade
Alex has extensive experience in business lending and R&D finance, and has overseen tens of millions in non-dilutive capital funded to Australian startups.
Here's the headline: Australian start-ups raised $5.4 billion in 2025 - up 31% year-on-year, the third-largest funding year on record.
For founders and CFOs who spent 2022 to 2024 grinding through a correction, that number is genuinely good news.
But here's what the headline doesn't tell you. Deal count marginally fell: from 414 deals in 2024 to 390 in 2025. The top 20 investments captured 58% of all capital. VC funds are still struggling to return cash to their investors. And the time from first investor conversation to first cheque has stretched from six months to twelve.
This is not 2021. Capital is available but it has become highly selective, deeply diligent, and structurally different in how it gets deployed. The founders and CFOs who understand those structural changes – and build their planning around them, will raise better rounds, on better terms, and with more time to execute. Those who don't will find themselves chasing rounds in a market that has quietly moved on.
This article draws on the State of Australian Start-up Funding 2025, produced by Kashcade’s friends at CutThrough Venture and Folklore Ventures, to extract the most relevant findings for R&D-intensive Australian start-ups. We've focused specifically on what's changed, what it means for your capital strategy, and what you can do about it right now.
The Market Has Split and You Need to Know Which Lane You're In
The clearest structural change in 2025 is what investors describe as a 'two-speed market.' On one side: start-ups with genuine AI capability at their core, early and demonstrable traction, and a narrative built around defensibility and unit economics. These companies experienced fast-moving, competitive rounds – sometimes closing within weeks of going to market. On the other side: everyone else, navigating longer processes, more extensive diligence, and investors who are measuring twice before writing any cheque.
For R&D-intensive start-ups, this bifurcation matters in a specific way. Your company likely sits in a sector such as bio/medtech, fintech, climate tech, deep tech, enterprise software – where the R&D cycle is long, the product isn't yet fully commercialised, and the path to revenue is real but measured. That is not a disqualifying profile, but it does mean you need to be deliberate about how you present, and when you raise.
What 'AI-at-the-core' actually means to investors now
The sophistication of investor AI evaluation improved significantly in 2025. The companies that attracted premium valuations were not those that added 'AI-powered' to their pitch decks.
They were the ones that could demonstrate specific, measurable contributions: workflow automation that improved gross margin, proprietary training data that competitors couldn't replicate, model-driven features that demonstrably reduced churn, or AI capabilities that enabled fundamentally different unit economics than incumbent solutions.
If AI is genuinely part of your R&D programme – whether in your product, your development process, or both –this is a moment to make that concrete in your investor narrative. Not 'we leverage AI,' but 'our AI-assisted development cycle reduced time-to-feature by X weeks, allowing us to ship at half the headcount of comparable companies at our stage.' That's the version investors are paying premiums for.
The Timeline Problem – And Why R&D Start-ups Are Most Exposed
The data point that should most immediately change how you manage your cash position is this one: the average time from first investor conversation to receiving capital has doubled, from approximately six months to twelve months.
That is not a temporary blip. It reflects structural changes in how investors operate: more partners involved in decisions, more diligence on traction metrics, more scrutiny at every stage. Diligence requests were up 40% in 2025 versus the prior year. Founders report that half of first meetings end without a definitive next step. Most investors don't even open a pitch deck before the first meeting. The quality of outreach and the clarity of the narrative determine whether the meeting happens at all.
For R&D-intensive start-ups, this timeline problem is more acute than for most. Your capital needs are typically larger, the diligence is deeper, especially around IP ownership, regulatory pathways, and technical risk. And the intervals between fundable milestones are longer than in standard SaaS.
The working capital gap that most founders underestimate
There is a particularly dangerous trap that catches R&D-heavy companies: the gap between when your R&D expenditure is incurred and when the financial reward arrives. Government grants and R&D Tax Incentive refunds, critical sources of non-dilutive capital for most of our customers, are typically received months after the underlying spend. If your equity round takes 12 months to close, and your RDTI refund arrives 6 months after financial year end, and your grants are paid in arrears, these timelines compound quickly into a cash crisis that equity alone cannot solve in time.
This is not a sign of a poorly run business. It is a structural feature of capital-intensive innovation. The solution is deliberate sequencing: identifying every predictable cash inflow (think equity milestones, RDTI refunds, milestone grants, revenue) and building a capital plan that ensures you never approach a runway cliff without alternatives already in motion.
What Investors Are Actually Measuring in 2025
The most important shift in investor behaviour is not about sectors or themes; it is about which metrics they weight most heavily. Multiple investors quoted in the report describe a material change in their assessment criteria away from 'top-line revenue growth' toward what one partner described as 'the ability to build a strong moat, resist churn, and generate attractive margins at scale.'
For CFOs preparing for a fundraise, this is the single most important behavioural change to internalise. The conversation that used to start with ARR growth rate now starts (or quickly pivots to) gross margin, net revenue retention, CAC payback period, and operating leverage. Having clean, trended data on these metrics, benchmarked against sector peers, is now table stakes for any investor meeting above Seed stage.
The 2025 SaaS benchmarks you need to know
The report includes sector-wide performance data that provides useful calibration points for your own planning and investor conversations:
The revenue growth data deserves particular attention. A median of 28% annual growth is the market-wide figure – but this includes companies at all stages. For pre-revenue or early-revenue R&D start-ups, investors are less focused on current revenue growth rate and more focused on the credibility of the path to growth. That means the quality of your pipeline, the strength of your LOIs or pilot agreements, and the clarity of your commercialisation timeline matter more than your current ARR multiple.
Churn is the metric investors watched most closely
Notably, the report highlights that despite the SaaS revenue growth slowdown, churn remained relatively stable – and among top performers, actually improved. Investors noticed. In a market where top-line growth is compressing across the board, companies that demonstrate strong retention are differentiated. For B2B SaaS companies especially, NRR remains a powerful signal of product-market fit and is weighted heavily in Series A and B diligence.
Non-Dilutive Capital Is No Longer a Niche Option. It's Strategic
A clear shift that Kashcade has experienced first-hand is the mainstream acceptance of non-dilutive capital as a deliberate component of a growth-stage start-up's capital stack. The report documents this comprehensively: 31% of VCs surveyed actively advised portfolio companies to investigate venture debt in 2025.
The report frames this shift as a fundamental change in how sophisticated founders and CFOs think about capital: 'Rather than defaulting to additional equity, there is now greater emphasis on optimising each portfolio company's capital stack.'
The logic is straightforward but often overlooked in the pressure of a fundraise: equity is the most expensive form of capital available to a start-up. Debt, grants, and tax incentive advances carry none of that dilution cost.
The specific use cases where non-dilutive capital creates the most value
The report identifies the venture debt and non-dilutive capital use cases that generated the strongest outcomes in 2025:
- Extending runway to a milestone: Deploying non-dilutive capital to bridge from your current position to a specific fundable event – regulatory approval, a key customer contract, a product launch – allows you to raise the subsequent equity round at a materially higher valuation. The difference in dilution between raising at a $15M pre-money versus a $20M pre-money is enormous across the life of the company.
- Smoothing working capital gaps: R&D-intensive companies often face significant timing mismatches between expenditure and cash receipt. RDTI refunds, grant milestone payments, and large customer contracts all arrive on cycles that don't align neatly with monthly burn. Non-dilutive facilities designed to bridge these gaps avoid forced equity raises at inopportune times.
- Funding proven go-to-market: Once a channel has demonstrated positive unit economics – a clear CAC payback, an NRR above 100% - scaling that channel is a lower-risk activity than developing new ones. The report notes that lenders are most willing to extend debt for 'execution of what is already working' rather than exploratory spend.
- Bridging to a better equity round: One of the most impactful uses of bridging capital is simply buying time. In a market where rounds take 12 months to close, having 6 months of additional runway to let a strong quarter of results materialise (before committing to a valuation)can shift the terms of an equity round significantly.
Going Global Is No Longer Optional. It's a Structural Requirement
For founders planning a Series A or beyond in the next 24 months, there is one finding from the report that deserves to sit at the top of your strategic agenda: domestic capital alone cannot close a competitive growth-stage round.
This is not a judgement on the quality of Australian VCs. It is a structural observation about cheque sizes. The Australian VC market does not yet have the fund sizes, or the LPs willingto commit the capital, to lead the large rounds that successful growth-stage companies now require. As a result, 2025 saw a structural shift toward blended rounds – Australian-led with international co-investors filling the balance – and founders who had built international investor relationships well ahead of their raise reported materially faster closes and better terms.
What this means if you're 12-18 months from a growth round
Building relationships with international investors takes time. Partners at top-tier US and UK funds receive thousands of inbound approaches per year. The introductions thatactually result in allocations are overwhelmingly warm – coming from trustedco-investors, portfolio founders, or advisors they respect. If you want international capital in your Series A or B, the groundwork needs to start now.
- Identify your target funds: Map 5-8international VC firms that have previously invested in Australian companies at your target stage and in your sector. Their existing familiarity with Australian startup quality reduces the education cost significantly.
- Build context before the ask: International investors need to see a track record of engagement before a capital conversation. Publishing thought leadership, speaking at offshore conferences, or contributing to international industry forums builds a profile that makes awarm introduction land.
- Use your existing investors: Any Australian VC with international co-investment relationships is a potential bridge. Ask specifically: 'Which international funds do you co-invest with regularly, and would you be comfortable making an introduction once we hit [specific milestone] ?'
- Target the right timing: The ideal time for an initial conversation with an international investor is 12 months before you need capital – not when the round opens. The relationship needs time to develop.
Five Things to Do in the Next 90 Days
The findings above translate into a concrete short-term agenda for founders and CFOs. They are operational tasks that will materially improve your position regardless of when you next raise.
1. Build your metrics dashboard and benchmark it
If you do not have a clean, monthly-updated data pack showing ARR (or pipeline-equivalent), gross margin, NRR, CAC payback, and burn rate – build one. Benchmark your numbers against the appropriate 2025 medians: revenue growth, S&M multiple, top quartile growth. Know exactly where you stand and where the gaps are. This dashboard is the foundation of every investor conversation you will have in the next 24 months.
2. Map your capital timeline to your milestone calendar
List every significant milestone in the next 24 months – product releases, regulatory events, customer contracts, clinical data readouts – and map the capital events (equity raises, RDTI receipts, grants, revenue) alongside them. Identify every point where cash falls below a comfortable buffer and decide in advance how you will address each gap. Non-dilutive options should be evaluated first: they are cheaper and faster than equity.
3. Optimise and document your RDTI claim
If you are not already working with an R&D tax advisor to optimise your RDTI claim, start now. The RDTI refund is among the lowest-cost capital available to an Australian R&D start-up – it is a government-backed cash flow with no equity dilution attached. Ensure your R&D activities are thoroughly documented throughout the year, your eligible expenditure categories are accurate, and your expected refund amount is factored into your 18-month capital plan. Also consider whether accessing that refund earlier (rather than waiting for EOFY and ATO processing) could improve your cash position at a strategically important moment.
4. Start international investor relationship-building now
If your next equity round is 12-18 months away and it will need international participation, you are already behind. Identify your target funds this month. Seek warm introductions through your existing investors and advisors. Publish a piece of thought leadership – a market insight, a technical perspective, a trend analysis – that demonstrates your domain authority to an international audience. Build a consistent presence so that when you do go to market, you are a known quantity rather than a cold inbound.
5. Lock in non-dilutive capital before you need it
The founders who navigate the 12-month fundraising cycle most effectively are those who have already secured non-dilutive runway before going to market. Knowing that your RDTI refund is accessible early (rather than sitting as a locked receivable 10 months away) changes how you negotiate, how long you can run a process, and ultimately the terms you can hold out for. Explore your options now, not when the pressure is on.
Final Word
The State of Australian Start-up Funding 2025 data paints a picture of a funding market that has matured, not just recovered. Capital is available, more than at any point since 2021, but it is flowing with sharper intent, to founders who can demonstrate they understand the game they are playing: the metrics that matter, the timeline that applies, and the capital structure that makes sense.
R&D-intensive Australian start-ups have a genuine structural advantage in this environment. The depth of technical capability, the non-dilutive capital available through the RDTI and grants, and the operational discipline that comes from building in a market that demands it – these are real assets. The opportunity in 2026 is to pair that discipline with the strategic clarity that investors are now rewarding: sharper metrics, smarter capital stacks, and earlier international relationships.
The founders who will win the next funding cycle are the ones doing that work now, not when they need to raise.