VC start-up funding prioritising AI, new report finds

Proptech Start-Ups and Scale-Ups will be especially interested in the latest annual report on VC funding in Australia, which has been produced for a fifth year by Cut Through Venture and Folklore Venture.

The State of Australian Startup Funding 2025 paints a picture of growing confidence in the domestic technology sector, and it suggests levels of funding are on the rise – especially for those specialising in AI.

Funding focus fell on AI-powered solutions ($1 billion), Fintech ($868 million), Biotech and Medtech ($829 million), Climate-related Technologies ($585 million), Hardware and Robotics ($297 million) and Health Technologies ($271 million). The report said almost one-third (30%) of Start-Ups seeking capital last year raised more money than they had anticipated. 

In its analysis of the various technology sectors looking for funding, sentiment for Property Technology remained stable when compared with 2024. The top three favourite sectors were Artificial Intelligence, Hardware/Robotics/IoT and Enterprise/B2B software. Fintech was sixth on the list behind Deep Technology and Space/Aviation/Defence.

The report, released in early February, says 61% of all funding went to technologies with an AI capability. 

The median deal sizes were:

• Angel / Pre-Seed – $1 million

• Seed – $2.5 million

• Series A – $11 million

• Series B+ – $30 million

  
  

Its information is based on 390 deals worth a total of $5.1 billion.

Equity raised by female founders increased significantly last year, with 24% of capital being raised. In 2024, the percentage of equity raises attributed to female founders was 15%. However, the percentage of their deal number fell from 27% to 23%.

The majority of funding went to companies in Victoria ($1.9 billion) and NSW ($1.7 billion).

The report called 2025 a significant "rebound year" after a period of cautious recalibration. It said the data revealed Australian VCs consolidating around high-quality, AI-native and capital-efficient businesses.

For Proptech founders and C-suite executives, the report offers a roadmap for navigating a more competitive but increasingly liquid capital landscape.

Here is a summary of the reports key findings:

Top-Line Funding Performance

The headline figure for 2025 is a sharp recovery in total capital deployed, though the deal volume suggests a shift toward "quality over quantity”.

• Total capital: Australian startups raised $5.1 billion in 2025, a 24% increase year-on-year. This makes 2025 the third-largest funding year on record.

• Deal concentration: The recovery was "top-heavy". The 20 largest deals accounted for 58% of all funding.

• Momentum: The final quarter of 2025 was particularly explosive, with $2 billion raised in Q4 alone – the strongest quarterly result since the 2021 peak.

  
  

The Proptech Opportunity

The implications for residential and commercial Proptech are profound. Investors are aggressively seeking "AI-first" companies. For Proptech leaders, this means capital is moving away from simple "SaaS for Real Estate" and toward platforms utilising:

• Generative AI for automated property management and legal documentation.

• Predictive Analytics for commercial valuation and yield forecasting.

• Computer Vision for automated building inspections and maintenance.

  
  

Hardware & IoT Resurgence

Hardware, Robotics and IoT – sectors deeply intertwined with Smart Buildings and Commercial Real Estate (CRE) – attracted $297 million. As ESG mandates tighten, Proptechs focusing on energy efficiency and "Smart Precinct" hardware are seeing renewed investor appetite.

Valuation & Deal Dynamics

For founders planning a 2026 raise, the "valuation floor" has stabilised and, in some stages, begun to rise.

• Pre-Seed: Median deal sizes surpassed $1 million, as investors paid a premium for high-potential teams.

• Seed: Median rounds approached $3 million, nearing 2021-era highs.

• Founder Sentiment: 76% of founders plan to raise in the next 12 months, and 86% are confident they will succeed – the highest confidence level in three years.

  
  

The Exit & Liquidity Gap

A recurring theme in the report is the "missing ingredient" of liquidity.

• The Problem: While deployment has returned, exits (IPOs and M&A) remain sluggish.

• The Proptech Opportunity: With the commercial real estate sector facing structural shifts (the rise of industrial/logistics and the decline of traditional office), a wave of M&A activity is possible. Larger real estate incumbents are likely to acquire Proptech Start-Ups to quickly integrate the "AI-native" capabilities they lack.

  
  

Real Estate Market Tailwinds

To put this report into perspective for Proptech leaders, consider these three external factors currently shaping the market:

• Industrial/Logistics Boom: Vacancy rates in industrial property remain ultra-low (2.5%). Startups optimising warehouse efficiency or "last-mile" delivery are in a prime position for funding.

• Residential Supply Crisis: With new dwelling supply forecasted to be 30% below national targets, any Proptech focusing on Build-to-Rent (BTR) technology or planning automation is solving a "tier-one" national problem.

• Interest Rate Stabilisation: The stabilisation of rates has led to 51% of investors predicting even higher activity in 2026.

  
  

Observations

1. Audit Your AI Strategy: If your 2026 pitch doesn't lead with AI, you may struggle to achieve the "AI Premium" valuations currently seen in the market.

2. Focus on "Capital Efficiency": The report highlights that investors are rewarding Start-Ups that can show a clear path to profitability, even if they are raising for growth.

Read the full report here.