When I came back to the Australian startup ecosystem in the second half of 2024, much had changed. From the 2021 bubble to a slow down in 2022 - 2024. Startups were getting high valuations and a lot of them did not have their foundations in order which resulted in down rounds (when a company raises capital at a lower valuation than its previous round) and bankruptcies in the years after. A slight optimism and funding have started to return to the startup ecosystem in the past year and I couldn't be more excited for the year to come.

I left the startup ecosystem in 2022. At the time, interest rates were low, inflation was reasonable and the economy in general was quite healthy. Investors were throwing money at startups at the idea stage, scale ups were achieving high valuations… it was a good time to be in tech.

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Coming back in 2024, things have changed.

High inflation coupled with high interest rates has slowed spending, global conflicts are being felt worldwide and covid spending has caught up to us. Tech companies are downsizing and raising capital early stage has not come as easy.

But as the landscape around us changes, so do we. Founders are becoming more lean, focusing on profitability and on creating sustainable businesses.

Technologically, things have dramatically changed too. ChatGPT and AI went from something your nerdy friend used to talk about to something your grandma uses to get an apple pie recipe.

Sharing my two cents on trends I’ve seen affect the startup landscape in 2024 and where it is heading in 2025.

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AI

Of course when reflecting on 2024, let’s just get the AI section out of the way first. I’ve noticed that while initial AI investments heavily focused on developing sophisticated models, we’re now seeing a real shift towards specialization and practical applications. In other words, the focus now is on AI solutions that solve real world, day-to-day customer problems, hello Vertical AI (AI solutions that are tailored to a particular industry). A great example is the healthcare space, where AI applications have helped medical professionals relieve their admin burden to be able to focus more on patients and practising medicine.

These developments are especially exciting for non-technical founders with deep industry expertise, who can now use LLMs and other practical AI applications to solve inefficiencies in their specific vertical. AI agents are the next big development, set to completely change the game in almost every single industry.

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AI Models vs. AI Agents

AI models give answers and ideas based on things it has learned. AI agents, take things a step further by using what it has learned to do tasks on its own with minimal human input.

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Staying Lean and Capital Efficient (2024)

In 2024, being lean and capital-efficient was essential for founders. Getting pre-seed funding in Australia has always been harder compared to Europe and the US, largely because our ecosystem is less mature and investors here are generally more risk-averse. In the last few years, it’s been even tougher, with founders expected to show a working product and traction—preferably paying customers—much earlier.

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What is Pre-seed?

Pre-seed funding is typically the very first round of investment, meant to help founders refine an idea, validate a concept, or build an initial product before substantial revenue or traction is established.

In the past, being a visionary with a big idea and a compelling story might have been enough for investors. Now, having your finances in good shape is a must. You have to know your unit economics inside out and have a solid plan for efficient customer acquisition.

I’ve also noticed how important it is to keep operations tight. Being able to show how you’re leveraging AI and remote talent to significantly cut costs tells investors you’re thinking ahead and future-proofing your startup’s scalability.

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Challenges for First-Time & Solo Founders

For first-time founders, raising capital at the pre-seed stage remains challenging —and it’s even harder if you’re a solo founder. Startups with three or more co-founders are statistically more likely to succeed, so investors often worry: “What happens if the one founder leaves?”

On the upside, starting out solo can sometimes be simpler. With the rise of low-code/no-code tools and AI, developing tech products is more accessible than ever. Being non-technical shouldn’t keep you from launching a tech startup. And once you have an MVP (Minimum Viable Product) up and running with a few customers, it’s usually much easier to bring additional co-founders and investors on board. So the focus should be on building an MVP and getting customers as cost efficiently and time-efficiently as possible rather than wasting valuable hours trying to secure pre-seed investment.

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What is an MVP?

MVP (Minimum Viable Product) refers to the most streamlined version of your product that can still address a key problem and let you test the market. It’s essential for gathering early feedback and showing potential partners or investors that there is a real opportunity for your business.

Having co-founders has almost become essential, not only for complementary skills but also to show your ability to lead a team. Different perspectives and backgrounds make your startup stronger and more future proof.

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The Rise of Venture Studios

With VCs and Angel investors being more careful with where they are investing, they want founders to show more traction—even revenue or profit—to close an early stage deal. That’s a big ask for many. As a result, Venture Studios are stepping in to help fill the gap.

Each venture studio operates a bit differently, but in general, they help build startups from idea stage and guide founders through developing an MVP and securing early customers, by offering a blend of funding, operational support, and mentorship. After that, you’re better positioned to raise subsequent rounds of investment and truly scale your business.

While some of these newer requirements for investment may feel daunting, it’s actually a healthy sign for our startup ecosystem. The focus is now more on sustainable business practices that reward clear paths to profitability.

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Outlook for 2025

If there’s one thing founders should note about 2025, it’s that there’s more money flowing into the Australian startup scene. This is big news for early-stage startups. I’m particularly excited about Western Australia’s $150 million government investment for local startups and scaleups, and Antler’s second fund of $77 million. On top of that, multiple new funds target innovative tech—Consensus Ventures, the FNC Follow-on Fund, and Pacific Partner’s AI fund - are ones to watch.

All these fresh funds, combined with technological progress and renewed investor confidence, create a unique environment for founders who come prepared. The real question is not whether we’ll see growth, but how much.

2025, bring it on!