The Start-Up Funding Slump and a Deepening Divide

This week’s AFR piece on the Aus start-up scene finally puts numbers to what everyone has been feeling in their bones for months: the vibes are off. Venture capital investment plunged to an 18-month low, with Q2 2025 clocking in as one of the weakest funding periods in recent memory. This is a major reversal from the start of the year, when things looked more on par with the glory days of 2022. Luckily, there is some positive sentiment and cautious optimism still in air, which is great- unless, of course, you’re a female founder other than Airwallex’s Lucy Liu. For women, this downturn feels more like a gale than a headwind; and it’s painfully clear just how little progress has been made.

The Investment Climate

Here’s the highlight reel via Cut Through Ventures:

• Australian startups raised $812 million across 76 deals in Q2 2025.

• That’s an 8% drop from Q1, and a 47% nosedive year-on-year.

• Deals are at a two-year low. Only two companies (Airwallex and RayGen) nabbed rounds over $50 mill.

• Strip out Airwallex’s $232 million Series F, and the landscape looks pretty dusty.

What’s driving the drop? An era of investor caution (macro-economic trends, etc etc) is making larger rounds difficult to come by. Early-stage (angel to seed) deals are still moving, but the appetite for bigger bets is basically gone.
Investors being more cautious than in the days of “growth at all costs” is in itself not necessarily a bad thing- but it’s not great if you’re anyone trying to raise without fitting the ‘traditional’ VC mould.

Women in the Start-up Ecosystem

I’ll preface this part with some self-awareness. When I read these stats, my first impulse was to take them at face value and start ranting online.  However, I paused (and that’s growth) and took the time to dig a bit deeper. Because I know I, like everyone else, am operating with a certain amount of my own bias as I move through the world each day. So I got into some of the research* in the hope that maybe, just maybe, there was a more innocent explanation for these dire numbers?

Spoiler: there isn’t really, sorry. Women make up a dynamic, enthusiastic, and growing chunk of Australia’s entrepreneurial community, but are still dramatically underfunded- and largely not for reasons within their control.

Here’s how the numbers break down:

• Women are at the starting line: 30–40% of Angel to Seed round deals have women in the team.

• The squeeze happens as the stakes rise: Female-only founder teams attracted just 0.5% of total capital in Q2 2025- literally the lowest on record.

• Only 11 of the 76 deals this quarter involved female founders at all.

• Exclude Airwallex’s mega-deal, and only $29m went to mixed-gender teams of the remaining $580m.
  
  
  

That’s $551 million to all-male teams, and $4 million to all-female teams.

Yikes?

Let’s zoom out a touch to look at the trajectory we’re on:

• 2023: 3% of funding went to female-only teams

• 2024: 2% of funding went to female-only teams

• 2025: 0.5% of funding went to female-only teams

Are we moving in the right direction? You can answer that for me.   

Barriers from Seed to Scale-Up

So, why aren’t more women-led start-ups breaking through? The barriers are both structural and cultural, and they’re sticky.

• Underrepresentation in Tech and VC: The boys’ club is alive and well. Most investors are men, and the tech sector itself is widely known to struggle with diversity. This lack of representation shapes opportunities and investment decisions, and keeps women out of the rooms where it happens**.

• Network Limitations: Later-stage funding is often all about who you know. If you’re not already in the right circles (see above), you’re playing the game on hard mode.

• Resource Disparities and Uneven Performance Expectations: Even when women-led start-ups get funding, it’s usually less. And they often have to outperform their male peers just to get the same (or smaller) cheques.

• Sector Preferences: This one I like, because it’s something women can take more control of. Women are more likely to build in retail, health, or personal services sectors- still huge potential, but areas that VCs historically don’t favour as much. Recent interest is targeted to fintech, climatech, biotech, AI (obvs). So what opportunities can women find to link their expertise to these other high-demand growth arenas?

• Visibility: It’s hard for women to be taken seriously and generate real opportunity when publicity and conversation is so centred on the big players in the game. Cool, you got a quote from a guy at Amazon. But so did a bunch of other people. We know what they’re doing, so who else is out there? Who is driving real innovation, instead of looking out for the best interests of their shareholders? Who can you platform that really deserves it?

• Just Plain Bias: Ok, I know no one likes to talk about it, but bias is real. Studies show female founders get grilled with “prevention-oriented” questions (all about risk) during investment pitches, while men get “promotion-oriented” ones (all about upside). The result? More conservative offers, less fuel for growth.

The Case for Diverse Leadership

Why should you care? Maybe you’re unbothered by the status quo (bold choice). But here’s the thing: the business case for funding women-led start-ups is rock solid. Companies with diverse leadership don’t just look good, they generally outperform their less diverse peers, with stronger financial returns, more innovation, happier shareholders.

Investing in women isn’t just cool, it’s smart. (But also yes, very cool.)

Strategies to Enhance Funding Equity

Honestly, I know the constructive approach would be to put solutions here. But I feel like they’re out there already, and largely well understood. So, I think perhaps this post was an opportunity to vent a little after all, but also to remind people that we haven’t actually achieved gender equity in this environment, and I beg you all not to take your eye off the ball. I don’t have the power, money, or influence to move the needle- but if someone reading this does- please go talk the talk, and walk the walk.

Australia’s funding slump isn’t just another market cycle, it’s a stress test. We’re about to undergo a whole entire industrial revolution and my hope is for it to benefit the many, not the few. We’re at risk of locking in inequities that could become very difficult to undo.

There’s a lot of untapped potential out there, waiting to be unlocked.

*Please don’t come at me if I’ve missed any specific research, there really is only so much time in the day.

**A nod to the Hamilton fans out there.