Navigating the Startup Funding Landscape in Australia

Australia has long been a fertile ecosystem for budding startups, as the home of world-renowned brands like Canva, Atlassian, and Afterpay. Early 2025 saw an 11.94% increase in funding for Australian companies, with recent research from the Angel Investment Network revealing that 80% of Australian startups are optimistic about 2025. 

Despite this optimism and early signs of a market uptick, startups remain cautious, with 92% of Australian business founders having concerns surrounding their financial operations.

The Australian Startup Financial Confidence Report offers some insight into these concerns:

• 37% of startup founders are concerned with maintaining compliance with local regulations. 
• 35% have concerns with international regulation compliance
• 35% are concerned with the management of employee expenses and budgets

As investment lawyers, with offices in Australia and beyond, we have a unique, behind-the-scenes perspective on the road ahead for Australian startups. That’s why we're equipping startups with the most up-to-date advice, spanning regulatory frameworks, international compliance, funding instruments, and more. 

We’ll discuss: 

• Key legal frameworks and compliance requirements for founders in Australia
• Current trends in startup funding across the Australian market
• Popular funding instruments: SAFEs, convertible notes, and crowdfunding
• How are Australian investors approaching funding rounds?

Let’s start with the top-of-mind focus for Australian startup founders today: legal compliance and frameworks for startup funding. 

Key legal frameworks and compliance requirements for founders in Australia

Founding an Australian business comes with plenty of opportunities, but those same opportunities walk hand-in-hand with legal obligations. When investment looms on the horizon, those same businesses need to be confident in their:

• Corporate governance and company structure
• Documentation and upcoming legal due diligence
• Existing shareholder agreements and founder rights

This is something we’ll get into in more detail later on. Before we dive into the legal details, however, what are some key legal frameworks startups need to be aware of when fundraising in Australia?

Australian Securities and Investments Commission (ASIC) 

The Australian Securities and Investments Commission (ASIC) is an independent government body that acts as Australia's corporate regulator. The ASIC enforces laws and regulations that ensure fair and transparent financial markets, protections for investors, creditors, and consumers, and the maintenance of confidence in the financial system. Australian startups would be wise to be aware of their obligations to ASIC, as non-compliance could lead to penalties. 

Make sure you:

• Are correctly registered.
• Maintain accurate financial records.
• Stay informed on ASIC guidance, practices, and updates.
• Lodge annual statements.
• Inform ASIC of any changes to your company.

Navigating ASIC obligations? Take a look at our guide.

Corporations Act 2001

The Corporations Act 2001 governs corporate conduct, responsibilities, and the financial transparency required for businesses operating in Australia. Here’s a quick guide to the essentials: 

• Legal compliance: Ensure all fundraising activities comply with requirements around financial disclosures, existing shareholder rights, reporting and record-keeping.
• Disclosure requirements: Be prepared to provide accurate and detailed information to potential investors.
• Fundraising obligations: Understand the procedures and limitations when it comes to raising capital.
• Documentation and reporting: Maintain thorough records, as you may need to report to regulatory authorities like the above-mentioned ASIC.
• Legal structures and securities: Clarify the types of securities you are offering and ensure they align with provisions.

The Foreign Investment Review Board (FIRB)

The Foreign Investment Review Board (FIRB) oversees foreign investments for Australian startups to ensure they align with the national interest. When it comes to the FIRB, it can be helpful to consider: 

• Thresholds for approval: Check the financial thresholds that trigger the need for FIRB approval. Depending on the sector, these thresholds can vary. This can impact whether or not you’ll need to make an application.
• Sector-specific rules: Certain sectors may have stricter guidelines. Take the time to research sector-specific restrictions that could apply to your investors.
• Application process: Early preparation for potential applications - and their timelines - can help avoid delays or issues in securing necessary approvals.
• Investor identification: Ensure accurate identification of foreign investors to prevent non-compliance.
• Legal consultation: Consider engaging with legal experts familiar with FIRB regulations to guide you through compliance and due diligence processes. This can help in navigating any complexities efficiently.

On the topic of investment beyond Australian shores, startups may also consider flipping up from the AU to the US. The process of flipping up is not only hugely advantageous to expansion, but can also secure increased funding. You can learn more about this in our guide to flipping up from Australia to the United States of America.

What else should founders be aware of?

It’s worth noting that this isn’t an exhaustive list of the legal frameworks and bodies that startups should be aware of (such as Anti-Money-Laundering compliance and Counter-Terrorism-Financing regulations). With this in mind, it’s always advisable to work with experienced Australian investment lawyers who have one eye on the global market. 

You should expect your lawyer (and tax advisors!) to guide you through:

• Thorough due diligence on potential investors, to ensure credibility and close alignment with your company’s goals.
• Detailed documentation that outlines your business plan, financials, and valuation to investors.
• Drafting or reviewing investment agreements and term sheets.
• Ensuring compliance with Australian securities regulations, including understanding restrictions and requirements set by ASIC.
• Clarifying tax implications related to your investment.
• Negotiating terms that safeguard your interests, such as decision-making processes.
• Reviewing shareholder agreements to define roles, responsibilities, and the rights of all parties involved.
• Securing intellectual property protections to safeguard your startup's assets and innovations.

Finally, investment lawyers are hugely advantageous when it comes to maximising your investment opportunities. For example, lawyers can help you make strategic decisions on share scheme implementation, to make it easier to obtain tax relief and attract top talent. For more on this, you can check out our article on how Australian businesses can benefit from updates to the AU employee share scheme.

Current trends in startup funding across the Australian market

As mentioned, Australian investment in January 2025 has resulted in an 11.94% rise in funding compared to January 2024. 

Aside from early increases in funding, what other investment trends are emerging?

• Domestic growth: Financial services, healthcare, and information technology continue to lead the pack in investor popularity, while healthcare, renewable energy, tech, and tourism are among the fastest-growing Australian sectors.
• Foreign investment focus: In 2024, the services industry, mineral exploitation and development industries saw the largest number of foreign investment funds. Other strong-performing sectors included commercial real estate, finance and insurance, manufacturing, electricity, and gas. Foreign investment continues to increase, with $4.7 trillion in 2023 coming predominantly from the US, UK, Belgium, Japan, and Hong Kong.
• Future Made in Australia package: Announced in April 2024, this government initiative (inclusive of $ 22+ billion in committed funds) is expected to benefit several startups in 2025 and beyond, particularly those operating in Australia’s national interest (such as green-tech companies). 
• Sustainability: Investments in 2025 are expected to heavily lean towards ESG initiatives, with investors prioritising sustainability-first startups. 
• Emerging technologies: The technology world continues to dominate investment and this year will be no different. Emerging technologies like AR/VR, cryptocurrency, and quantum computing are expected to take the spotlight. 

Popular funding instruments: SAFEs, convertible notes, and crowdfunding

In the efforts to raise funds, there are several options available to Australian startups, each with its own pros and cons. Let’s take the most popular options one by one. 

Seed or Venture Capital investment

A cap raise is typically a pivotal moment for most startups. Capital raises can come from various sources, including venture capitalists, angel investors, or institutional investors, each offering different terms and expectations. The primary goal of a capital raise is to provide financial resources to scale your business, develop new products, hire essential staff, or expand market reach. For startups, a successful capital raise not only injects much-needed cash but also often brings strategic advice and mentorship from seasoned investors.

Preparing for a cap raise? Our capital raise lawyers have put together a step-by-step approach.

SAFEs

A Simple Agreement for Future Equity (SAFE) is a popular funding option for startups, offering a flexible way to raise initial capital. Unlike traditional equity investment, a SAFE allows founders and investors to bypass valuation complexities at the early stages. 

Instead, a SAFE is a legal agreement between a startup and its investors, where investors receive a promise of future equity based on a future valuation event, such as a priced funding round or other liquidity events. This approach is particularly appealing as it speeds up the investment process and reduces legal costs. 

Exploring SAFEs? Check out Carta’s Guide to SAFEs.

Convertible Notes

Convertible notes are another popular means of quickly securing financial investment for early-stage startups. They’re usually “cashed out” at a later stage, be that in an equity round, or a business exit, and can be thought of as a loan that bears interest over time. As a debt-equity hybrid, they allow you to delay business valuation, often including a negotiable "valuation cap."

Startups typically use convertible notes at the seed round stage, although they can also be useful when raising bridging finance between rounds. 

Considering this option? Explore our guide to convertible notes.

Crowdfunding

Crowdfunding can be a unique avenue for startups to raise funds, allowing them to reach out directly to the public to attract a large number of small investors. This method allows entrepreneurs to present their business ideas to a global audience, often resulting in not just financial backing but also valuable exposure and market validation. This can equip startups with capital, without the need for traditional investment structures. 

How are Australian investors approaching funding rounds?

Reports are already rolling out regarding the attitudes of Australian investors for the year to come. 

Morgan Stanley’s 2025 outlook predicts: 

• Australian investors will take a balanced approach, by paying close attention to slowly stagnating inflation, interest rate adjustments, and evolving policies with the potential to impact finances.
• Many investors are tactically diversifying their portfolios, with a focus on sustainable investments. 

Research from Schroders also highlights: 

• Potential impacts of global political forces on investor appetites.
• Broadly positive optimism towards the integration of AI in startups to streamline operations.
• A key focus on Net Zero-focused startups and green energy transition efforts.

In 2025, Australian investors are strategically navigating funding rounds with a keen focus on sectors poised for substantial growth. Venture capital firms such as One Ventures, Blackbird, OIF Ventures, and Airtree are directing their investments towards vertical AI software, fintech, and embedded payments. This targeted approach reflects a deliberate effort to capitalize on emerging technologies and innovative financial solutions.

The investment landscape has evolved from the unsustainable valuations observed in previous years. In 2025, a normalization of valuations has created a more favorable environment for investors, offering better opportunities to identify and support promising startups. This shift allows for more prudent investment decisions, aligning capital deployment with realistic growth projections and market demands.

However, the current political climate presents challenges, particularly for climate-focused startups and technology hardware companies. Under the Trump administration, policies such as tariffs and a less supportive stance on climate change are anticipated to create headwinds for these sectors. Investors are cognizant of these potential obstacles and may exercise caution when considering funding rounds in these areas, balancing their portfolios to mitigate associated risks.

Conclusion

Now is a particularly exciting time for startups preparing to secure investment, with the market brimming with a sense of optimism. While this is true - it’s best to approach fundraising with commercially-minded expertise that maximises the opportunity at hand. 

At Biztech Lawyers, we equip Australian startups with the guidance needed to finance and scale within Australia, and beyond. Discover how we can help your fundraising.