The Australian venture capital landscape in Q1 2026 looks substantially different from where we were two years ago. The AI hype is maturing into selective investment. Climate tech is attracting serious money. And some sectors that dominated 2024 fundraising have gone quiet.

Here’s what the data actually shows about where venture capital is flowing in Australia right now.

The Overall Numbers

Q1 2026 saw approximately $1.8 billion deployed across Australian startups, according to Austrade data. That’s down about 15% from Q1 2025 but up significantly from the 2023 low point.

Deal count is down more than dollar volume. We’re seeing fewer but larger rounds. The median seed round is now $3.2 million, up from $2.1 million in 2023.

Series A rounds are consolidating around $12-18 million. The smaller $6-8 million Series A rounds that were common in 2022-2023 have largely disappeared.

This reflects investor preference for backing fewer companies with stronger capital positions rather than spreading bets across many startups.

Where the Money Is Actually Going

Enterprise AI Infrastructure: $420 million

This is the largest category by investment volume. Not consumer AI applications, but infrastructure for enterprises building AI capabilities.

Companies building secure AI deployment platforms, model monitoring tools, enterprise data preparation, and governance frameworks are attracting significant capital.

The largest Q1 deal was $85 million for a Sydney-based company building private cloud infrastructure specifically for enterprise AI workloads.

Investors are betting that enterprises need specialized infrastructure beyond generic cloud platforms to deploy AI safely and compliantly.

Climate Tech: $380 million

Still strong and growing. Battery technology, grid management, industrial decarbonization, and carbon accounting platforms all seeing investment.

The focus has shifted from pure R&D to commercialization. Investors want to see pathways to revenue within 18-24 months, not just promising technology.

Two notable deals: $70 million for an industrial heat pump manufacturer targeting hard-to-decarbonize manufacturing, and $55 million for a platform that aggregates distributed energy resources for grid stability.

Healthcare Tech: $310 million

Digital health is maturing beyond telehealth into specialized clinical applications. AI-assisted diagnostics, surgical planning, hospital operations, and personalized medicine platforms.

The largest healthcare deal was $60 million for a company using AI to optimize hospital bed management and patient flow, directly addressing one of healthcare’s most expensive operational challenges.

Investors are favoring companies with clear clinical evidence and existing revenue from hospital contracts.

Fintech: $280 million

Down from its peak but still substantial. The focus has shifted from consumer fintech to B2B infrastructure.

Payment orchestration, embedded finance platforms, lending infrastructure, and compliance automation are attracting capital.

Buy-now-pay-later has gone quiet. Only one BNPL deal in Q1, and it was a down round.

AgTech: $180 million

Precision agriculture, supply chain traceability, and farm management software. Particularly strong investment in platforms that help farmers demonstrate sustainability credentials to buyers.

One interesting trend: several ag robotics companies raised capital, suggesting the economics of agricultural automation are finally working.

Cybersecurity: $160 million

Steady investment in both enterprise and SMB-focused security tools. Identity management, zero-trust architecture, and security for operational technology networks are all active.

The SMB security market is attracting attention because it’s underserved and growing as cyber insurance requirements push smaller companies to adopt better security.

What’s Gone Quiet

Consumer Apps: Only $85 million deployed. Unless you have extraordinary metrics and proven monetization, consumer apps are not attracting institutional capital right now.

Crypto/Web3: $40 million, down from $320 million in Q1 2022. Institutional investors are mostly staying away.

Proptech: $95 million, down from $240 million in Q1 2024. The property market uncertainty has made investors cautious.

Social Commerce: Nearly zero. The category that was hot 18 months ago has completely dried up.

International vs Domestic Capital

Approximately 55% of Q1 capital came from international investors, primarily US and Singapore-based funds.

Australian superannuation funds deployed about $380 million into local VC-backed companies, continuing their gradual increase in early-stage allocation.

Government-backed investment through entities like CSIRO’s Main Sequence and Clean Energy Finance Corporation represented about $140 million.

Stage Distribution

Seed: $420 million across 131 deals (avg $3.2M) Series A: $580 million across 38 deals (avg $15.3M) Series B: $490 million across 18 deals (avg $27.2M) Series C+: $310 million across 7 deals

The later-stage market is constrained. Series B and beyond are difficult to raise unless you have exceptional growth metrics.

This is creating a bottleneck. Series A companies with good but not exceptional performance are struggling to raise follow-on capital.

The Valuation Reality

Valuations have stabilized but not recovered to 2021 peaks.

Median pre-money valuations:

• Seed: $12 million
• Series A: $45 million
• Series B: $140 million

These are roughly 30-40% below 2021 levels but up slightly from 2023 lows.

Down rounds are still happening but less frequently. About 12% of Q1 deals were down or flat rounds, compared to 25% in early 2023.

Geographic Distribution

Sydney remains the dominant ecosystem with 48% of capital deployed.

Melbourne: 32% Brisbane: 9% Perth: 6% Adelaide: 3% Other: 2%

Brisbane’s increasing share reflects growing investment in climate and agtech companies, where Queensland has concentration.

What Investors Are Actually Saying

I’ve talked to several VCs about their Q1 activity. The consistent themes:

They want to see revenue earlier. Pure product-market fit validation without revenue traction isn’t enough for most Series A deals anymore.

Unit economics matter again. The era of growth-at-all-costs is over. Investors want to see pathways to profitability or at least dramatically improving margins.

AI needs to be more than a feature. Simply adding AI capabilities to an existing product isn’t sufficient differentiation. Investors want to see AI enabling fundamentally new capabilities or business models.

International expansion requires proof. Plans to expand to the US or Europe need more validation than they did in previous years. Investors want to see initial traction, not just market research.

The Sectors to Watch

Based on Q1 investment patterns and investor conversations, these sectors are likely to see continued strong activity:

Enterprise AI governance and security. As AI adoption grows, companies need tools to manage risk.

Industrial decarbonization. Technology that helps heavy industry reduce emissions without compromising production.

Healthcare operations. Software that makes hospitals and clinics more efficient.

Agricultural supply chain. Traceability and verification for food supply chains.

Infrastructure for embedded finance. Platforms that let non-financial companies offer financial services.

What This Means for Founders

If you’re raising in 2026, these patterns matter:

Raise more at seed if possible. The small seed round won’t get you to Series A metrics anymore. You need 18-24 months of runway to demonstrate the growth VCs want to see.

Revenue validates everything. If you can show revenue traction, even modest amounts, you’re in a much stronger position.

Pick your investors for more than money. In a constrained capital environment, having investors who can lead or support your next round is crucial.

International expansion needs to be strategic, not aspirational. Don’t claim you’re going to tackle the US market unless you have a genuine plan and early validation.

The Outlook

Q1 is typically slower than later quarters, so full-year deployment will likely reach $8-9 billion if current patterns hold.

That’s healthy but selective. The firehose of capital from 2021 isn’t coming back. We’re in a more normal venture environment where investors are selective and founders need strong metrics.

For companies with product-market fit, revenue growth, and capital efficiency, it’s still a fundable environment.

For companies without those fundamentals, it’s tough.

The Australian ecosystem is maturing. That means higher standards and more scrutiny, but also more sophisticated investors and better quality companies attracting capital.

The data suggests we’re in a sustainable funding environment, not a bubble or a crash.

That’s probably a good thing for everyone except founders who expected capital to be easy.

It never should have been.