Cicada Innovations report: Surge in Aussie deep tech startups but VC, industry, government missing out

MEDIA RELEASE

Research by Australia’s flagship deep tech incubator Cicada Innovations reveals an unprecedented rise in local deep tech entrepreneurship that risks being stifled by limited support from venture capital,  industry, and government.

The “Cicada x Tech23 Insights Report 2024: Deep Tech: Australia’s Critical Technologies” revealed that 72 percent of Tech23 applicants were founded within the last five years, indicating strong local momentum in science and engineering-led entrepreneurship

Promisingly, the majority of startups also aligned with Australia’s “critical technologies” list, with strong representation across artificial intelligence, hardware, advanced manufacturing, clean energy, and biotechnology.

However, just 17 percent of deep tech startup funding was reported to come from venture capital, compared to the significantly higher 20 to 30 percent observed in more developed overseas deep tech ecosystems.

When it came to industry collaboration, Australian corporates were also almost equal to international corporates (58 collaborations compared to 57), and both were completely eclipsed by local collaborations with much smaller SMEs (92 collaborations).

This indicates limited engagement from local industry, and that smaller firms with more limited resources may be more engaged in deep tech commercialisation than large corporations, who could be missing large opportunities.

Even more disappointingly, many deep tech startups also reported securing international government procurement contracts before gaining local traction, showing that global governments often act as early adopters ahead of domestic procurement pathways.

This is despite government being an early funder of deep tech, with 38 percent of early-stage funding coming from government grants, highlighting early investment that is not being followed up with a procurement strategy.

These findings indicate that overseas markets may be seeing the value in deep tech before local VC, corporate, and government do, according to Cicada Innovations.

Sally-Ann Williams, CEO of Cicada Innovations, said: "Australia has a strong foundation of deep tech talent, but startups are still struggling to scale. So we have to ask ourselves, why are international companies and governments seeing the value in Australian deep tech before our own local corporates and government do? 

“Successive government failure to bridge the gap between early grant funding and procurement also raises another critical question: Has Australia inadvertently been subsidising global deep tech innovation? 

“The clear gaps in funding, industry engagement, and procurement revealed by this report highlight areas where more coordinated support could unlock significant economic potential for Australia. For instance, while government plays a key role in funding, its impact must extend beyond R&D support to drive market adoption through procurement and pilot opportunities.

"The ingenuity of Australian deep tech founders is undeniable. What we need now is to match that ingenuity with the right support—investment that reflects deep tech’s longer timelines, industry partnerships that drive real commercial outcomes, and procurement strategies that back homegrown solutions first.”

The “Cicada x Tech23 Insights Report 2024” report collates data gathered from 141 deep tech applicants to Cicada x Tech23 2024, as well as insights gleaned from Cicada’s 25-year tenure as Australia’s longest-standing deep tech incubator. 

It is the largest collection of insights from Australian deep tech startups to date and covers a broad cross-section of deep tech founders, sectors, and business stages.

Key Report Takeaways

Australia’s deep tech sector is growing, but scaling challenges remain:

• 72 percent of startups in the report were founded in the last five years, showing continued momentum in deep tech entrepreneurship.
• 78 percent of startups have raised some form of funding, but accessing capital for later-stage growth remains a major hurdle.
• 71 percent of startups founded independently, rather than spun out from universities or research institutions (77 percent in 2023 report)

Funding gaps persist, especially for later-stage investment:

• Government grants (38 percent), friends and family (34 percent), accelerator programs (34 percent), and angel investment (30 percent) are the most common funding sources, playing a critical role in early-stage deep tech development.
• Venture capital (17 percent) remains significantly less common, reflecting the difficulty of aligning deep tech’s long R&D cycles with VC expectations for rapid returns.
• Startups with early users or paying customers are more likely to raise larger amounts—of the 46 startups that have reached this stage, 22 have raised over $1M, while 9 have raised more than $5M.

Corporate partnerships are underdeveloped, with stronger global pull:

• 57 collaborations were reported with international corporates, nearly equal to 58 with Australian corporates, suggesting:
  • A lack of structured corporate engagement, making it difficult for partnerships to progress beyond early discussions.
  • A stronger pull from international players, who actively seek out Australian deep tech innovations.

Government is the largest deep tech funder, but procurement is the missing piece:

• 38 percent of startups indicated they had received funding through government grants
• State (52) and federal (50) government collaborations are also supporting deep tech, particularly in health tech, defence, and sustainability, aligning with Australia’s Critical Technologies in the National Interest.

Collaborations are strong with SMEs and research facilities:

• 92 collaborations were reported with Australian SMEs (compared to 58 with Australian corporates), suggesting that smaller firms may be more engaged in deep tech commercialisation than large corporations.
• 101 collaborations were reported with Australian universities, 40 with research institutions, and 41 with CSIRO, reinforcing the role of academia in deep tech development.

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Please contact Lindsey Salas for any interview requests:  0480 097 479

Cicada Innovations (www.cicadainnovations.com) is Australia's leading deep tech incubator. With a 25 year track record of developing ventures focused on the world’s most pressing problems and promising opportunities. Their network of incubators, training, and community are designed to meet the unique needs of deep tech startups. Cicada Innovations has been the home of groundbreaking science and bold engineering, transforming ideas into world-changing ventures, reshaping industries, and driving deep tech success stories in fibre optics, space, medtech, and climate innovation—delivering tangible impact for Australia and the world. They are committed to building Australia's Deep Tech economy.

Cicada x Tech23 (www.cicadainnovations.com/cicada-x-tech23), Australia's premier deep tech conference, connects the nation's 23 most promising deep tech innovators with investors, industry leaders, and policymakers to foster investment, partnerships, and future visions. The 2024 cohort showcased remarkable breakthroughs in artificial intelligence, robotics, biotech, and clean energy, underscoring Australia's exceptional tech talent and ambition. Since 2009, Tech23 has featured 346 of Australia's most innovative startups, including renowned success stories like Canva, Fleet Space, and Morse Micro.