To me, three observations stood out that are relevant for Australian founders:

The reopening of the IPO market is high on the agenda for investors. While there is a clear need for liquidity events, this excitement is largely concentrated at the very top end of the market. There’s optimism around the mega IPOs in the pipeline, but the market feels very top-heavy.

AI is increasingly dictating valuations across every sector –as listed software companies in both Australia and the US have discovered all too painfully. That said, many investors are looking to alternatives to pure AI plays to diversify their exposure or capture more attractive valuations. Climate tech, deep tech, and hardware are seen as less susceptible to AI disruption.

The speed of technological progress is raising top-end AI valuations faster than anything we have ever seen in Australia. Large language models (LLMs) now ship updates in weeks or months, not years. Where companies used to raise funds every 18 to 24 months, some AI companies are now raising capital two or three times a year –each time at a multiple of the previous round.

The benefits of this are debatable: at the top end, such rapid valuation growth could create unrealistic expectations, while other sectors are being crowded out. Large VC funds are raising tens of billions, while smaller boutique funds are deploying small, high-risk bets targeting 100x returns.

But there is a “missing middle”, as mid-sized deals —often in the US$30–$50 million range —are struggling for attention.

For Australia’s startups and scaleups, this environment could present some interesting opportunities.

Many of the US VCs we met in March are wary of current valuations but don’t want to miss a generational company. They are actively looking further afield to find the next 100x opportunity.

Outside the US, companies like European startup Mistral AI –which has a partnership with HSBC¹–are benefiting as countries and regions look to build their own models. And globally, a large number of investors are still looking to support founders who are solving difficult problems, and capital continues to flow into areas when the use case is compelling.

Australia’s mature, multilayered ecosystem is an attractive fit. The superannuation sector is increasingly connecting with major global VCs and the startup pipeline is strong, with Australia’s universities producing high-quality research and expertise in areas including deep tech, climate tech and frontier innovation. The recent Series A fundraising for PlasmaLeap Technologies, a pioneer in green fertiliser production spun out of the University of Sydney, shows that capital is available for this kind of technology.²

For Australian founders, though, there’s still a strong case for having a presence in the US —particularly in San Francisco —given the speed and intensity of the VC ecosystem. The “velocity gap” is real: what feels fast in Australia can feel strangely slow in the Bay Area.

This message has clearly registered with founders; 66% of Australian fundraisings now include at least one international investor, mostly from the US.³ As we discussed on a recent US webinar, engaging these global networks early helps position companies for later-stage funding and provides a more deliberate pathway to scale.

Many successful teams now operate across both markets —maintaining engineering or research capabilities in Australia while establishing a commercial or fundraising presence in the US. Early exposure to that environment can significantly accelerate a company’s trajectory.

The scale of capital flooding into AI is extraordinary, but we are increasingly hearing investors question whether it can be sustained. Geopolitical risks are distorting capital flows, which could have a delayed impact on venture funding. And ultimately, we’re operating in a world of narrow AI, with artificial general intelligence (AGI) still theoretical. Whether this is a bubble or a structural shift will only become clear in hindsight.

What is clear to us is that the market is moving along two different tracks. At the top end, we are in a high-speed AI race to reach AGI and superintelligence that is consuming ever-greater sums of capital. Yet there is also a quieter, but still vibrant, ecosystem for companies with a defensible moat that are embracing AI to solve big problems. Australia’s startups and scaleups can play in both – as long as they can keep up.

This article originally appeared in the Cut Through Quarterly 1Q 2026 Report, published 28 April 2026. Click here to read more.