Mixed bag: Birchal’s crowdsourced funding report shows 26% decline amongst some impressive raises

Birchal has released its fifth annual report into crowdsourced funding (CSF), revealing a 26% decline compared to last year. But its not all bad news, with some record breaking raises during FY23, as well as a smaller funding drop-off than ASX IPO raises.

Birchal doesn’t see 26% funding decline as all bad news

Birchal released its report on Tuesday, posting the Australian crowdfunding sector’s first ever decline. The last financial year saw $64 million raised across 85 crowdfunding campaigns — a 26% decrease year-on-year.

However, Birchal was quick to point to the positive, saying that a quarter of the successful deals raised were over $1 million, with growth businesses with more than $1 million in reported revenue accounting for 44% of all CSF deals. According to Birchal, the average deal size across CSF was $763k, with an average investment of $1739.

The platform also reported that CSF funding activity was higher than ASX IPO activity during that same period — a first for the sector — with 85 deals versus 57. It also pointed to Cut Through Venture’s recent quarterly funding report which showed a 70% decrease in funding in the first six months of this year.

And it is not wrong. Our 2023 weekly funding roundups have certainly been lighter than other quarters, with Cut Through also reporting that the first half of the year has been the slowest funding start since 2019. About $1.5 billion was raised, which was just a third of what we saw in the first half of 2022.

We’ve also seen this hit the startups relying on fresh VC cash, with the likes of Milkrun shutting up shop and proptech business :Different having to bring in administrators.

Some record-breaking raises for Birchal

Despite the comparatively slow funding environment, there were some record-breaking raises in the CSF space during FY23. Cannabis startup, Cannaponics reached $5 million — the maximum amount allowed under CSF law. It’s only the second company to reach this milestone and it was the largest medicinal CSF campaign to date.

Until Cannaponic came along, booze was leading the pack. Despite the dethroning, two remained in second and third place with Old Young’s Distillery raising $2.7 million (the largest alcohol raise of all time) with Your Mates Brewery nipping at its heels on $2.5 million.

Unsurprisingly, food and beverage was the leading category for CSF, raising $23.7 million which equated to 37% of the total funding volume for the period.

“Coming back after the break in January, it’s always a challenge to heat the market back up. Given the context, this year was particularly challenging, so the importance of the campaigns that completed successfully in Q3FY23 cannot be overstated,” Matt Vitale, Co-founder and CEO of Birchal, said in an email to SmartCompany.

“In particular, Old Young’s successful $2.7m raise in just 23 hours earlier this year was a much-needed confidence booster, for the whole country really, that even in 2023 results like these can be achieved.”

Money for WA

Birchal also reported a 30% uptick in CSF funding for Western Australian startups, with $16.2 million being raised across 16 deals. And we’re not surprised by this. The last 12 months have seen an increase in interest and VC funds going into startups outside of Sydney and Melbourne.

“It’s such an exciting time in the development of the WA startup ecosystem. I recently spoke at a ScaleUp WA event for agri-food entrepreneurs. I also recently participated in an investor forum organised by Curtin University who have assembled a team to participate in MIT’s Regional Entrepreneurship Accelerator Program (REAP) on behalf of WA,” Vitale said.

“West Tech Festival is going from strength to strength. And three new VC funds have been established, with support from the WA Government: Purpose Ventures, Fund WA and Quokka Capital.

“A total of $38m has already been invested into WA businesses through CSF since the regime began ($16m in FY23 alone). We’re looking forward to partnering with the WA startup ecosystem at this exciting formative stage.”

Regional and rural Australian startups and accelerators have become a particular focus for the likes of Fishburners and Airtree’s 2023 free angel investment course. And back in April Brisbane’s River City Labs opened up a new location in Maroochydore.

“The CSF results show that opportunities for regions, and areas that are underserved by professional investors are significant. This is awesome, because it can empower founders to build businesses anywhere, rather than feeling the need to relocate to major cities and ecosystems where professional investors are,” Vitale said.

“So far… 22% of successful offers hosted by Birchal have been for regional businesses, raising a total of $45m of the $170m Birchal has raised since we launched.

“Two companies have reached a $5m maximum under CSF now, and they are both regional businesses! ZeroCo raised $5m in seven hours from Byron Bay in October 2021. And Cannaponics achieved $5m earlier this year from Collie, a small town in the South West region of WA.”