Rising costs and changing investor expectations are forcing Australian startups to focus on runway preservation over growth, according to a new sector snapshot.
Fresh research from private capital platform Carta, using insights of 500 startup decision-makers across Australia, shows how local innovators are faring in a cautious investment environment.
With the COVID-era boom in startup funding fading into the distant past, 65.4% of surveyed startups have less than 12 months of runway ahead of them, according to the report.
Nationwide, 31.8% of startups have enough cash in the bank to operate for between 12 and 17 months without another capital injection.
Just 2.8% are well-capitalised enough to continue for 18 to 24 months, and no surveyed startup has enough runway to continue for more than two years without intervention.
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“Shorter runways don’t automatically signal distress,” wrote Bhavik Vashi, Carta’s managing director for APAC and MEA.
But 86% of startups said their cash burn has accelerated in the past 12 months, with 29.2% declaring it has increased significantly.
Startups are responding in familiar ways to meet those cost pressures.
Increasing prices (42%) was the most-reported pressure release valve for startups, followed by a relatively even split of slowed or delayed growth plans, marketing budget cuts, bridge funding rounds, and layoffs.
Beyond rising costs, the report suggests growing investor caution has shortened capital runways: fewer speculative investments mean startups have less time to ‘figure it out’ before achieving profitability or an exit.
The report echoes a Cut Through Ventures analysis of the local startup sector, which found investors used more discretion in 2025 than in years past, and doubled down on their due diligence before cutting a cheque.
AI hype — and layoff prospects
Beyond increasing costs and a declining ‘growth at all costs’ mentality among investors, the Carta report sheds light on how local startups are adopting artificial intelligence — even if the immediate benefits are unclear.
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Half of the surveyed startups are investing in AI as a growth tool, according to the paper.
But a remarkable 80% of respondents said they believe AI is a ‘bubble’, and their startup feels pressure, from investors or the market at large, to bolt AI systems onto their operations.
The data cuts against the prevailing narrative that AI adoption will inherently boost startup performance, and that founders should simply experiment until they find the right fit for agents, LLMs, and other generative technology.
Tellingly, the data also shows how Australian startups are thinking about AI as a cost-reduction tool, even if the majority of respondents thought the technology exists in a ‘bubble’.
Some 74% of respondents say they expect AI to contribute to layoffs in their startup over the next two years, after tech giants including Atlassian, WiseTech, and Block cited the power of AI as a deciding factor in their decisions to cut thousands of workers.
