Startup investment: what founders and investors need to know about FIRB and ACCC

This article first appeared in the Q3 2026 edition of the Australian Startup Funding Report, published as part of Cut Through Quarterly.

Australian venture capital and growth-stage funding has reached record levels, with several sectors emerging as magnets for domestic and international capital. Data centres, artificial intelligence and energy infrastructure have attracted some of the largest funding rounds in Australian startup history over the past 12 months.

These sectors sit at the intersection of technology, infrastructure and national security, and that convergence is now attracting regulatory attention that startup founders and investors need to understand. In particular, two regulatory regimes in Australia, the foreign investment review framework administered by the Foreign Investment Review Board (FIRB) and the new mandatory merger notification regime administered by the Australian Competition and Consumer Commission (ACCC), may have a material impact on the speed, structure and confidentiality of capital raisings in these sectors. 

FIRB, national security and critical infrastructure

The very sectors attracting the most capital in Australia, data centres, AI and energy infrastructure, are also squarely within the scope of recent reforms to Australia’s foreign investment regime under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) and the Security of Critical Infrastructure Act 2018 (Cth) (SOCI Act).

The Australian Government has progressively expanded the definition of “critical infrastructure assets” under the SOCI Act to cover data storage and processing (including data centres), energy assets, telecommunications, and a range of other sectors. This expansion means that many of the companies operating in the sectors currently attracting the most venture and growth capital may now fall within the SOCI Act’s regulatory perimeter.

The SOCI Act and FATA are directly linked - a “national security business” under FATA includes businesses that are critical infrastructure assets or operators of critical infrastructure under the SOCI Act. Given the expansion of the SOCI Act’s coverage, many data centre operators, AI companies handling sensitive datasets, and energy infrastructure businesses may now constitute “national security businesses” under FATA.

Under FATA, acquisitions of a “direct interest” in a national security business require mandatory notification to FIRB, regardless of the value of the transaction. In addition, acquisitions of a “direct interest” in any business by investors which are considered “foreign government investors” require mandatory notification to FIRB. The term “foreign government investor” is broader than it sounds and captures many international private equity funds as a result of their passive upstream investors.

A “direct interest” is generally 10% or more of the entity, or the ability to influence or participate in the management or policy of the entity. If a person is in a position to veto any resolution of the board, central management or general meeting of an entity, then that person is also taken to have a “direct interest”.  Critically, there is no monetary threshold: even relatively small investments can trigger the notification obligation if they meet the “direct interest” test. This is a key distinction from many other FIRB notification triggers, which apply only above certain monetary thresholds.

For venture capital investors, the practical implication is significant: participation in a funding round for a company in one of these sectors may require FIRB approval if the investor is a “foreign person” under FATA. This includes not only foreign-domiciled funds, but also Australian-domiciled funds with significant foreign limited partners, which may cause the fund itself to be classified as a “foreign person”. 

The FIRB approval process can take 30 to 90 days for relatively simple cases, and longer in complex cases. This can create material timing challenges for VC rounds that are typically structured to move quickly. Founders and lead investors in affected sectors should factor FIRB timing into their deal timetables from the outset, and where a round involves multiple investors, only some of whom may require FIRB approval, structuring the round to accommodate different closing timelines may be necessary.

This picture has recently become even more complex. On 19 May 2026, the Treasurer announced significant reforms to the FIRB framework, with the Government proposing to expand mandatory notification and approval requirements for investments in “current and emerging sensitive sectors” that give rise to high national security risks. While specific sectors have not yet been named, it is expected that investments in critical minerals, data centres, and AI-related businesses will be captured. The updated Foreign Investment Policy (released 19 May 2026) states that investments into data centres must be consistent with the Government’s National AI Plan and its expectations of data centres and AI infrastructure developers – proposals aligned with those expectations will be prioritised. A stronger risk-based approach will be applied to investments in critical infrastructure, critical minerals, critical technology, proposals involving sensitive data sets, and investments in close proximity to defence sites. 

ACCC merger clearance — a new consideration for some investors

The ACCC’s new merger control regime, which came into force on 1 January 2026, may also be relevant for certain investors in these high-growth sectors. The new regime represents a seismic shift, moving from a voluntary, informal process to a mandatory, suspensory regime with low notification thresholds that will inevitably capture many more transactions.

The regime applies not only to traditional M&A, but captures (among other things) share acquisitions that result in ‘control’, which can include minority investments where the investor acquires meaningful practical influence over the target.  Relevantly, acquisitions of shares in private companies which result in the acquirer’s voting power exceeding 20% are deemed to confer ‘control’, and so will need to be notified if the monetary thresholds are satisfied. Helpfully, a recent set of legislative amendments, which took effect on 16 September 2026, clarified that merely obtaining standard minority investor rights which are consistent with the protection of the investor’s financial interests (such as protections relating to changes to the constitution or capital, liquidation or winding up, related-party dealings, information access, board observer rights and, to the extent consistent with those requirements, board representation) does not, by itself, amount to control.  Where a minority investor obtains more meaningful governance rights or has a significant involvement in the business, further analysis may be required.

Investors who already hold interests in competing or adjacent businesses in the same sector should be particularly alert. The “serial acquirer” threshold, which looks at the aggregate Australian turnover of the current target and any similar businesses acquired in the past three years, effectively lowers the notification thresholds for same-sector investments, and may be particularly relevant for active VC and growth equity funds with diversified portfolios across the technology and infrastructure sectors.

One aspect of the new regime that is especially challenging for startups is the absence of a confidential review process, given that waiver applications, and a summary of any notification under the ‘standard’ merger review process will be published to the ACCC’s public register. This creates real commercial sensitivity issues for startups that may not wish to signal to competitors that they are raising capital, or that a particular investor is looking to back them. 

What founders and investors should do now

The convergence of strong capital flows into data centres, AI, and energy infrastructure with heightened regulatory scrutiny under the FIRB and ACCC regimes means that the legal landscape for venture capital and growth-stage investment in these sectors is materially more complex than it was even two years ago. The requirements are manageable with proper planning and early engagement, but they do require founders and investors to build regulatory analysis into their deal processes and timetables from the outset.  With FIRB reforms expanding and ACCC refinements ongoing, this is a landscape that continues to evolve, reinforcing the need for early consideration of both regimes as part of a capital raising process.