IVCA data indicates resilience in seed and early-stage funding, but association warns on over reliance on overseas investors.
The decline in Irish venture capital funding levels continues unabated with a 48% drop in funding into Irish SMEs to €258.5m in Q1 2024.
The decline in Irish venture capital funding levels continues unabated with a 48% drop in funding into Irish SMEs to €258.5m in Q1 2024.
“Despite this fall, investment in the last three quarters has held up well against a backdrop of global uncertainty”
This compares with €502m for the same period last year, according to new data from the Irish Venture Capital Association and William Fry.
Three years ago there was a dearth in seed funding for SMEs while massive later-stage rounds distorted the picture leading to record quarters for Irish venture funding.
However, seed funding is now in the ascendancy with concerns over the ability for scaling SMEs to raise capital.
Global trends impact Irish funding
“Despite this fall, investment in the last three quarters has held up well against a backdrop of global uncertainty,” commented Denise Sidhu, chairperson, Irish Venture Capital Association.
“This quarter and the same period last year each included one exceptional deal above €100m. If one excludes these two outliers then the decrease in Irish funding is in line with global trends which saw a 20% decline in the first quarter.”
She said that seed funding showed resilience with very early-stage Irish companies raising €40m. Seed funding represents first rounds raised by SMEs.
While there was a downturn in funding across the majority of deal sizes, companies looking to raise €1m-€3m enjoyed a positive first quarter. Funding in this sector rose by 126% to €22.7m compared to €10m last year.
Over-dependency on international investors
IVCA director general Sarah-Jane Larkin
Sarah-Jane Larkin, director general, IVCA noted that international funding into Irish SMEs in the first quarter fell by 57% to €184m from €425m last year.
“The Irish ecosystem for getting companies off the ground, including Government and state bodies such as EI (Enterprise Ireland) and ISIF (Irish Strategic Investment Fund), is largely working well. The big challenge is our over dependence on unpredictable international investors in taking these start-ups to the next level of growth. In this regard, we welcome Minister Michael McGrath’s recent comments on the desirability of unlocking some of the €150bn in domestic household deposits into more productive use for both the economy and for savers.”
She added that the IVCA’s pre-budget submission would also make a case for allowing pension savers the opportunity to invest in Ireland’s dynamic indigenous start-up tech sector under the planned auto enrolment scheme, as happens in France.
The top five deals in the first quarter were: medical device company, Mainstay Medical (€115m); energy transition firm, GridBeyond (€42m), fintech software company, Halo Technologies (€18.4m); space tech supplier, Mybronics (€15m) and medtech company, Cumulus Neuroscience (€13m).
The life sciences sector (62%) led the way in funding this quarter followed by envirotech (17%) and software (9%).
Main image at top: IVCA chair Denise Sidhu
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