Venture capital funding into Irish tech SMEs reaches €192m in third quarter, up just 1% in the year.
While globally venture capital levels have plummeted 15%, Irish venture capital investment into SMEs in the third quarter “treaded water”, rising just 1% year-on-year.
Investment in the third quarter finished up at €192.5m, according to the Irish Venture Capital Association Venture Pulse survey, published in association with William Fry.
“There is now a severe shortage of matching private capital in Ireland from investors such as pension funds, family offices and corporates”
Venture capital (VC) funding in Ireland for the nine months to end of September fell by 18% to €945.3m from €1.1bn in 2023.
Globally VC funding fell by 3.7% over the same period. International VC funding into Ireland fell by almost €200m or 24% for the year to end of September. International funding for the third quarter of €85m amounted to 44% of the total for the period.
“A positive feature of the third quarter is that the number of deals rose by 55% to 59,” said Gerry Maguire, chair of the Irish Venture Capital Association.
“While there were no rounds in the €30m plus range, this was compensated for by an increase in deals under €10m, including seed funding. These underlying trends reflect a buoyant ecosystem in Ireland for early-stage companies, many of which are involved in cutting edge technologies such as Artificial Intelligence (AI), Cyber Security, Quantum Computing, MedTech and Envirotech.
“However, the potential for an isolationist leaning incoming administration in the White House to implement policies that could be negative for Ireland emphasises the need for us to take these indigenous companies to the next level and grow our own tech champions rather than rely on less committed overseas investment.”
Taking Irish tech to the next level
Sarah-Jane Larkin, director general, Irish Venture Capital Association, said that while there were no deals over €30m in this quarter, there was an encouraging bounce in smaller rounds.
Deals in the €3-€5m range rose by 52% to €29m. €1m-€3m rounds grew by 16% to €26m, and deals under €1m rose by nearly a third to €9m. Seed funding, or first rounds raised by SMEs, more than doubled to €33.5m.
Commenting on the opportunities for an incoming Government to enhance Ireland’s competitiveness in an increasingly uncertain global market, Larkin welcomed the small business provisions in a number of party manifestos which emphasise the need for scaling up funding, and in particular the backing of pension funds in this regard.3
She said that while the support for early-stage firms was a positive feature of the Irish economy, a warning signal was that average deal size in Ireland has fallen since 2018, compared to comparative European countries.
“Drip feeding of small rounds is not efficient. As a result, the proportion of Irish firms going out of business is higher than the European average.”
Largest deals in the third quarter were medtech company, Neurent Medical (€18.2m); renewable energy firm, Circal (€15m); EV and solar installation provider, ePower (€15m); medical device company, Luminate (€13.9m) and medtech firm, Loci Orthopaedics (€13.8m).
Sarah-Jane Larkin added: “Access to public capital for VCs through the likes of EI (Enterprise Ireland) and ISIF (Ireland Strategic Investment Fund) in Ireland and EIF (European Investment Fund in Europe), has never been better.
“However, there is now a severe shortage of matching private capital in Ireland from investors such as pension funds, family offices and corporates. Government policy can have a significant impact in fixing this, as is happening in the UK, and in several EU countries such as Denmark and France.”
Life sciences was the leading sector in the nine months to end September raising 42% of the total (€392.8m), followed by Envirotech (13%); Regtech (10%); Fintech and Software (both 9%). In the third quarter AI & Machine Learning was the third highest sector raising 11%.
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