Stormy global financial trends contributed to a 16% drop in Irish venture in the final quarter of 2023.
On the face of it venture capital funding levels in 2023 rose 2% to reach a record €1.35bn. However, the final quarter of 2023 reflected a genuine global struggle that is impacting on investment in local SMEs and start-ups.
Funding for the fourth quarter fell by 16% to €204m, from €244.6m in the same period last year, according to the latest Irish Venture Capital Association VenturePulse survey in association with William Fry.
“This data highlights the risk of these highly innovative indigenous firms hitting a brick wall just at a critical time in their growth trajectory due to the lack of locally-sourced scaling finance”
“The first half of 2023 looked extremely strong with €963m of investment, however the second half saw a marked decrease with only €394m. This is not totally surprising in a year where VC funding globally fell by 38%1 in 2023 and by 25% in the final quarter compared to same period in 2022,” explained Denise Sidhu, chair, IVCA.
She said that the data illustrates mixed fortunes for companies at different stages. “It was a positive year and last quarter for start-ups looking to raise less than €5m, but it was far more challenging for firms seeking larger amounts.”
Shockwaves felt in Irish funding
Sidhu pointed out that deals in the €5m to €10m range fell by over a quarter (26%) to €105.5m in 2023 from €142m the previous year. This trend accelerated in the fourth quarter with deals in this range falling by 100% to €31.8m from €64.6m, compared to the same quarter in 2022.
It was a similar story in the €10m to €30m category with funding falling by nearly a half (47%) to €208m in 2023 from €396m the previous year. Funding for quarter four in this category also fell by almost a half (49%) to €30m from €59m in the same quarter in 2022.
“This data highlights the risk of these highly innovative indigenous firms hitting a brick wall just at a critical time in their growth trajectory due to the lack of locally-sourced scaling finance,” Sidyu said.
“We warmly welcome Minister Coveney’s move to publish the report of the Finance for Scaling Working Group, which includes actionable recommendations to support high potential firms to access scaling finance.”
There some green shoots in the seed and early stage arena, however.
Funding in the €3m to €5m range increased by over a third (36%) to €40m in the final quarter compared to the same period in 2022.
Deals in the €1m to €3m category grew 170% to €63.7m. Deals below €1m grew by 8% to €8.6m while seed funding also performed well, increasing by 58% to €63.6m.
The top five deals in Q4 2023 were EasyGo (envirotech) €30m; LUMA Vision (life sciences) €20m; Cloudsmith (software) €10m; Alvarius (life sciences) €5.5m and OOHPod (business services) €5.4m.
Over-reliance on international backers
“Ireland Inc has become over-reliant on critical but transitory scaling finance provided by international backers,” said Sarah-Jane Larkin, director general, IVCA.
“International funding into Irish tech SMEs amounted to two thirds of the total for 2023. €745m, or 55% of the total €1.35bn, was into eight companies.”
She said that the sector breakdown for the year reflected Irish innovative tech companies participating in new technologies.
“Envirotech raised €612m or 45% of total funds raised in 2023, followed by life sciences at €224.5m (17%) and software at €110m (8%).
“Artificial intelligence and machine learning represented 7% or €97.8m of the total in 2023, almost at the same level of software, one of the traditional leaders in Irish funding.”
Main image at top: Denise Sidhu, chair, IVCA
