TechIreland data reveals a chilly prospect for Irish start-ups, despite a strong performance last year.
Investment in Irish start-ups dropped by a staggering €300m last year, falling from €1.6bn in 2021 to €1.3bn in 2022, according to TechIreland.
At well more than €1bn, last year was the second best year both in terms of the total raised and the number of companies funded. It is, however, a gloomier picture with both the amount invested and the number of companies being funded declining by 19% and 5% respectively.
“It is encouraging to see that early stage supports by Enterprise Ireland, NDRC, HBAN and third-level continue their strong support for early stage tech entrepreneurs, paving the way for a new generation of start-ups and Irish innovation”
Once again, the top 10 largest investments accounted for more than half of the overall funding. Wayflyer raised €226m, followed by Flipdish (€87.2m) and TransferMate Global Payments (€66m).
For the first time, four companies from outside Dublin feature on the top 10 – Kilkenny’s TransferMate, Galway’s Carrick Therapeutics, Trinity BioTech from Wicklow and Keelvar from Cork.
Funding into Dublin companies dropped by a third from €1.2bn in 2021 to €800m.
Pre-seed funding is making a difference
On the positive side, a record number of young start-ups (founded in the last three years) raised funding last year, thanks to Enterprise Ireland support, including the new Pre-Seed Start Fund.
“In 2022 we successfully launched our new Pre Seed-Start Fund, which seeks to build upon the success of our previous CSF Scheme,” noted Donnchadh Cullinan from Enterprise Ireland.
“The new fund aims to enhance and modernise the offer to more closely align with the ever-changing needs of the start-up ecosystem. Initial demand was encouragingly high, and we look forward to fully rolling the fund out in 2023.
Last year was the best ever for Angel Funding, 20% up on 2021. HBAN reported a record €33m, comprising 699 individual investments in 86 deals.
“The Irish start-up ecosystem is robust,” said John O’Dea, CEO of TechIreland.
“For the first time, over 140 early stage start-ups fundraised, up from 96 in 2021. It is encouraging to see that early stage supports by Enterprise Ireland, NDRC, HBAN and third-level continue their strong support for early stage tech entrepreneurs, paving the way for a new generation of start-ups and Irish innovation.”
Ireland continued to outperform with European Innovation Council funding. Nine Irish start-ups secured a total of €43M in 2022.
“While the outlook is challenging, this represents a relatively strong performance,” said Brian Caulfield, chair of Scale Ireland. “US venture capital investment in H2 2022 dropped by a staggering 54% compared to H2 2021 and expectations are that the current quarter will be no better. Meanwhile, in Europe, investment was down 25% compared to 2021. So, Ireland and Europe seem to be weathering the downturn rather better than other regions…so far.
Sectorally, for the first time, healthtech was not the top sector, dropping 44% to €350m, while fintech was up 37% to €363m, driven by the large WayFlyer raise.
Security and cleantech also showed large increases (140% and almost 500% respectively). Tines dominated the Security figures, raising over 75% of the total. The big losers, apart from HealthTech, were Enterprise Solutions, e-commerce and especially consumer products which fell by 80%.
In terms of regions, Galway had its best year ever with 25 companies raising a combined €182m while funding to Dublin dropped by over a third. Again, outliers distort the picture, notably Kilkenny-based TransferMate’s €66m. A total of fourteen regional startups/scale-ups each raised over €10m.
Last year was a disappointing one for tech start-ups and scaleups in Northern Ireland. Funding appears to have decreased substantially from €80m in 2021 to €50m. As in previous years, Belfast dominates with over 95% of the funding.
Funding dropped for some technology clusters including Artificial Intelligence, SaaS and medical devices while Blockchain and ImmersiveTech saw renewed activity.
“Recent global events have threatened the liberal economic order and concerns about the wisdom of being so reliant on flows of overseas capital are emerging,” said Sarah Jane Larkin, director general of the Irish Venture Capital Association.
“But a significant positive in the figures is the increase in companies raising for the first time.
Despite declines for global and European start-up funding, Irish women entrepreneurs bucked the trend; 72 female-led startups raised a total €234m last year, a small increase on the record €230m raised in 2021.
“Global venture capital was down 30% last year compared to 2021, 20% in Europe, and 2023 is showing more of the same,” said Yoram Wijngaarde from Dealroom.
“In the past Ireland has been successful at attracting high levels of overseas investment. As global investment eases, Irish tech funding could be at risk.
Emerging trends include sustainability solutions, reward solutions tied to carbon offsetting, platforms for hybrid working.
“Capital has become more discerning and will seek out the most compelling opportunities first with a broadening out only when the risk environment improves,” explained Peter Bennet from Davy Group.
“With a world-class technology ecosystem, Ireland will continue to attract international investors and punch above its weight. However, we too will need to adapt to the new reality of the global capital markets.
