Despite tech funding reaching a high of €1.1bn for 2020, the figures mask a glaring reality that there’s a dearth of funding for early stage start-ups.

Irish tech funding in 2020 reached a new high of €1.19bn in 2020 with a record number of 264 companies raising investments, according to TechIreland.

Despite the pandemic, 10 companies each raised over €30m last year – more than double the previous year when just four companies raised over €30m.

“Ireland is producing world-class entrepreneurs and tech businesses with the ambition and capability to conquer global markets”

The number of companies raising €5m to 30m also more than doubled since 2018.

According to Tech Ireland’s John O’Dea these results highlight the real advances being made by the Irish tech sector and underline the benefits of supporting tech start-ups that are now scaling and creating exports and jobs across Ireland.

The overall results were dominated by some very large rounds. The top 10 largest investments accounted for a little more than half (53pc) of the funding raised. Amarenco raised €165m, followed by ALX Oncology (€98m) and Fenergo (€73.6m).

Early stage start-ups face dangerous plight

While €1.19bn is a record achievement, the report highlights some not so good news.

The downward trend in funding at the seed stage, which has been evident for the past few years continued.

Funding rounds in the €1m to €3m range have been dropping consistently by more than 20pc over the last four years (€97m in 2017, €89m in 2018, €82m in 2019 and further down to €78m in 2020).

“Ireland is producing world-class entrepreneurs and tech businesses with the ambition and capability to conquer global markets,” said John O’Dea, chief executive of TechIreland.

“While we rightly celebrate some of the huge investments here, we always need to remember to support the vulnerable early-stage businesses that will be the giants of the next decade.

For very early stage companies, supports like New Frontiers, the Competitive Start Fund and High Potential Startup (HPSU) funding by Enterprise Ireland held up the numbers despite the pandemic. Enterprise Ireland doubled its support for early stage businesses last year.

“Irish start-up funding, while challenging, remains robust,” said Niall McEvoy from Enterprise Ireland.

“We have more than 10 active institutional investors alongside Enterprise Ireland, a strong angel network in HBAN and European Angel Fund, good family office activity and now crowdfunding as a real option.”

Health demand for medtech

According to TechIreland, the heathtech sector accounted for most of the funding last year – 64 companies raised a total €411m.

Covid-related projects were important for several companies: Let’s Get Checked raised €71m to produce rapid test kits, and companies like Kastus, Remedy Bio and Aquila Bioscience all received supports for their Covid-related solutions.

“Over a third of the funding went to life science companies,” said Sarah-Jane Larkin of the Irish Venture Capital Association.

“Ireland is now a global centre of excellence in this sector.  The picture was quite different 15 years ago when the emerging life science sector accounted for just 4pc of the total.

Enterprise solutions was the largest sector in terms of the number of companies, with 86 companies raising €219m. Fintech was at a distance third with 30 companies raising a total of €186m. 10 cleantech companies raised €173m.

“Globally there has been a trend towards investment in later stage companies,” said Anna Scally from KPMG. “It will be important to ensure that Irish fintechs don’t get left behind and that earlier stage companies continue to attract investment to scale and compete internationally.”

Other sectors such as agtech, e-commerce, and mediatech all raised in the €30m range with smaller sums going into sportstech, travel, security and telecoms.

“The pandemic had a dramatic impact on some sectors, with travel, hospitality and some retail businesses very badly hit and were forced to take radical action to reduce costs and extend their runway,” said Brian Caulfield, partner at Draper Esprit.

“Companies serving other markets were largely unaffected and quickly transitioned to remote working.”

The rise of the regions

Dublin dominated the funding scene, taking over 60pc of the funding. The East region saw €800m invested into 153 companies. Companies based outside Dublin raised a total €438m. The West had 27 companies that raised a total €58m.  The South East had 36 companies that raised €310m, including Amarenco’s €165m. More than €10m went into seven companies in the South West.

29 Northern Ireland-based companies raised a total €26m. “In the past year, Northern Ireland has had some great investment success stories,” said Gary Davidson from Tech Nation. “However, access to capital is always an issue – hence the need to support our founders to showcase to international investors.”

Companies building future technologies raised significant funding last year. 32 Artificial Intelligence companies raised a total €121m, double the funding of the previous year.  Thirty nine Software-as-a-Service companies raised €202m. There was a big increase in funding for augmented reality/virtual reality with €45m invested, up from €11m in the previous year. 

2020 also saw a new milestone in female founder funding as 48 companies with female founders or co-founders raised a record €105m.

Although Irish female founders outperform their European and American counterparts, there is still a lot more work needed to support female entrepreneurs. In 2020, average funding into female founded companies was €2.1m, less than half of the average for all-male founder teams.

By John Kennedy (john.kennedy3@boi.com)

Published: 29 March 2021

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