Irish venture capital funding held steady in Q3 and increased in line with European trends despite global uncertainty.
The waves of bad news and layoffs from Silicon Valley did little to dint the onward march of indigenous Irish tech firms as venture capital funding into Irish SMEs rose 34% during the third quarter to reach €309m, compared with €230.6m last year.
Funding into Irish SMEs, mostly tech firms, for the nine months to end September 2022 reached just over €1bn (€1,087m) up by a quarter (25%) from €871.8m on the same period last year.
“In view of continuing global uncertainty, this is an encouraging outcome for the indigenous technology sector and compares favourably to Europe”
The latest report from the Irish Venture Capital Association (IVCA) in association with William Fry indicated a softness in deals under €10m but that seed funding – an area that has been a problem historically – rose by 45%.
IVCA chair Leo Hamill commented: “In view of continuing global uncertainty, this is an encouraging outcome for the indigenous technology sector and compares favourably to Europe where funding year on year for the third quarter fell by 35% and by 44% for the nine months.”
“However, when you drill down into the data, it shows that the growth in the third quarter in Ireland was driven by two deals in the €30m plus category (Fonoa and Tines) and five deals in the €10m to €30m range. Deals in categories under €10m fell, with the exception of seed funding.”
Decline in substantive deals
Sarah-Jane Larkin, director general, Irish Venture Capital Association pointed to a decline in deals between €5m and €10m which fell 54% from €72.2m to €33.5m, and deals under €1m which fell by 41% from €11.4 to €6.7m.
“More tellingly perhaps, the number of deals in the latter category dropped sharply to six from twenty two in the same quarter last year. The softness in these two categories probably reflects uncertainty over the global economic outlook combined with the impact of the Russian war against Ukraine.”
However, she said that the outlook remained encouraging for Irish based start-ups and companies looking to raise first round funding. “Seed funding, which represents early stage first round investments, increased by 45% in the third quarter to €44.8m, from €30.9m in the same quarter in 2021. Seed funding for the nine months rose by 13% to €92m on the same period last year.”
She said this compared favourably to Europe where seed funding fell by 29% quarter over quarter, and 20% for the year to date compared to 2021.1
She said that this out performance compared to the rest of Europe was probably due to the number of Irish funds currently investing at seed stage in the Irish market including ACT, Delta, Elkstone, Furthr and Lightstone Ventures, amongst others. “This will be further backed up by the Government’s €90m Irish innovation seed fund which is supported by the European Investment Fund.”
Cybersecurity and fintech were the leading sectors in the third quarter, each raising 28% of total funding. These were followed by software (13%), life sciences (10%) and other (17%).