Venture capital firms looked to up their investment in existing portfolio companies to overcome the threats caused by the pandemic

Venture capital funding into Irish SMEs increased by 41pc to €192.8m in the third quarter of 2020, compared to €136.4m last year, according to the latest Irish Venture Capital Association (IVCA) VenturePulse survey published in association with William Fry.

This follows a record second quarter (Q2) this year when funding increased by 58pc to €363.8m.

“Hi-tech companies account for approximately 90pc of VC funds raised in Ireland in recent times compared to the European average of 22pc”

Part of the reason for the increase in funding in Q3 could be venture capital (VC) firms shoring up investments in existing clients impacted by the pandemic.

Growth in the third quarter was largely driven by a fivefold increase in deals in the €5-10m range. Value rose to €72m compared to the third quarter 2019 of €13.3m. The number of deals in this category increased from two to 11.

Funding for the first nine months of the year rose by 39pc to €785.7m from €566.3m in the same period last year.  

Pandemic threats

Dark-haired woman in red dress.

IVCA’s new chair Gillian Buckley

“Tech firms, from fintech to life sciences and software-as-a-service, have certainly faced Covid-19 challenges but are probably less impacted than in many other sectors”

Growth in the third quarter was largely driven by a five-fold increase in deals in the €5m to €10m range. Value rose to €72m compared to the third quarter 2019 of €13.3m. The number of deals in this category increased from two to eleven.

“We may be seeing a continuation of the trend in the second quarter when VC firms looked to up their investment in existing portfolio companies to overcome the threats caused by the pandemic and help them through the next 12-24 months,” said the IVCA’s new chair Gillian Buckley.

She added that that the overall performance on funding this year despite the pandemic might be partially due to the structure of the VC industry in Ireland.

“Hi-tech companies account for approximately 90pc of VC funds raised in Ireland in recent times compared to the European average of 22pc. Tech firms, from fintech to life sciences and software-as-a-service, have certainly faced Covid-19 challenges but are probably less impacted than in many other sectors.”

Early stage funding struggles

Dark-haired woman in grey coat.

IVCA director-general Sarah-Jane Larkin

“Seed funding did not increase in line with the market in general”

Early stage funding continues to flag However, Sarah-Jane Larkin, director general, Irish Venture Capital Association expressed concern about early stage funding.

“Deals in the €1-5m range fell by 20pc to €40.6m from €50.5m compared to the same quarter last year. In addition, seed funding did not increase in line with the market in general. Seed funding rose by 9pc in this quarter to €18.9m from €17.3m, compared to a 41pc increase overall.”

In other indicators of the pressure on start-ups, she said that deals of less than €1m were down 7pc in this quarter to €11m from €11.8m. Deals in this category for the year to date dropped by 15pc to €32.3m from €38m.

Software accounted for 30pc or €58.9m in the third quarter followed by life sciences (16pc); fintech (15pc); agtech (10pc); environmental (7pc) and other (22pc).

For the nine months to date, life sciences accounted for over a third (35pc) of total funding at €282m followed by software, €192m (24pc) and fintech, €115m (15pc). 

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

Published: 17 November, 2020

Recommended