Venture capital funding to Irish tech firms grew by 52% to almost €380m in Q1, but headline figure conceals worrying fall in deals under €10m.
On the face of it, bolstered by new funds and strong funding activity, the outlook for early stage and start-up businesses in mid-2022 has never seemed better.
Venture capital funding to Irish tech firms grew by 52% to almost €380m in first quarter, according to the Irish Venture Capital Association (IVCA) VenturePulse survey in association with William Fry.
“While the momentum carried over from last year has continued for more established companies raising large rounds, some of that impetus seems to have stalled for earlier stage companies”
However, according to the IVCA chair Nicola McClafferty, the headline figure conceals a “potentially worrying fall” in deals under €10m, including seed funding.
The number of deals overall fell by almost a third to 50 from 74 in the same period last year.
Impetus has stalled for early stage firms
“All the growth came from eight deals worth over €10m each, including three over €30m,” McClafferty said. “While the momentum carried over from last year has continued for more established companies raising large rounds, some of that impetus seems to have stalled for earlier stage companies.
“The venture industry worldwide saw a slowdown in the first quarter as a result of an uncertain global economic outlook and the war in Ukraine. While challenging market conditions may continue, we also know that many great companies are started and built in times of downturn, so we await with interest the data in the coming quarters.”
The value of deals between €5m to €10m fell by 51% to €11m. Deals in the €1m to €5m also halved to €34.5m from €70.3m in the same period last year. Deals under €1m dropped by 31% to €8.9m.
It is worth considering whether new early-stage focused funds announced recently will change this picture. Recent news of the new fund Delta Partners (€70m) came amid a slew of new funding announcements, including Elkstone (€100m) and Melior (€160m) – all underpinned by the Government’s €90m investment in seed capital revealed in February.
Will the growth of local funding sources make a difference?
Sarah-Jane Larkin, director general, IVCA said that 79% of funding came from international sources in the first quarter. “While this is to be welcomed and emphasises the quality of Irish tech firms and their appeal to international investors, we have expressed concern before about where any shortfall would be made up if the global economy contracts.”
She pointed out that seed funding in the first quarter had fallen by nearly 40% to €22.3m from €36.5m in the previous year. “So the Government’s announcement in February of a new €90 million Irish Innovation Seed Fund Programme for Irish start-ups is particularly timely.”
Top deals in the first quarter were two Irish unicorns, fintech company Wayflyer which raised €134m, and digital food ordering platform Flipdish (€94m). Envirotech company Exergyn raised €32.7m.
Main image at top: Sarah-Jane Larkin, director general, IVCA, and Nicola McClafferty, chair, IVCA