Funding for Irish start-ups plummets as VCs focus on later-stage companies

Venture capital funding for Irish start-ups collapsed last year even as overall investment for companies rose by more than €100 million, new figures show.

Deals under €5 million fell to €194 million from €285 million as VC firms focused their spending on later-stage companies.

Overall investment in Irish SMEs grew 13 per cent to €925 million with funding in the €5 million to €10 million range doubling to €204 million. Deals priced over €10 million were up almost one-third to €568 million compared to 2019.

Six companies raised more than €30 million in 2020, double the number who did so a year earlier.

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With a greater concentration of cash going into fewer companies, the overall number of rounds fell by 18 per cent to 233 last year, as against 285 deals in 2019.

Funding concern

The Irish Venture Capital Association (IVCA), which compiled the figures, said there is a growing concern that early-stage companies are finding it increasingly difficult to raise funds.

During the fourth quarter in particular, deals under €5 million fell by half to €41 million from €82 million a year earlier.

"It is vital that we nurture the pipeline and indigenous stars of the future. We won't have successful high-growth firms raising €5 million-plus in three years if entrepreneurial companies are starved of early funding now," IVCA chairwoman Gillian Buckley said.

The latest figures indicate a softening in the market during the final three months of 2020 with funding down 45 per cent to €139 million from €253 million in the fourth quarter of 2019.

Life sciences accounted for over one-third of all funding deals last year at €332 million, having grown from just 4 per cent of the total in 2004. Software companies raised a combined €269 million over the year, equivalent to 29 per cent of all deals with fintech accounting for €115 million or 12 per cent of total transactions.