Pandemic halves the value of venture capital deals in third quarter

Globally, VC investment rose slightly to $73.2bn across 4,861 deals over the period

Findings from KPMG’s Venture Pulse Q3’20 report show a decline in venture capital activity in Ireland. Photograph: Niall Carson/PA Wire

Findings from KPMG’s Venture Pulse Q3’20 report show a decline in venture capital activity in Ireland. Photograph: Niall Carson/PA Wire

 

The Covid-19 pandemic contributed to a decline of more than half in the value of venture capital (VC) activity in the Republic during the third quarter of 2020 compared with the same period last year, new data shows.

Findings from KPMG’s Venture Pulse Q3’20 report show a decline in VC activity in Ireland in the quarter, with $86.6 million (€73.2 million) invested in 24 deals involving Irish companies. This was down from the $187.6 million invested across 73 deals in the same quarter last year.

The volume of deals completed was at its lowest level in five years, when just 22 deals were completed in the third quarter of 2015.

Globally, VC investment rose slightly from $70 billion across 5,674 deals in the second quarter to $73.2 billion across 4,861 deals in the third.

The number of individual VC deals, however, dropped for the sixth straight quarter to the lowest volume seen since the last quarter of 2013.

KPMG fintech lead Anna Scally said it was “clear that private equity and venture capital firms are placing big bets on later-stage companies”.

“So the big concern is who is going to fund earlier-stage companies, or are they going to be funded at all?” she said.

“In Ireland, we need to make funding programmes more accessible, because if early-stage companies don’t receive funding, they will not be capable of securing follow-on investment down the road. That will have a big impact on the ecosystem here.”

Ms Scally also said it was “clear” that the uncertainty created by the Covid crisis has had a significant impact on the number of companies that successfully secured investment in the third quarter.

“Investors are very focused on supporting their existing portfolio companies and I suspect many are reluctant to increase their exposure at this point,” she said.

‘Blip’

“There is a real risk that this continues to be the case through the fourth quarter as the impact of the pandemic continues to be felt across the economy, although I’m hopeful that the third quarter was a blip as the fourth quarter has started off strong, with investments in Ireland in companies such as LearnUpon, Neuromod and Wayflyer already this month.

“Government will need to review existing initiatives like debt and equity funding programmes and tax incentives to ensure there is adequate support for early-stage companies, and to encourage more early-stage investment by private investors.

“We have seen the industry itself already taking action, with the establishment of the Alliance for an Innovation-Driven Recovery, a newly formed coalition of organisations with a shared interest in the growth of the indigenous tech sector in Ireland.”