Start-ups face wipeout as funding declines in first three months

New figures show that venture-capital funding for start-ups sharply declined even before the Covid-19 pandemic took hold locally.

The Irish Venture Capital Association (IVCA), which published the data, has warned that unless additional financial support is provided, many promising start-ups could go out of business.

The warning comes as data shows venture-capital funding for early stage rose by 16 per cent to €228.9 million in the first three months of the year. However, these figures were distorted by a €98 million funding round for clinical-stage immuno-oncology company ALX Oncology in mid-February – the largest single deal recorded since 2018.

In addition, the figures do not fully reflect the impact of the coronavirus outbreak, which only began to have an impact here towards the end of the first quarter.

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The latest numbers show a pre-coronavirus outbreak collapse in deals, particularly those in the €1 million to €5 million range. The value of fundraises in this category declined 44 per cent to €38 million from €68.8 million a year earlier. The number of deals was also significantly lower, falling to 18 from 30.

Deals under €1 million were down 39 per cent in the quarter to €8.4 million, with the number falling from 36 to 22.

In the first three months of 2020, fundraises in the €10 million to €30 million category fell by a third to €58.2 million. Deals in the €5 million to €10 million range declined by 5 per cent to €26.1 million.

The IVCA said that while the Government should be congratulated on responding to the Covid-19 crisis promptly with a number of measures, early-stage start-ups urgently needed additional capital support to help them stay afloat.

The association recently warned that investment in start-ups could fall by as much as 50 per cent this year due to the impact of the pandemic.

“There is a real danger that we will lose a generation of innovative Irish start-ups. Without further Government intervention, our fear is that Covid-19 will act like a hard frost which will wipe out the majority of Irish seed companies,” said IVCA chief executive Sarah-Jane Larkin.

Her warning came as lobby group Scale Ireland recently warned that up to 80 per cent of start-ups could run out of cash within six months without additional support.