Venture capital funding for tech start-ups slumps

Venture capital funding for Irish technology start-ups slumped in the first quarter of the year, despite an overall increase of more than 50 per cent in financial backing for the tech sector overall.

The figures showed a "potentially worrying" decline in the value of deals under €10 million, figures from the Irish Venture Capital Association Venture Pulse survey showed, with early stage capital down between 30 and 50 per cent.

Deals

Deals worth a total of €380 million were announced in the first three months of 2022, a 52 per cent increase on the same period a year earlier.

The number of deals was down almost a third, from 74 in 2021 to 50 in 2022, indicating that investors were participating in higher value deals.

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The VenturePulse survey covers equity funds raised by Irish small and medium sized enterprises and SMEs headquartered on the island of Ireland.

The information is supplied internally by members of the Irish Venture Capital Association and also includes information published elsewhere, where IVCA members were not involved. .

Among the top deals in the first quarter were Irish unicorns: fintech Wayflyer’s €134 million raise, and food ordering platform Flipdish, which raised €94 million.

Envirotech company Exergyn raised €32.7 million. Other big number deals were struck in lifesciences, software and cyber security.

“All the growth came from eight deals worth over €10 million each, including three over €30 million,” said chairperson of the Irish Venture Capital Association, Nicola McClafferty.

Momentum

“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.”

Deals under €1 million fell by 31 per cent to €8.9 million, while those between €1 million and €5 million halved to €34.5 million compared with the same period a year earlier. It was a similar situation with deals between €5 million and €10 million, which totalled €11 million in the quarter, down 51 per cent year on year.

Almost 80 per cent of funding in the first quarter came from international sources, raising concerns about the potential impact of macroeconomic factors.

“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,” said Sarah-Jane Larkin, director general, IVCA.

Fund

She also welcomed the announcement of the Government’s €90 million seed fund programme in February aimed at start-ups, noting the almost 40 per cent decline in seed funding in the first quarter.

Global uncertainty has clouded the outlook somewhat.

"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, " said Ms McClafferty.

“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.”