Venture capital funding into Irish technology SMEs in the third quarter fell by 38% to €190m from €309m, in the same period last year, according to the Irish Venture Capital Association in its Venture Pulse survey, published in association with William Fry.
According to the IVA third quarter data “raised alarm bells” and that funding across almost most levels “fell significantly”.
“Following a strong first half, overall funding for the nine months to end September 2023 just about held up, with an increase of 6% to just over €1 billion, compared to the same period last year,” commented Denise Sidhu, chairperson, Irish Venture Capital Association.
“However, the Irish third quarter data raises alarm bells, as the value of deals across all sizes fell significantly, with the exception of those under €1m.” She added that the number of transactions fell by over a quarter (26%) compared to the same period last year.
Reacting to the report, Mark Quealy, Corporate and M&A Partner at William Fry said, “There has been a significant slowdown in VC and PE investment globally in 2023 and Ireland, like its international peers, is mirroring this trend. A factor causing this could be the frustration voiced by some investors that sellers’ expectations on valuation have not yet adjusted to reflect the realities of prices in listed markets. This is particularly the case in industries such as TMT. Inevitably, business owners will take some time to become accustomed to the idea of lower valuations compared to those seen in recent years, but as those expectations do shift, VC and PE investors have the capital and the appetite to do more deals.”
Sarah-Lane Larkin, director general, IVCA, said that another worrying indicator was that the value of international VC investment in the third quarter fell by over two thirds (69%) or by over €120m.
“The reliance on international VC investors at a time when US venture capital and private equity investment has slowed significantly, emphasises the need for Ireland Inc to build local private funding sources in order to combat global dependence and headwinds.”
Sectors most successful in raising funding in the nine months to end September 2023 included Envirotech or clean energy which raised €580m or 50% of total VC investment, followed by Life Sciences at €157m (14%); Software €92m (7.9%); AI & machine learning €88m (7.6%); and Fintech €82m (7%).