Venture capital funding into Irish tech firms increased by 24% in the first half of 2023, coming to a record 963.2m, compared to the same period last year, according to the Irish Venture Capital Association VenturePulse survey published this week in association with William Fry.
“Ireland well outperformed global trends,” said Denise Sidhu, chairperson, Irish Venture Capital Association, “VC investment worldwide fell by over 50% in the first half and by almost 50% for the second quarter.” She added that the performance was reflected in the fact that, “Ireland only broke the €1 billion threshold for a full year for the first time in 2021, yet we are close to that in 2023 for the half year”. Denise, however, marked a note of caution in relation to all sectors. “If you exclude deals over €30m, then investment fell by 52% for the second quarter compared to last year and by 16% for the half year.”
A feature of the survey was the rise of investment in Irish artificial intelligence (AI) companies. “For the first time, AI was in the top three sectors for the first half, raising €83m or 9% of the total,” commented the IVCA chairperson. Meanwhile, envirotech or clean energy was the leading sector in the first half, raising 57% or €550.5m of the total VC investment, followed by life sciences at €92.2m (10%).
Denise Sidhu cautioned that international investors accounted for 82% or €785.4m of total venture capital investment in Ireland in the first half of 2023, and 78% or €360.5m for the second quarter. “The value of international investment in the first half has risen from 58% of the total last year to over 80% in 2023. As in the case of Foreign Direct Investment (FDI), there is a high risk of over dependence on mobile international capital. We need to put in place alternative sources locally.”
She added, “The global interest in our best companies shows that we have the technology and talent to create world beaters. In my view, the only reason holding us back from creating more tech equivalents of domestic global success stories like Kerrygold or Ryanair is lack of scaling finance.”
Sarah-Jane Larkin, director general, IVCA said that despite the overall positive results, the IVCA VenturePulse half year survey data highlighted a difficult environment for start-ups looking to raise under €1m. The value of deals in this category for the half year fell by almost a third to €14.6m, and down by 33% in the second quarter to €8m.
The number of deals in the first half in the under €1m range fell by 45% to 27 from 49. The number of deals in the same category in the second quarter fell by 55% to 13 from 29 in the same quarter last year. However, seed funding or first equity rounds recovered in the second quarter, rising by over 80% to €44.9m.
The overall number of deals in the first half dropped by 16% to 100 from 119 last year. The overall number of deals in the second quarter fell by 17% to 57 from 69 in the same stage last year.
Mark Quealy, Corporate and M&A Partner at William Fry commented that “The latest IVCA Venture Pulse results point to both the resilience of the Irish venture fundraising landscape and also some of the challenges currently facing those seeking to raise capital. The increase in the amount of capital invested in Irish businesses last year is very encouraging, particularly when contrasted against the wider global picture. However the drop-off in the volume of deals done points to difficulties facing some of the earliest-stage companies in raising equity funding in the current environment.“
