IVCA chair Denise Sidhu said that this drop in funding according to the group’s latest report is not surprising as it is consistent with a global decline in VC funding.
Investment in Irish SMEs reached a record €1.35bn in 2023, but fell by 16pc in the last quarter compared to the previous year.
This is according to latest figures released by the Irish Venture Capital Association today (25 February) in its VenturePulse report.
Published in partnership with law firm William Fry, the report found that even though investment for the whole year was at a record high and increased 2pc over 2022, funding flowing into SMEs in the fourth quarter was only €204m compared to €244.6m a year before.
Denise Sidhu, chair of the Irish Venture Capital Association (IVCA), said that this drop in funding is not surprising as it is consistent with a global decline in VC funding.
Irish tech companies raised more than €963m in VC funding in the first half of last year, a record amount that represented a 24pc increase over the €778m raised in the first half of 2022. But latest data shows the second half saw a marked decrease with only €394m.
‘Firms hitting a brick wall’
According to Sidhu, the IVCA report illustrates “mixed fortunes” for companies at different stages. “It was a positive year and last quarter for start-ups looking to raise less than €5m, but it was far more challenging for firms seeking larger amounts,” she said.
Deals in the €5-10m range fell by more than a quarter (26pc) over the year. This drop accelerated alarmingly in the last quarter, when deals in this range fell by 100pc compared to the same period in 2022. It was a similar story for deals in the €10-30m range, which fell by nearly half both across the year and in the last quarter.
“This data highlights the risk of these highly innovative indigenous firms hitting a brick wall just at a critical time in their growth trajectory due to the lack of locally sourced scaling finance,” Sidhu added.
On a more positive note, funding in the €3-€5m range increased by more than a third (36pc) in the final quarter, while deals in the €1-3m category grew by 170pc and deals below €1m grew by 8pc to €8.6m.
According to the report, the top five deals in the last quarter were bagged by EasyGo, Luma Vision, Cloudsmith, Alvarius and OOHPod.
“Ireland Inc has become overreliant on critical but transitory scaling finance provided by international backers. International funding into Irish tech SMEs amounted to two thirds of the total for 2023. €745m, or 55pc of the total €1.35bn, was into eight companies,” said IVCA director-general Sarah-Jane Larkin.
“Artificial intelligence and machine learning represented 7pc or €97.8m of the total in 2023, almost at the same level of software, one of the traditional leaders in Irish funding.”
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