A sharp fall in venture capital funding for Irish SMEs is a “warning sign” for the country, according to the Irish Venture Capital Association.
The Association’s latest VenturePulse survey, published in assocation with William Fry, shows a 77% fall in SME funding in the second quarter, with funding tumbling from €494m last year to €112.6m this year.
This marks the lowest figure recorded by the IVCA since the second quarter of 2015 and as a result, funding in the first half of the year fell by 14% to €645.5m from €752.7m the previous year.
Caroline Gaynor, chairperson of Irish Venture Capital Association, noted that the fall off would have been worse if not for a record first quarter which saw an increase of over 100% to €532.8m compared to the same time last year.
She added that the quarterly drop was mainly explained by an 81% pull back by international investors, which invested just €69.5m in the quarter, compared to €375.3m the previous year, a shortfall of over €305m.
“This is a timely warning sign for Ireland and highlights the need for us to stand on our own feet in terms of funding and backing for our brightest and best indigenous start-ups, instead of depending on volatile international support,” she said.
Sarah-Jane Larkin, director general of the IVCA, said that bearish international sentiment was reflected in quarter two deal sizes.
“There was only one deal (Nomupay) in the €30m+ category, compared to five last year. Funding fell by 88% to €37m from €300.3m,” she said.
She also said there was also only one deal in the €10m+ category (Kota), down from six rounds last year. Funding fell by 87% to €12.4m from over €100m.
“There was a falloff in all deal sizes, with the exception of those under €1m,” added Sarah-Jane Larkin. “Seed funding, or first rounds by SMEs, fell by over a half to €25.5m.”
Today’s figures show that the life sciences sector with €255.3m (40%) led the way in funding for the half year, followed by cybersecurity (18%), fintech (14%), software (9%) and AI & machine learning (8%).