Despite Covid-19, Irish VC funding jumped 41pc in Q3

17 Nov 2020

Sarah-Jane Larkin, director general of IVCA. Image: Fennell Photography

The IVCA said that compared with this time last year, VC funding in Ireland increased by 41pc to just under €193m.

While many businesses across the country continue to struggle as a result of Covid-19, the Irish Venture Capital Association (IVCA) has said that investment into Irish SMEs still appears strong.

The IVCA’s latest VenturePulse report for Q3, published with William Fry, found that venture capital (VC) funding into Irish SMEs increased by 41pc to €192.8m in the third quarter of 2020, up from €136.4m in the same period last year. Growth during the last quarter was largely driven by deals valued at between €5m and €10m.

Funding for the first nine months of the year rose 39pc to €785.7m, up from €566.3m in the same period last year. This follows a record Q2 for VC funding in Ireland, which saw an increase of 58pc compared to the second quarter of 2019.

Attempting to offer an explanation for strong performance in the midst of a pandemic, IVCA chair Gillian Buckley said: “We may be seeing a continuation of the trend in the second quarter when VC firms looked to up their investment in existing portfolio companies to overcome the threats caused by the pandemic and help them through the next 12 to 24 months.”

Buckley added that the structure of VC funding in Ireland may be behind this year’s strong performance, as tech companies account for approximately 90pc of VC funds here versus the European average of 22pc. She said that while tech firms have faced challenges as a result of Covid-19, they have been less impacted than other sectors.

Early-stage funding concerns

While overall funding is up, IVCA director general Sarah-Jane Larkin warned that early-stage funding is showing signs of concern.

“Deals in the €1 to €5m range fell by 20pc to €40.6m from €50.5m compared to the same quarter last year,” she said. “In addition, seed funding did not increase in line with the market in general. Seed funding rose by 9pc in this quarter to €18.9m from €17.3m, compared to a 41pc increase overall.”

Other figures for concern, the report found, were that deals of less than €1m among start-ups were down 7pc in this quarter and down 15pc for the year so far.

Software accounted for 30pc or €58.9m of funding in Q3. This was followed by life sciences (16pc), fintech (15pc), agritech (10pc), environmental (7pc) and other (22pc). For the first nine months of 2020, life sciences accounted for more than one-third (35pc) of total funding at €282m, followed by software at €192m (24pc) and fintech at €115m (15pc).

The biggest deal of the most recent quarter involved Dublin-based edtech software business LearnUpon, which raised more than €47m. There were other big funding deals for medical device start-up OneProjects, e-commerce financing and marketing analytics start-up Wayflyer, and agritech business MagGrow.

Colm Gorey was a senior journalist with Silicon Republic