Irish VC funding fell flat in 2022 with a sharp end-of-year decline

12 Feb 2023

IVCA chair Leo Hamill. Image: Fennell Photography

The IVCA attributed the decline to a ‘flight’ from many international investors, due to issues in the global economy.

VC funding into Irish SMEs fell sharply toward the end of 2022, leading to a flat year overall despite previously positive results.

The total VC investment into Irish SMEs in 2022 was €1.33bn, representing no change compared to 2021. This is according to a new survey by the Irish Venture Capital Association (IVCA).

The latest IVCA survey shows the VC investment decline by 47pc in the fourth quarter of 2022, compared to the same period in 2021.

The sudden change represents a sharp turn compared to the third quarter of 2022, when VC investment jumped by 34pc to €309m compared to the same quarter in the previous year.

The IVCA said this change is due to the global economy, as Ireland witnessed a “flight” from many international investors.

IVCA chair Leo Hamill expressed concern as overseas VC investment in Ireland fell by 73pc in the fourth quarter to €58.3m, compared to €214m in the same period in 2021.

“The flight of international capital in the fourth quarter highlights Ireland’s exposure and the need to boost local sources of funding for scaling companies,” Hamill said.

Last September, the IVCA said that Irish tech companies had raised record levels of venture capital in the first half of 2022 – but warned that a slowdown in the second quarter could threaten the outlook for the rest of the year.

Despite this drop, Hamill said VC funding performed “reasonably well” overall in 2022 compared to global trends, in which overall funding dropped by 35pc to $445bn.

“It should also be remembered that VC funding in Ireland in 2022 was still 43pc ahead of 2020, despite all the global economic challenges and uncertainties faced last year,” Hamill said.

Best performers for Q4 2022

Overall, Ireland’s life sciences sector performed the best toward the end of 2022, representing 46pc of all VC investment that quarter and outshining every other sector significantly.

This was boosted by the largest VC deal Ireland saw toward the end of the year, which was the investment into biopharma company Carrick Therapeutics. This was the only deal above €30m reported for the fourth quarter.

Almost all deal sizes dropped compared to the same period in 2021, except for deals between €5m and €10m which saw a 3pc increase.

IVCA director general Sarah-Jane Larkin said seed or first round funding to start-ups grew by only 1pc in 2022, but the fourth quarter saw an 18pc drop to €40.2m.

“Economic and geopolitical headwinds experienced last year highlight the importance of having active Irish seed funds in the local market, able to invest in a counter cyclical manner and ensure that great founding teams can build companies in Ireland even during a global downturn,” Larkin said.

For the total year of 2022, the Irish fintech sector performed the best with 23pc of total VC investment, followed by life sciences at 21pc and software at 19pc.

Three of the five biggest deals in 2022 were in the fintech sector. These were the €134m raised by Wayflyer, €66m raised by TransferMate and €62m into Fonoa.

The software sector’s biggest deal for 2022 was €94m into Flipdish, while Carrick Therapeutics had the fifth biggest deal of the year.

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Leigh Mc Gowran is a journalist with Silicon Republic