Seed funding deals have been drying up, new figures show

29 Mar 2021300 Views

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The numbers from TechIreland back up concerns about the dwindling investor cash flow to early-stage start-ups.

Latest start-up funding figures show once again that seed deals in Ireland are drying up.

Numbers from TechIreland for 2020 show that companies in total raised €1.19bn in funding throughout the year but the lion’s share of this were later-stage rounds.

While TechIreland’s figures tally higher than figures recently published by the Irish Venture Capital Association, which tracked €925m worth of deals in 2020, both reports found drop-offs in the level of seed funding.

The TechIreland report shows that funding deals in the €1m to €3m range were down from €82m in total in 2019 to €78m in 2020. This is a downward trend that has “been evident for the past few years”, it said.

Larger rounds dominated the field during the pandemic year with some highlights being LetsGetChecked and Fenergo. The number of companies raising between €5m and €30m has also more than doubled since 2018, according to TechIreland.

This 2020 trend of bigger rounds lends credence to the belief that investors have been reluctant to invest in young risky companies during the pandemic-fuelled downturn. Instead they are investing in shoring up existing portfolio companies or safe bets, if they are investing at all.

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“While we rightly celebrate some of the huge investments here, we always need to remember to support the vulnerable early-stage businesses that will be the giants of the next decade,” John O’Dea, chief executive of TechIreland, said.

Despite the shortfall in seed money, a number of programmes by Enterprise Ireland have continued to operate during the pandemic, such as New Frontiers and High Potential Start-ups, but these alone cannot plug the gap.

“Irish start-up funding, while challenging, remains robust,” Niall McEvoy, who leads Enterprise Ireland’s High Potential Start-up efforts, said. “We have more than 10 active institutional investors alongside Enterprise Ireland, a strong angel network in HBAN and European Angel Fund, good family office activity and now crowdfunding as a real option.”

TechIreland said that 2020 was a milestone year for investments in female-founded start-ups, which raised a record €105m in the year.

Health-tech and enterprise solutions accounted for the most investor interest in the year. Despite Fenergo’s large round, fintech was a distant third.

“Globally there has been a trend towards investment in later-stage companies,” Anna Scally, partner and fintech lead at KPMG, said. “It will be important to ensure that Irish fintechs don’t get left behind and that earlier-stage companies continue to attract investment to scale and compete internationally.”

Jonathan Keane is a freelance business and technology journalist based in Dublin

editorial@siliconrepublic.com