Sharp decline in early-stage Irish start-up funding deals in 2020

7 Feb 2021404 Views

Gillian Buckley, chair of the IVCA. Image: IVCA

New figures from the Irish Venture Capital Association show that investors put money in safer bets during the pandemic.

Venture capital funding in early-stage start-ups in Ireland fell by almost a third in 2020 as the pandemic downturn took its toll on deal making.

While overall funding figures are up – with €925m invested in Irish SMEs last year compared to €820m the year prior – investments in early-stage start-ups dropped 32pc, from €285m to €194m. That’s according to the new figures from the Irish Venture Capital Association (IVCA), which deems an early-stage start-up deal to be €5m or less.

“Despite the positive overall figures in a difficult year, the data highlights a concern that early-stage companies are finding it increasingly difficult to raise funds,” Gillian Buckley, chair of the IVCA, said.

‘We won’t have successful high-growth firms raising €5m-plus in three years if entrepreneurial companies are starved of early funding now’
– GILLIAN BUCKLEY

This repeats a common concern flagged throughout 2020 as the pandemic tightened its grip – that investors would double down on existing portfolio companies to see them through the crisis rather than invest in new start-ups.

It is further reflected in the fourth-quarter numbers from the IVCA, where there was a particularly sharp decline for young companies. Deals under €5m dropped 50pc compared to the same quarter of 2019, falling from €82m to €41m.

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“It is vital that we nurture the pipeline and indigenous stars of the future. We won’t have successful high-growth firms raising €5m-plus in three years if entrepreneurial companies are starved of early funding now,” Buckley said.

The growth in the overall numbers in 2020 can be attributed to more deals above the €5m mark, with six companies raising more than €30m. Some of 2020’s bigger funding rounds were LearnUpon’s $56m investment round and Immedis’s $50m raise in December.

Other notable raises were OneProject’s €11m Series A and Buymie’s two rounds in quick succession that totalled more than €8m.

Sarah-Jane Larkin, director general of IVCA, said that despite the overall funding growth in 2020, the fourth quarter of the year was starkly different with numbers down 45pc year on year.

Life sciences was the outlier of 2020 funding, however, attracting the most investor attention. “This reflects Ireland’s growing reputation as a global centre of excellence in this sector,” Larkin said.

Software, fintech, environmental investments and agtech rounded out the rest of 2020’s funding activity.

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

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