Irish tech venture capital in free fall as funding plummets 25pc in 2018

21 Feb 2019513 Views

Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Pin on PinterestShare on RedditEmail this to someone

Image: © weerapat1003/Stock.adobe.com

Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Pin on PinterestShare on RedditEmail this to someone

Figures buoyed up by a rebound in seed funding.

Venture capital funding into Irish technology firms fell by 25pc to €739m in 2018.

The picture continued to worsen in the final quarter of the year as funding declined 35pc to €115m in Q4, continuing the trend of previous quarters, as reported by the Irish Venture Capital Association (IVCA) VenturePulse survey published today (21 February) in association with William Fry.

‘Seed funding rebounded strongly … But this has not compensated for a decline overall, which is a concern at a time of international uncertainty when we should be investing in indigenous tech companies’
– ALEX HOBBS

In the third quarter funding plummeted by 47pc year on year and yesterday (20 February) we reported how the Irish venture capital scene was said to be one of the worst in Europe right now by NimbleFins.

The figures will only add to calls for more realistic entrepreneurial tax reliefs such as those that exist in the UK, an overhaul of Capital Gains Tax rules and the creation of a funding climate where entrepreneurs will be able to invest in other entrepreneurs.

The average deal size in 2018 fell from €3.5m to €3.2m, driven by a decline in larger investments of more than €10m. These were down 30pc on 2017 levels with companies in this category raising €432m in 2018 compared to €610m in 2017. Only 12 companies raised more than €10m in 2018.

Two massive funding deals in 2018 alone – one in Dublin’s Intercom ($125m) and Limerick’s AMCS (circa €100m) – mask what is increasingly a volatile situation.

“If you strip out the two investments in 2018 and the one in 2017 of more than €100m, then the decline year on year was 40pc,” admitted Alex Hobbs, chair of the IVCA.

Silver lining not enough for scale-ups

The only silver lining in the figures is that seed funding is appearing to rebound.

“Seed funding rebounded strongly in the final quarter, achieving its highest quarterly total of nearly €20m across 50 companies,” Hobbs continued. “But this has not compensated for a decline overall, which is a concern at a time of international uncertainty when we should be investing in indigenous tech companies.”

IVCA director general Sarah-Jane Larkin said that while the rebound in seed funding is encouraging, the real crisis point is ensuring there is sufficient access to later-stage capital for companies as they scale and generate jobs.

She added that the importance of a vibrant Irish VC industry with global – especially US and UK – relationships is once again emphasised by continued strong support from international players.

“The Irish venture capital community continues to be the main source of funding for Irish innovative SMEs, both through direct investment and as the local lead investor for international syndicate investors who accounted for 50pc of the funding raised by Irish SMEs in 2018.”

She pointed out that since the onset of the credit crunch in 2008, in excess of 1,550 Irish SMEs have raised venture capital of €5.5bn.

These funds were raised almost exclusively by Irish venture capital fund managers who during this period supported the creation of up to 20,000 jobs, attracted more than €2bn of capital into Ireland and geared up the State’s investment through the Seed and Venture Capital Programme by almost 16 times.

John Kennedy is an award-winning technology journalist who served as editor of Siliconrepublic.com for 17 years.

editorial@siliconrepublic.com