How Has Ireland’s Startup Scene Been Impacted by the COVID Pandemic?

In this post, we’re going to take a look at some key points that illustrate how the pandemic has affected Ireland’s startup scene and what the future might hold.

Investors Have Become More Cautious

Smaller companies are finding it increasingly difficult to secure funding. Of the seventy-nine tech companies covered in the report mentioned above, only three early-stage companies (founded after 2019) managed to secure investment, amounting to a total of €340,000.

Investors have generally become more cautious, opting to direct capital to their existing portfolios to ensure resilience in the longer-term and supplement government aid packages. Risk aversion has increased substantially, and there is a general reluctance to funnel money into young companies.

Ireland is not unique in this regard. This trend of investor hesitance has been reflected across the world, and most developed economies have seen a marked reduction in individuals’ and companies’ willingness to part with their capital.

Without access to start-up funds, it has become difficult for start-ups to find the money necessary for growth. And while there is some scope for governments to fill this investment gap, it is vital to remember that the pandemic hit unexpectedly. Administrative departments, with limited access to funds, are still determining the best way to respond. The fact that many early-stage companies do not qualify for aid packages given their age is another factor that may prove disastrous in the longer-term.

Growth Is Often Attributable to COVID-19

Despite a generally gloomy picture, not all sectors have suffered as severely as others. One notable phenomenon is the myriad of investments in companies that have experienced high demand because of the COVID pandemic.

Delivery company Buymie, for example, secured €2.2 million in April and a further €5.8 million in June. Let’sGetChecked, a business specializing in diagnostics, raised €71 million to produce COVID testing kits in a Series C round. And several Irish companies in the medical field, including Kastus, RemedyBio, and Aquila, acquired funding from the European Innovation Council.

Many similar examples of investments spurred by COVID have been seen around the world. Global payroll and workforce management company Papayaglobal, which is based out of Tel Aviv and enables remote and distributed companies to process overseas payroll raised $40 million in back-to-back series A and Series B rounds, for example. Other foreign businesses have also received hefty investments.

The Longer-Term Outlook Is Poor

Most businesses are bracing for the after-shocks of the pandemic. And it is highly probable that a large number will be unable to adapt to post-COVID markets once the various government aid packages are stopped. Several well-known brands, along with a host of small and medium enterprises (SMEs), have already closed permanently.

According to data published by CRIF Vision, a credit risk analysis firm, the number of startups founded in the first half of 2020 represents the lowest figure recorded since 2005. The month of April, when the global pandemic began to gain pace, was the worst. And while information covering the second half of the year still needs to be published, it is unlikely that the situation improved from that date, when worldwide lockdowns came into full force.

Neil McAvoy of Enterprise Ireland, a government-backed investment body, said, “While the funding environment for the technology sector in Ireland during H1 proved remarkably robust, unsurprisingly H2 is likely to be challenging for companies and investors alike as the early and growth-stage funding market reacts to the Covid-19 economic shock.”

Conclusion

It’s essential to understand the dramatic changes in Ireland’s startup scene in the context of a truly global pandemic. Ireland has one of the most robust startup infrastructures in the world. And many of the problems currently affecting the corporate space are also being experienced in most if not all developed economies.

Moving forward, it is likely that Ireland will see continued investor reluctance and a much greater emphasis on resilience as opposed to fast growth. The government response, encompassing stimulus packages, tax breaks, and capital investment, will also play a significant role in determining how quickly emerging companies can recover and how attractive the market will appear to young entrepreneurs.