VC funding increases 41% to €193m in third quarter despite Covid-19

Despite the impact of Covid-19, venture capital funding into Irish SMEs increased by 41% to €192.8min the third quarter of 2020 compared to €136.4m last year, according to the Irish Venture Capital Association VenturePulse survey published today in association with William Fry.

This follows a record second quarter this year when funding increased by 58% to €363.8m.

Funding for the first nine months of the year rose by 39% to €785.7m from €566.3m in the same period last year.

Growth in the third quarter was largely driven by a fivefold increase in deals in the €5-10m range. Value rose to €72m compared to the third quarter of 2019 of €13.3m. The number of deals in this category increased from two to eleven.

Commenting on the apparent resilience of VC funding in the face of Covid-19, Gillian Buckley, chairperson, Irish Venture Capital Association, said, “We may be seeing a continuation of the trend in the second quarter when VC firms looked to up their investment in existing portfolio companies to overcome the threats caused by the pandemic and help them through the next 12-24 months.”

She added that that the overall performance on funding this year despite the pandemic might be partially due to the structure of the VC industry in Ireland. “High tech companies account for approximately 90% of VC funds raised in Ireland in recent times compared to the European average of 22%. Tech firms, from fintech to life sciences and software-as-a-service, have certainly faced Covid-19 challenges but are probably less impacted than in many other sectors.”

However, Sarah-Jane Larkin, director general, Irish Venture Capital Association expressed concern about early-stage funding. “Deals in the €1-5m range fell by 20% to €40.6m from €50.5m compared to the same quarter last year. In addition, seed funding did not increase in line with the market in general. Seed funding rose by 9% in this quarter to €18.9m from €17.3m, compared to a 41% increase overall.”

In other indicators of the pressure on start-ups, she said that deals of less than €1m were down 7% in this quarter to €11m from €11.8m. Deals in this category for the year to date dropped by 15% to €32.3m from €38m.

Software accounted for 30% or €58.9m in the third quarter followed by life sciences (16%); fintech (15%); agtech (10%); environmental (7%) and other (22%).

For the nine months to date, life sciences accounted for over a third (35%) of total funding at €282m followed by software, €192m (24%) and fintech, €115m (15%).