Venture capital funding falls by 20% in third quarter to €136m but strong growth in deals under €10m

Overall venture capital funding into Irish firms fell by 20% to €136m in the third quarter of 2019 compared to last year, according to the Irish Venture Capital Association VenturePulse survey published today in association with William Fry.

Funding for the first nine months of the year rose slightly by 3.7% to €566m from €546m in the same period last year.

“There has been a notable decline in larger deals, above €10m so far this year,” commented Neil McGowan, chairman, Irish Venture Capital Association. “But these deals are lumpy by nature. Thanks to Government support, there has been a strong recovery in seed funding and deals below €10m which is very pleasing to see.”

He referred to a 36% increase in the number of companies achieving investment up to €10m. This rose from 139 in the first nine months of 2018 to 189 in 2019. This figure is also up 11% for the quarter versus the same period last year.

Seed funding in the third quarter is up 30% on the same period last year. The number of companies which have raised seed funding this year to date is up 90%.

Sarah-Jane Larkin, director general, IVCA, highlighted a decline in the proportion of funding coming from overseas investors with a fall of 60% for the quarter and 40% in the year to date.

“This is again due to the decline in the number and amount of investment in larger funding rounds. Major overseas venture capital investors are less attracted by deals below €10m which have characterised the Irish market this year.”

She said that the reduction in overseas investment emphasised the need to introduce policy initiatives to unlock greater local private sector funding into domestic innovative companies, as happens in other European countries.

“While they remain an important player in the Irish market, as a nation we should not be overly dependent on overseas investors but create the environment locally to create Irish multinational companies.”

Software accounted for 34% of funding in the third quarter. A surprising entry in the top three was food and drink at 26%, partly due to a number of whiskey firms raising funds including West Cork Distillery (€15m), Nephin (€2.5m) and Chapel Gate (€1m). Life sciences accounted for 14%.