Venture capital investment into start-ups fell by a third in 2020

Despite challenges caused by Covid-19, venture capital funding into Irish SMEs grew by 13% to €925m in 2020, compared to €820m the previous year, according to the Irish Venture Capital Association VenturePulse survey published today in association with William Fry.

However, deals under €5m, which represent start-ups and early-stage indigenous companies, fell by almost a third (32%) to €194m in 2020 from €285m the previous year.

Commenting on the findings, Gillian Buckley, chairperson, Irish Venture Capital Association said, “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.”

She said that the trend had accelerated in the fourth quarter of 2020 when deals under €5m fell by 50% to €41m compared to €82m in the same period the previous year.

“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.”

The overall growth in 2020 was accounted for by deals over €5m. Funding in the €5-10m range doubled to €204m in 2020 from €102m the previous year. In addition, deals above €10m were up by almost a third (31%) to €568m from €433m.

Sarah-Jane Larkin, director general, IVCA pointed to a significant softening in the market overall in the fourth quarter. Funding overall fell by 45% to €139m from €253m in 2019.

It was a good year for life sciences companies which raised €332m or over a third (35%) of 2020 funding followed by software (29%).

“Life sciences has topped the funding league for the second time in three years and has grown from just 4% of the total in 2004,” commented Sarah-Jane Larkin. “This reflects Ireland’s growing reputation as a global centre of excellence in this sector.”

The balance of funding in 2020 was made up of fintech (12%); environmental (5%); agtech (3%) and other (16%).

There was an increase in the value of deals over €30m. Six firms in 2020 raised over €30m or a total of €353m compared to three firms in 2019 which raised €147m.

Reflecting the fall off in early-stage funding, the overall number of rounds fell by 18% to 233 in 2020, from 285 in 2019.