Irish tech companies raised a record €963 million in funding from venture capital firms in the first half of the year, but the figures were heavily influenced by a small number of big deals while start-ups struggled to raise less than €1 million.
The VenturePulse survey from the Irish Venture Capital Association also highlighted a reliance on overseas investment. Even so, the overall figures showed funding up 24 per cent compared with the previous year, hitting an all-time high.
“Ireland well outperformed global trends,” said Denise Sidhu, chairwoman, Irish Venture Capital Association. “VC investment worldwide fell by over 50 per cent in the first half and by almost 50 per cent for the second quarter.”
The figures compare favourably with 2021 too, when tech companies here raised more than €1 billion for the first time.
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But Ms Sidhu also warned that the figures were skewed somewhat by large deals. “If you exclude deals over €30 million, then investment fell by 52 per cent for the second quarter compared with last year and by 16 per cent for the half-year.”
Among those deals were almost €60 million invested in electric vehicle charging company Weev in the second quarter and €65 million in artificial intelligence and machine learning company Everseen. Jolt Energy, meanwhile, raised €150 million in the second quarter of the year.
Meanwhile, the value of deals in the category under €1 million was down almost a third to €14.6 million, and down 33 per cent in the second quarter to €8 million. The total number of deals also declined, with only 27 under the €1 million mark in the first six months of the year. Thirteen of those deals were in the second quarter, a 55 per cent decline year on year.
There were some positive indicators though with seed funding rising by more than 80 per cent to €44.9 million in the second quarter.
Artificial intelligence made its entry into the top three sectors invested in during the first six months of the year, raising 9 per cent of the total or €83 million.
But a focus on clean energy and envirotech led the way in the first six months of 2023, accounting for more than half of the total funding raised And almost 80 per cent of the second-quarter’s tally.
The group also warned of the reliance on overseas investment, saying local sources needed to be put in place.
“The value of international investment in the first half has risen from 58 per cent of the total last year to over 80 per cent in 2023. As in the case of Foreign Direct Investment [FDI], there is a high risk of over-dependence on mobile international capital. We need to put in place alternative sources locally,” Ms Sidhu said.
“The global interest in our best companies shows that we have the technology and talent to create world beaters. In my view, the only reason holding us back from creating more tech equivalents of domestic global success stories like Kerrygold or Ryanair is lack of scaling finance.”
But IVCA is also calling on the Government to change the tax credit legislation covering research and development to make it easier to invest in Irish start-ups, and has suggested some of the proposed sovereign wealth fund be invested in domestic technology companies.
“Last year corporates in the United States accounted for 52 per cent of total venture capital investment. We should be tapping into our success in attracting the world’s largest multinationals by incentivising them to invest in innovative Irish companies,” said Sarah-Jane Larkin, director general of IVCA.
She pointed to the success of crowdfunding for tech companies in recent years, although the number of companies pursuing such a funding route is still relatively small. In the first six months of the year, sport tech company All About Sunday, software company Gigable and AI specialist Binarii all raised funding through platform Spark Crowdfunding, while the Happy Pear and Riley also opted to crowd source their funds.
“This suggests that there is an increased appetite among personal savers to invest in innovative SMEs, and this should be reflected in creating opportunities under the planned auto enrolment pension scheme,” she said.
