During the peak of the Covid-19 outbreak, first time funding into Irish tech start-ups during April-June 2020 fell by almost 60% with only a handful raising their first equity rounds.
Simultaneously, venture capital funding into Irish tech firms overall recorded its highest quarter on record reaching €363.8m for the year's second quarter.
This is a 58% on the same period last year, according to the Irish Venture Capital Association (IVCA) VenturePulse survey published yesterday.
A third (33%) of VC funding in the second quarter went to life science companies. This was followed by software (27%); fintech (21%) and other (19%).
The second quarter showed a 100% increase in large deals above €30m. There were also significant increases of 68% between €10-30m and 40% in the €5-10m range. The only deal size to fall were of those less than €5m which are down 7%.
For the half year, the VenturePulse survey finds that venture capital and private equity investment rose by 38% from €430m to €593m.
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Gillian Buckley, chairperson of the IVCA said: “The fact that we recorded a record quarter in this period seems counter intuitive but may be explained by VCs looking to assist client companies overcome the threats caused by the pandemic and upping their investment in this quarter to help them through the next 12-24 months.
“The fall in first time funding rounds is a major concern but understandable as VCs focussed on backing existing portfolios rather than seeking out new investments.”
Sarah-Jane Larkin, director general at the IVCA
Sarah-Jane Larkin, director general at the IVCA added: “The collapse in first round funding highlights the need to encourage more investment in start-ups. In our pre-budget submission we will be recommending how to enable an innovation driven economic recovery by attracting new private investors in start-ups through increased tax relief for high risk, early stage firms.
“This is particularly critical as many VCs have accelerated investments to ensure the survival of existing portfolio companies, leaving potentially reduced fund reserves for new investments. This will have an impact on future investment levels, particularly as the Covid-19 pandemic continues to disrupt the economy.
“The Employment and Investment Incentive Scheme (EIIS) provides tax relief of up to 40% but investors naturally tend to gravitate towards lower risk investment areas such as property or nursing homes. We need to encourage more private investment in higher risk, high tech start-ups by increasing tax relief in these companies to a much higher level than the current 40%.”
The IVCA said its data covers equity funds raised by Irish SMEs and other SMEs headquartered on the island of Ireland from a wide variety of investors, and that this research is the result of detailed information supplied internally by members of the IVCA and from published information where IVCA members were not involved.
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Source: Written from press release
