Venture capital funding into Irish SMEs increased by 19% to almost a quarter of a billion Euro or €231m in the third quarter of 2021, compared to €193m last year, according to the Irish Venture Capital Association VenturePulse survey published in association with William Fry.
Funding into SMEs, mostly tech firms, for the nine months to end September 2021 reached €872m, up 11% from €786m last year.
Nicola McClafferty, chairperson, Irish Venture Capital Association, said that a feature of the third quarter was a recovery in funding for start-ups. Seed funding, which typically represents first investments by equity investors, rose by 63% to €31m from €19m.
“In the early stages of the pandemic, many venture capital companies looked to back their existing investments and well established companies. Having managed that, there is a renewed appetite to focus on opportunities in early stage companies.”
She said this is reflected in fact that in the third quarter, deals in the €1-5m mark increased by 89% to €76m from €40m. Of these, the majority were under €3m.
Sarah-Jane Larkin, director general, IVCA said that the positive outlook for start-ups is enhanced by the Government’s Budget 2021 changes to the Employment Investment Incentive Scheme (EIIS).
“In addition, the planned €90m innovation fund, due to be launched early next year and focused entirely on early stage enterprises, should have a really positive impact on new and emerging companies. One consequence of the pandemic is increased interest in entrepreneurs and tech firms which have ideas relating to health as well as the digital economy.”
Deals in the €5-10m range in the third quarter at €70m showed little change from last year.
Investments over €10m more than tripled to €71m from €22m.
Sarah-Jane Larkin added that there were no deals in the €30m plus range. “So this was a solid quarter unaffected by an outlier mega deal.”
For the year to date, life sciences accounted for 38% or €329m of total funds raised, followed by software at almost a quarter, 24% (€207m) and fintech at 11% (€96m).
In the third quarter, environmental industries made an entry, representing 12% of the total.
Mark Quealy, a partner in our Corporate department commented that "The latest IVCA Venture Pulse survey figures show a continued resurgence in venture investment activity, building on the results of H1. The key sectors of life sciences, software and fintech dominated the funding, however 12% of activity was in environmental businesses reflecting the increasing prevalence of ESG considerations in driving investors' investment decisions."