Pressure on Ireland as UK attracts one third of VC funding
Published 24/07/2015 | 02:30
A third of all venture capital funding in Europe in the second quarter took place in the UK, a new report shows.
This dominance chimes with what experts here have been saying about the favourable funding environment in the UK for start-ups and other businesses.
Experts have warned that Ireland is at risk of losing growing numbers of startup businesses to the UK where the tax regime for entrepreneurs is much more competitive, and the funding environment more advanced.
The study from KPMG and CBI Insights, published yesterday, notes that London has developed a strong startup community and culture, which has rippled across the UK, with $351.1m (€319m) invested via 49 deals in London in the second quarter.
Meanwhile, $23m was invested via three deals in Brighton and $11.1m in Cambridge.
Venture capital is a source of financing for new businesses. It involves pooling investors' cash to back startups and other businesses that are perceived to have long-term growth potential.
Venture capital-backed companies raised more than $32bn globally in the second quarter, across over 1,800 deals, bringing the total raised by VC-backed companies globally to $59.8bn for the first half of the year, according to the study.
The KPMG report shows that funding generally rose dramatically during the first six months of the year, with European venture capital investment reaching $6.6bn. The report also notes that during the first three months of the year, €120m was deployed by Venture Capital funds in Ireland.
Anna Scally, KPMG tax partner, said this is still a significant amount given Ireland's market size. "Venture capital is thriving around the world and Ireland is punching well above its weight," Ms Scally said. "A number of factors are driving this activity, including numerous disruptive technologies and applications which are spurring interest and investment from the VC community."
Dublin's first Commissioner for Startups, Niamh Bushnell, however, told the Irish Independent earlier this week that the environment in Ireland doesn't encourage people to get involved in investing or startups. She warned there were instances of Irish companies going to the UK for early stage funding.
Ms Bushnell said Ireland must allow for a culture of angel investment to develop, similar to what is taking place in the UK.
And Gary Leyden of NDRC, an early stage investor in Irish tech companies, also suggested Ireland should look to the UK and emulate its approach, saying London is aggressively marketing itself as a start-up hub.
Meanwhile, the KPMG report notes that overall, large deals are playing a major role in driving funding trends driven primarily by late-stage deals whose sizes are soaring worldwide.
The report says $100m plus mega round financings to VC-backed companies are also on the rise. In the first half of the year, there were more than 100 mega rounds, including 61 in the second quarter that cumulatively raised more than $16bn in investment.
"Low interest rates, combined with increasing participation by hedge funds, mutual funds and venture capital arms of large corporations means there is a tremendous availability of capital," said Brian Hughes, of KPMG venture capital practice in the US.
Separately, Dublin Chamber of Commerce warned this week that there was a risk of Irish companies relocating to the UK where the tax regime for entrepreneurs is much more competitive.
Dublin Chamber of Commerce said it has noted an increase in the number of businesses seeking to relocate away from Ireland to Britain, and warned the UK has achieved a number of competitive advantages within the last five years that pose a threat to Ireland.