Friday 21 October 2016

For tech startup cash, Dublin oozes while Cork snoozes

A breakdown of venture capital funding into Irish tech companies shows a sharp disparity between Dublin and the rest of the country. Our technology editor looks at the figures

Published 02/04/2015 | 02:30

Click to see a bigger version of the graphic
Click to see a bigger version of the graphic

When it comes to tech investment cash, Dublin is blowing the rest of the country away. A 41pc surge in Irish venture capital funding is being sucked up almost entirely by Dublin-based tech companies, with Cork missing out completely.

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In all, Dublin-based companies hoovered up €253m of disclosed venture-backed tech investments last year, twice the amount of the rest of the country combined.

By comparison, Cork firms attracted just €7.5m of declared VC funding.

Tech firms based in Limerick and Galway gained small chunks of the rest of the venture pot, with €31m and €30m respectively.

The overall figure for Ireland's venture capital spend last year was €401m, including a number of undisclosed investments. The figures come from the Irish Venture Capital Association.

Dublin also dominated the country in terms of individual funding rounds. Backers invested in 69 different tech and tech-related firms in the capital last year, with 40 throughout the rest of the country.

Next best was Galway, with 12 separate investments, while Limerick saw eight tech-funding rounds. Cork is the biggest underperformer in Ireland, with just six individual investments logged in 2014.

Outside Dublin, Galway showed the most evenly spread level of venture capital investment with Limerick's marginally higher investment figure due to a single €23.5m investment in AMCS, the waste recycling software firm founded by Jimmy Martin and Austin Ryan.

That Limerick funding round also pushed the average deal size in Limerick marginally above Dublin's, to €3.9m per investment. Dublin's average funding round was €3.7m, while Galway and Cork saw average rounds of €2.5m and €1.3m.

Belfast attracted €15m in venture-backed tech investment here.

The figures mean that venture capitalists are spending €200 per head of population in Dublin, compared to €161 in Limerick, €120 in Galway and just €15 in Cork.

Business software remains the most common tech activity for venture-backed Irish startups and companies, making up almost half of all Irish venture investments last year.

There was also a significant level of funding for Irish firms in the medical devices market, with 15 individual investments recorded, including the year's biggest round of €42.8m for Dublin-based breast-implant firm GC Aesthetics.

Electronic components is the third most popular technology category to receive investment here, with 13 separate rounds last year. Telecoms technology (10 investments) comes next, with financial technology (five investments), environmental technology (five investments) and biotechnology (five investments) following.

Overall, software companies outnumbered hardware companies three to one in ireland when it comes to garnering venture funding.

Seed rounds still dominate the number in venture capital investments here, with around half of all deals struck for amounts of under €1m. Around a quarter of deals involve sums of between €1m and €3m, while a further quarter involve investments of between €3m and €10m. There were only seven disclosed venture deals of over €10m in Ireland last year, three of which were for medical devices or healthcare technology.

The figures are based on activity recorded by the Irish Venture Capital Association. As such, they don't reflect all tech company activity, as many firms find funding through alternative means.

Nevertheless, they paint a picture of a market dominated by Dublin. With the exception of small medical tech ecosystems in Galway and Limerick, Dublin is grabbing the lion's share of investment and talent.

This is not a surprise, say some senior market players. "From what we see, about 75pc of funding is going into the Dublin area," says John Flynn, managing director of ACT Venture Capital and a board member of several successful tech firms.

"The ecosystem is simply stronger. There are way more elements in place, from an accelerator community to advisory and support services. That is probably leading to migration, too.

"You're seeing startups that might have stayed in other parts of the country but now go to the Dublin because that's where the services and ecosystem are."

A concentrated hub like this isn't unusual, says Flynn. "If you look to the US, what's happened there is that 90pc of capital gets invested in three geographic centres," he says.

"You have Silicon Valley, New York and Boston. Europe is going the same way. Already, 90pc of the funding is going to one of nine hubs around the continent."

Last year's cash haul was the biggest venture capital pot here in a decade. While medical tech firms grabbed some of the largest individual funding rounds (Mainstay Medical's €15m and GC Aesthetics' €43m rounds among them), homegrown software companies are surging ahead in Ireland.

The €401m raised here compares to the €7.9bn raised across all of Europe during the same period. This means that Ireland, with 1pc of the population, is taking about 5pc of the continent's tech investment cash.

It also signifies that, on a per capita basis, Ireland is close to the US tech funding scene. Last year saw $38bn (€35bn) in venture capital funding for US tech firms which is roughly the same per head of population as Ireland.

Venture funding prospects for 2015 continue to look positive, say market activists.

"There is still is a good stock of companies coming through," said Flynn. "They're in the right spaces, in internet and software, sensors and the internet of things. Connectivity is a huge theme, as is the whole app economy and analytics."

Software firms here are starting to think bigger, says Flynn.

"In the Irish market, there is still a lot of enterprise-focused businesses. But now we're seeing some of the scalability features that are common in consumer tech starting to see seep into enterprise tech."

However, tech firms face a number of hurdles to landing bigger rounds of funding.

"The challenges they have are really around attracting the right skillsets, from engineering and product managers," said Flynn. "That becomes even more important, and even more difficult, when you move into managerial roles for large capital rounds."

And venture funds themselves may face hurdles this year.

"Having completed investments, a lot of venture capitalists will now find themselves out of their primary funding phase," said Flynn. "So this year is a big year. To maintain momentum, they have to be successful in fundraising themselves."

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