Thursday 13 December 2018

Concern as tech startups suffer VC funding fall

The IVCA’s Sarah-Jane Larkin said the decline was driven by a drop in volume. Photo: Chris Bellew/ Fennell Photograph
The IVCA’s Sarah-Jane Larkin said the decline was driven by a drop in volume. Photo: Chris Bellew/ Fennell Photograph
Adrian Weckler

Adrian Weckler

Venture capital funding has slumped in Ireland with a fall-off in major deals and seed funding, new figures show.

Investment was down by almost a third to €546m in the first nine months of the year, confirming a significant slowdown on 2017.

The drop-off in cash accelerated during the year, with the amount raised by tech firms and startups in the last three months just half what it was last year.

The figures, collated by the Irish Venture Capital Association (IVCA) and William Fry, suggest that the largest segment of funding to see a decline is in deals above €5m.

These have fallen in value and volume by around 30pc, according to the IVCA report.

This year has not seen the same number of headline-grabbing funding deals as 2017, with the exception of the €110m round landed by Dublin-based Intercom.

But seed funding, which helps startups, has also fallen compared to last year.

"Seed funding accounted for 23pc of the total funds raised in the third quarter," said IVCA director general Sarah-Jane Larkin. "The decline in seed funding is being driven by the volume of deals, which is down 32pc."

Ms Larkin said that international investors accounted for €300m (58pc) of the venture capital cash raised in the first nine months of 2018.

Irish venture capital firms have recently complained about rules that limit their ability to raise money from institutional funds.

A number of investors and business owners have also begun lobbying for greater tax breaks aimed at tech entrepreneurs and their staff in Ireland, claiming that lower UK tax rates now make it less attractive to start a business in Ireland.

"The third quarter confirms our earlier fears of a significant slowdown in the market this year," said IVCA chairman Alex Hobbs.

"We know that the Government is considering initiatives to mobilise capital to this sector. These figures illustrate that we urgently need to see a meaningful response and action to address this."

The reversal comes just as venture capital funding had exceeded €1bn in Ireland for the first time.

"This is of particular concern at a time of global economic uncertainty when we need to be doing all we can to boost our indigenous technology sector for the future," said Mr Hobbs.

"The gap is widening between countries' investment activities, and now is not the time for Ireland to fall behind."

Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business