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Start-ups warned of funding woes as crisis hits VC


Warning: KPMG's Anna Scally says new firms face challenges

Warning: KPMG's Anna Scally says new firms face challenges

Warning: KPMG's Anna Scally says new firms face challenges

Irish start-ups will face difficulties securing investment and won't see the kinds of valuations witnessed in the market just weeks ago as the coronavirus pandemic affects the venture capital (VC) world, they've been warned.

KPMG's latest Venture Pulse report shows Irish companies raised $123m (€111m) in venture capital funding in the first quarter of the year, with the bulk of it - $80m (€72.1m) - secured by Dublin-based fintech firm Fenergo.

Founded in 2009 by Marc Murphy, the investment valued the company at about $800m (€721m).

Cubic, a telecoms company whose technology is used by 65 mobile companies in more than 180 countries, raised $12.4m (€11.2m) in the period. The company was founded by tech entrepreneur Pat Phelan and is now headed by Barry Napier. The fundraising came just months after it secured more than €23m in backing from the European Investment Bank.

Smart energy company GridBeyond raised $11.7m (€10.5m) in the first quarter. It will use the money to boost its market share and expand into new territories.

"It's likely that Q1 figures show the calm before the storm in terms of the impact the global Covid-19 pandemic is having here in Ireland," said Anna Scally, a partner and head of technology and media at KPMG in Ireland.

"Irish companies raising funds in Q2 will likely find it more difficult to achieve the valuations they might have expected only a short time ago," she added. "Equally, while VC investors may have a substantial amount of dry powder, they will be under pressure to hold that money for a number of months to see how the situation plays out."

She predicted that young start-ups will be hit particularly hard.

"They're more high risk and come with a much longer lead time before we can see their products and services coming to the market," said Ms Scally.

"It's important these companies stay focused on their survival for now, to ensure they are in the strongest possible position when we reach more stable times."

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Global VC investment in the first quarter fell to $61bn (€55bn) from $65.6bn in the final quarter of 2019.

The number of VC deals in Europe fell to 923 in the first quarter from 1,262 in the final quarter of 2019.

But the amount of VC money invested in the last quarter in the region hit $8.8bn (€7.9bn), compared to $7.9bn in the previous three months.

KPMG said Europe's strength continued to be driven by the growing geographic diversity of investment.

It noted that the top five deals in the first quarter of this year included companies in four European countries - the UK, Germany, Sweden and France. Israel, which is also included in European deals by KPMG, was also counted as one of the five countries.

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