Investments in Irish Small and Medium Enterprises (SMEs) rose to €1.35 billion in 2023, marking a 2% increase from the previous year, according to the VenturePulse report by the Irish Venture Capital Association (IVCA) and William Fry.
However, the fourth quarter saw a 16% drop in funding to €204 million, down from €244.6 million in the same period last year.
The first half of 2023 was particularly strong, with investments reaching €963 million. However, the second half saw a significant decrease, with investments totalling only €394 million. IVCA Chairperson, Denise Sidhu, noted that this trend aligns with the global VC funding landscape, which fell by 38% in 2023 and by 25% in the final quarter compared to the same period in 2022.
Sidhu highlighted that the year posed mixed fortunes for companies at different stages. Start-ups seeking less than €5 million had a positive year, while those seeking larger amounts faced more challenges. Deals in the €5-€10 million range fell by over a quarter to €105.5 million in 2023, and this trend accelerated in the fourth quarter, with deals falling to €31.8 million. The €10-€30 million category also saw a nearly half decrease to €208 million in 2023.
Sidhu expressed concern over the risk of innovative indigenous firms hitting a growth barrier due to the lack of locally sourced scaling finance. She welcomed Minister Coveney's move to publish the report of the Finance for Scaling Working Group, which includes actionable recommendations to support high potential firms to access scaling finance.
William Fry Corporate partner Mark Quealy noted, "The latest IVCA Venture Pulse results point to both the resilience of the Irish venture fundraising landscape and also some of the challenges currently facing those seeking to raise capital. There has been a significant slowdown in VC and PE investment globally in 2023 and Ireland, like its international peers, is mirroring this trend. Despite these challenges, the Irish venture capital community continues to be the main source of funding for Irish innovative SMEs both through direct investment and as the local lead investor for international syndicate investors."
Sarah-Jane Larkin, Director General, IVCA, commented on the over-reliance on international backers for scaling finance. International funding into Irish tech SMEs accounted for two-thirds of the total for 2023, with €745 million, or 55% of the total €1.35 billion, invested into eight companies.
The sector breakdown for the year reflected Irish innovative tech companies' participation in new technologies. Envirotech raised €612 million or 45% of total funds raised in 2023, followed by life sciences at €224.5 million (17%) and software at €110 million (8%). Artificial intelligence (AI) and machine learning represented 7% or €97.8 million of the total in 2023.
Funding in the €3 million-€5 million range increased by over a third to €40 million in the final quarter compared to the same period in 2022. Deals in the €1 million- €3 million category grew 170% to €63.7 million. Deals below €1 million grew by 8% to €8.6 million while seed funding also performed well, increasing by 58% to €63.6 million.
The top five deals in quarter four 2023 were EasyGo (envirotech) €30 million; LUMA Vision (life sciences) €20 million; Cloudsmith (software) €10 million; Alvarius (life sciences) €5.5 million and OOHPod (business services) €5.4 million.
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