Venture Capital Increased by 2% in 2023 despite a Challenging Second Half of the Year

Venture Capital
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Venture capital funding for Irish small and medium-sized enterprises (SMEs) increased by just 2% last year, despite a significant decline in the latter half of the year. According to the latest VenturePulse report from the Irish Venture Capital Association (IVCA) in collaboration with William Fry, a total of €1.35 billion was invested in SMEs over the twelve-month period. However, despite the overall growth for the year, funding in the fourth quarter actually decreased by 16% compared to the same period the previous year, amounting to €204 million.

Denise Sidhu, Chairperson of IVCA, commented, “The first half of 2023 showed promising signs with €963 million of investment, but the second half witnessed a notable decline with only €394 million.” She added, “This trend is somewhat expected in a year where global VC funding dropped by 38% in 2023 and by 25% in the final quarter compared to the same period in 2022.” Start-ups seeking funding of less than €5 million fared better than those aiming for larger funding rounds.

Funding in the €3 million to €5 million range surged by over a third in the final quarter compared to the same period in 2022, while those in the €1 million to €3 million category saw a remarkable growth of 170%, and those under €1 million experienced an 8% increase. However, in the €10 million to €30 million category, funding plummeted by nearly half to €208 million throughout the year, with the final quarter also witnessing a similar drop to €30 million compared to the same quarter in 2022. Funding in the €5 million to €10 million range also saw a decline of over a quarter to €105.5 million in 2023, with the downward trend intensifying in the last quarter.

“This data underscores the peril of highly innovative indigenous firms facing significant hurdles at a critical juncture in their growth trajectory due to the absence of locally sourced scaling finance,” remarked Ms. Sidhu. International funding into Irish tech SMEs constituted two-thirds of the total for the year, highlighting the dependency on overseas investments.

In terms of sector allocation, Envirotech secured 45% of the total funds in 2023, followed by life sciences with 17% and software with 8%. The rapidly expanding AI and machine learning segment represented 7%.

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