Irish technology firms raised €739m in venture capital funding last year, a decrease of 25% on the 2017 figure, according to the latest VenturePulse survey from the Irish Venture Capital Association. The survey also showed the size of the average deal slipped by €300,000 as a result of a dip in the number of larger investments.
Sarah-Jayne Larkin, director general of the Irish Venture Capital Association, said that while funding is declining across all deals, the biggest declines are being seen in the €10m-plus deals. For companies that are scaling and raising over €10m, the deal flow is down 30% last year on the previous year.
She said that in comparison to other countries, the policy incentives here to mobilise private capital to the technology sector are just not as strong as they could be.
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Ms Larkin said there is a cyclical nature to the venture capital industry in Ireland and Enterprise Ireland's Seed scheme does run on a seven year timetable and 2018 was the final year of one scheme. It is anticipated that a new scheme will be launched this year and Ms Larkin is expecting a greater degree of finance in the market this year from state sources.
However, since 2008 members of the Irish Venture Capital Association managed to take that state funding and gear it up over 15 times and then use that funding to invest in Irish SMEs. Ms Larkin described the Enterprise Ireland scheme as a cornerstone of investment, but she added that access to additional capital is also very important.
Ms Larkin said the cyclic nature of the funding means that if a cash injection comes in during year one, and if it is a seven year cycle, it is likely there will be less money in the system seven years down the line. One thing the association would like to see is an overlap so there is not a year where one scheme is running dry and a gap until another one starts, she suggested.
The options available to start-ups have expanded in recent years, with bank lending coming back on stream, more private equity money, as well as newer models like crowd-funding and so on. Ms Larkin said some of the figures released today by her association would include those other sources like private equity.
She said that all sources of capital in the Irish system are really welcome, adding that likes of crowd-funding is starting to be seen at the level where companies are just at the start-up phase and raising their very first capital to get going.
The venture capital sector really comes into place when those companies are starting to grow and really need fast access to significant levels of capital to globalise and participate on a world stage. "There is room for all forms of capital in the Irish system," Ms Larkin stated.