New figures show that venture capital funding into Irish SMEs increased by 41% to €192.8m in the third quarter of 2020 compared to €136.4m last year, despite the impact of Covid-19.

The Irish Venture Capital Association VenturePulse survey, published today in association with William Fry, said this follows a record second quarter when funding increased by 58% to €363.8m.  

It also shows that funding for the first nine months of the year rose by 39% to €785.7m from €566.3m the same time last year.

Today's survey shows that growth in the third quarter was largely driven by a fivefold increase in deals in the €5-10m range. 

The value of deals rose to €72m compared to the third quarter's total of €13.3m, while the number of deals in this category increased from two to eleven. 

Software accounted for 30% or €58.9m of the deals in the third quarter followed by life sciences (16%); fintech (15%); agtech (10%); environmental (7%) and other (22%).  

Gillian Buckley, chairperson of the Irish Venture Capital Association, said that VC firms were looking to up their investment in existing portfolio companies to overcome the threats caused by the pandemic and help them through the next 12-24 months. 

Ms Buckley said the overall performance on funding this year despite the pandemic might be partially due to the structure of the VC industry in Ireland. 

"High tech companies account for approximately 90% of VC funds raised in Ireland in recent times compared to the European average of 22%. Tech firms, from fintech to life sciences and software-as-a-service, have certainly faced Covid-19 challenges but are probably less impacted than in many other sectors," she added.

But Sarah-Jane Larkin, director general of the Irish Venture Capital Association, expressed concern about early stage funding. 

Sarah-Jane Larkin, the director general of the Irish Venture Capital Association

"Deals in the €1-5m range fell by 20% to €40.6m from €50.5m compared to the same quarter last year. In addition, seed funding did not increase in line with the market in general. Seed funding rose by 9% in this quarter to €18.9m from €17.3m, compared to a 41% increase overall," Ms Larkin said. 

She said that deals of less than €1m were down 7% in this quarter to €11m from €11.8m.