VC investment into Irish firms plummeted 57% in the first quarter

Venture capital investment into Irish firms plummeted 57% between January and March, compared to the same period last year.

Irish businesses raised $172.8m during the period through 24 deals, down from the 25 worth $401m in the first three months of last year.

Rising interest rates, high inflation, worries about the banking system and the ongoing war in Ukraine, as well as wider geopolitical and domestic challenges, all contributed to the drying up of the flow of cash, KPMG's latest Venture Pulse report found.

"We have seen a very substantial fall off in VC investment in the first quarter of 2023, that's coming off a very strong very 2021 - and a very strong first half of 2022," said Anna Scally partner and head of technology and media at KPMG Ireland.

"The protracted war in Ukraine is having an impact, increasing interest rates, stubbornly high inflation, there are domestic and geopolitical challenges, to say the least, and in Q1 there were certainly challenges and concerns around the stability of the global banking system.

They have all played into the depressed figures we're seeing in quarter one."

Vivasure Medical, the Galway based medical device firm, secured the largest deal within the country during the period, raising $32 million.

But with less money spread out across roughly the same number of deals as Q1 2022, there was a clear shift in the strategy of VCs in the period.

"In Q1 '23 we didn't see any 'very substantial' deals - there was no $100m+ deals in the quarter," she said. "But there were good-sized deals into very attractive companies here in Ireland.

"There were also a number of earlier stage companies that did get funded, and that's the really good news in this quarter."

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The problem domestically was mirrored internationally, with global VC investment falling dramatically from $177.6 billion across 9,349 deals in the first three months of last year to $57.3 billion across 6,030 deals in the same period this year.

"Global venture capital investment fell 68% in this first quarter - so we're not an outlier, in fact we're performing better than some regions," Ms Scally said.

Bucking the trend though was US based payment firm Stripe, founded by the Irish Collison brothers.

The $6.5 billion it raised was by far the largest fundraise of the period anywhere in the world.

"That was the stand-out deal," she said. "There were lots of other very substantial deals globally, principally focused around alternative energy infrastructure including electronic vehicles and batteries, and that's not a surprise, either, given where we're at geopolitically."

KPMG is predicting that the current quarter will also be a challenging one for VC investment here, with investors exercising caution and assessing deals carefully.

"I think some of the factors that have led to the fall-off in the late '22 and into quarter 1 '23, I think they're going to continue into the next quarter," Ms Scally said. "Interest rates are going to remain challenging, and the other geopolitical threats are still there, so I don't think there's going to be a quick fix here.

"But I do think in the second half of the year we should expect to see a bit more confidence in the market, and hopefully an increase in investment in Irish early-stage and scaling companies."