Irish Startup Investment Plunged Last Year - here's why things are looking up for 2019

Some bumper deals in 2018 masked a worrying lack of early stage finance for growing firms. While 2018 was a year to remember for a handful of Irish tech firms announcing bumper funding deals, it was one best left behind for the local startup sector as a whole.

Medical device and pharma investments tend to be large as the research and development costs of bringing a product to market are high.

However these mega-rounds masked a severe shortage of early stage capital, a trend that threatens to have a long-term impact in the industry.

Downward

The Irish Venture Capital Association (IVCA)’s latest figures for VC activity in the country show the amount of money flowing into firms dropped 47% for the first nine months of the year when compared to the same period in 2017.

The tally for the first three quarters of 2018 came to €546 million, making it highly unlikely that the final annual total will come anywhere close to the previous year’s near-€1 billion sum.

IVCA director general Sarah-Jane Larkin said 2017 was a “bumper” year, however 2018 had under-performed expectations.

“It would have been hard to beat that or top that (2017 figure) as there were a couple of very significant deals, but I think we still would have expected 2018 to close higher than it’s going to close,” Larkin said.

“We would have hoped that the fall off wouldn’t have been as dramatic.”

Startups

Galway medtech firm Neurent was one of the funding success stories in 2018 when it raised €9.3 million.

However chief executive Brian Shields agreed that the landscape for raising money, especially at the earlier stages, has become very difficult in Ireland.

“I’ve talked to a number of people about this as they’re trying to do the same,” he said.

“In the case of life science, it’s difficult to get early stage venture capital interest,” he explained.

“If they’ve never done a pre-first-in-human study, a pre-clinical investment, are they likely to do it now with you?”

He said that Neurent has enough funds to see it through hiring – it recently grew from two people to seven – and the company is gearing up for clinical trials in 2019. It will likely be another 18 months to two years before Neurent seeks another round.

“That doesn’t mean we’re not speaking to people because it takes a long time to raise a round if you’re bringing in new investors,” Shields added.

Changes

Nicola McClafferty, a partner at Dublin- and London-based Draper Esprit, said she expects the “cyclical low” in VC funding to abate in the near-term.

However, she added that many government initiatives intended to drive investor activity continue to deliver lacklustre results.

One such scheme is the Employment Incentive and Investment Scheme (EIIS), a tax incentive for investors that has been dubbed unfit for purpose by various industry players.

Critics regularly take aim at the unattractive rates of tax relief, as well as Ireland’s high capital gains taxes on share sales.

The government promised some reforms of the scheme in October’s budget, although McClafferty is concerned these may be difficult for the government to push through as such changes can be “politically sensitive”.

“Anything along this line would be perceived as some tax cuts for the rich and tax cuts for business, and we’re just not in the political environment that can support that, which is just the wrong positioning,” she said.

“The positioning from a political standpoint is seen as that, rather than supporting core levels of the economy, early stage business and people taking risk to drive employment. Click to read the full article from FORA

RELATED READ from Fora

Why Ireland's drought of early funding could have a long-term impact on local startups

Share

JOIN OUR MAILING LIST

Contact Us

South East BIC CLG.
Unit 1B, Industrial Park
Cork Road, Waterford
X91 DT38

Tel: +353 51 356300

Social Share

Our Partners

 

 

We use cookies to improve our website and your experience when using it. Cookies used for the essential operation of the site have already been set. To find out more about the cookies we use and how to delete them, see our privacy policy.

I accept cookies from this site.

We use cookies to improve our website and your experience when using it. Cookies used for the essential operation of the site have already been set. To find out more about the cookies we use and how to delete them, see our privacy policy.

I accept cookies from this site.