KPMG says venture capital in Ireland declined 17pc in 2023

Venture capital (VC) funding has declined in Ireland this year, according to new figures collated by KPMG.

The consulting firm’s Venture Pulse report into general VC funding showed that the value of the venture investment it tracked in Ireland, at €159m, was down 17pc in the first half of 2023.

A second report from the organisation, Pulse of Fintech, also showed a decline in funding for the financial technology sector, albeit one that was affected by an unusually large transaction in 2022.

The figures come against a backdrop of falling venture funding worldwide, reflecting higher interest rates, high inflation and ongoing disruption from the Ukraine war.

However, KPMG said that its figures were not collected itself, but based on looking at what US-based venture firm Pitchbook had reported for Ireland.

The KPMG figures paint a gloomier picture than those recorded by the Irish Venture Capital Association (IVCA), which measures a wide range of deals concluded in Ireland.The IVCA’s most recent report, compiled with William Fry for the first quarter of 2023, showed that funding into Irish SMEs rose by almost a third (32pc) to a record €502m in the first quarter of 2023, compared to €380m in the same period last year.

That tally was significantly driven by a €300m deal by Cork headquartered energy company Amarenco in March.

But even excluding deals above €30m, the IVCA figures still reported a rise of 70pc to over €200m for the first three months.

In Ireland, the biggest deal so far this year is the Dublin-based payments firm NomuPay, which raised almost €50m and is largely based on the remnants of Wirecard.

Other significant deals this year include Neuromod (€28m), Fire1 (€27m), Supernode (€16m), Assure Hedge (€15m) and Astatine (€15m).

Irish-led firms abroad saw some substantial funding activity, led by Jolt Energy (€142m), which is focused on the German market.

“VC funds benefited significantly in the years prior to 2022 when interest rates were low and non-traditional investors were looking for alternative investment opportunities,” said Anna Scally, partner and head of technology and media for KPMG in Ireland.

“With a higher interest rate environment, investors have more choice. This environment makes it more challenging for funds to secure investment and ultimately for companies to secure VC investment. However, investors are still looking. High-priority areas like alternative energy, medtech, cleantech, fintech, artificial intelligence and generative AI will remain attractive for investment in the coming quarters.”

The KPMG analysis reported that Ireland is reflecting the global trend with deals dropping from €56bn (across 2,885 deals) in the first half of 2022 to €46bn (across 2,153 deals) in the first half of 2023.

In the Europe, Middle East and Africa region, the KPMG study says, financial technology funding dropped by more than 50pc.

“It’s not a surprise that fintech funding has declined in the first six months of 2023, given the enormous headwinds pressuring the market at the moment,” said Ian Nelson, head of financial services at KPMG Ireland.

“However, our long-term view is that there are strong business cases for many subsectors within fintech to remain robust, notably within regtech, payments, insurtech and wealthtech.

"We expect that funding will rebound when market conditions begin to even out, if not necessarily to the record level experienced in 2021.”

reporting on: www.independent.ie