Venture Capital Dries Up For Startups

07 Sep 2020 | 12.05 pm

Venture Capital Dries Up For Startups

VCs focus on existing investments

07 Sep 2020 | 12.05 pm

Venture capital funding for new ventures fell by 60% through Q2 2020 with only a handful of startups raising their first equity rounds.

The Irish Venture Capital Association’s VenturePulse survey, compiled in association with William Fry, reports that VC funding into Irish tech firms recorded its highest quarter on record reaching €364m for the period April-June 2020, up 58% on the same period last year.

IVCA chairperson Gillian Buckley commented: “The fact that we recorded a record quarter in this period seems counter intuitive, but may be explained by VCs looking to assist client companies overcome the threats caused by the pandemic and upping their investment in this quarter to help them through the next 12-24 months.

Who raised how much through Q2 2020

“The fall in first time funding rounds is a major concern but understandable as VCs focussed on backing existing portfolios rather than seeking out new investments.”

A third of VC funding in Q2 went to life science companies, followed by software (27%), fintech (21%) and other (19%). For the half year for 2020, the VenturePulse survey finds that venture capital and private equity investment rose by 38% from €430m to €593m.

Fintech Trends

KPMG says that Ireland’s fintech sector saw a record period of activity in H1, with $329m recorded in M&A, venture capital and private equity transactions across eight deals.

The $162m acquisition of Prepaid Financial Services by Australia’s EML Payments was the largest strategic M&A deal of fintech globally for the period. The deal was announced in November 2019 but was renegotiated against the background of the global coronavirus pandemic and closed in March 2020.

Other notable deals in Ireland over the period include the $83m joint venture acquisition of Payzone Ireland by AIB and First Data and an $80m funding round by client lifecycle management company Fenergo.

Limerick-based CloudCards, developers of a cloud-based aircraft asset management software platform raised $2.2m in venture funding; Dublin-based Supply Finance, a provider of trade financing software for SMEs, raised $2m; and Circit, financial audit management platform developers, raised $1.2m in venture funding.

Anna Scally (pictured), partner and Fintech Lead at KPMG in Ireland, stated: “I expect interest and investment in Irish fintechs to remain hot in the second half of the year, particularly as UK and global fintechs work to ensure they are able to service their customers across Europe in the wake of Brexit.

“Globally over the remainder of 2020, we will likely see investors continuing to focus on late stage deals and safe bets given the current uncertainty.

“This will likely create challenges for less mature fintechs who could find themselves in cashflow difficulties and struggling to raise additional funding. In H2 there will likely be an increasing number of opportunistic investments by corporates and PE firms looking for good deals.”

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