Venture Capital investment declined in Ireland and globally for the third quarter, according to the Q3 2022 edition of the KPMG Venture Pulse.
Using data from PitchBook, KPMG counted $108m raised by Irish firms across 28 deals.
This is a significant drop from the previous quarter which saw Irish companies raising VC investment of $207m.
Activity levels in Ireland followed the global trend, where the number of international VC deals plummeted from $137bn in Q2'22 to $87bn in Q3'22, the lowest level since Q4'17.
This quarter’s largest deal was the $62m raised by Dublin-based developer of tax automation software, Fonoa. The next biggest deal by size was the $7.3m raised by ID-Pal.
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KPMG partner Anna Scally (pictured above) commented: “Significant market volatility, ongoing geopolitical and economic turmoil have led to a continued and significant cooling of global VC funding.
“While the number of sectors saw declining investment in Europe during Q3, VC investors continued to show strong interest in cybersecurity.
“We see some positive and negative trends in the Irish VC market. There is still a reasonable number of companies managing to secure funds in the Irish market.
“However, there are indications that VC investment is going into more developed companies that have products/services ready for the market. That means less money is being invested into earlier-stage companies.
“We need investment in early-stage start-ups if we are to create the funnel of companies necessary to ensure that we have companies capable of scaling and competing globally,” Scally added.
“It is also critically important that we start to see the deployment of the €90m Innovation Seed Fund Programme launched earlier this year.”
Other notable Q3 deals include Xunison, the developer and provider of smart devices, which raised $3.45m; VRAI, the virtual reality company which raised $ 3.42m; and Yonder, the health and pension benefits platform raised $2.69 million.
KPMG surmises that VC investors took more time to evaluate deals than in recent quarters, conducting additional due diligence and focusing on profitability and business model sustainability.
As a result, VC investors flocked to the B2B space, particularly solutions focused on improving operational efficiencies and employee productivity.
Energy, healthtech, and cybersecurity also showed resilience in the face of current market dynamics.
KPMG expects global VC investment to remain subdued in the final quarter of 2022.
“While the strongest companies will continue to attract VC funding, down rounds will likely become more common, and some start-ups will fail to raise funds,” Scally explained.
“M&A activity is expected to increase as some companies consider alternatives to IPO exits and start-ups unable to obtain additional financing look to sell.”
