Venture capital funds steer clear of start-ups because of the global pandemic

Start-ups struggled for investment in the 2nd quarter of the year as venture capital companies prioritised agencies already in their portfolios.

The Irish Venture Capital Association VenturePulse survey posted in affiliation with William Fry reports a close to 60 per cent slide in first time investment throughout the second quarter as a handful of start-ups raised their first equity rounds.

This comes whilst investment overall rose nearly 60 per cent to €364 million.

“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 to 24 months,” said Gillian Buckley, chairwoman of the IVCA.

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“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.”

Among the investments introduced during the quarter have been a €65 million increase by at-home testing organisation LetsGetChecked, and €seventy three million by fintech business enterprise Fenergo. Other wonderful offers have been an €18 million increase by analytics business enterprise Profitero and and €17 million for drug-delivery organization Avectas.

The investment was led by the life sciences sector during the sector, which accounted for 33 per cent of the funds closed withinside the 3 month period. That was observed by software program at 27 per cent and fintech with 21 per cent of the total.

IVCA director general Sarah-Jane Larkin stated the reduction in first round investment highlighted the need to inspire more funding in start-ups.

“In our pre-budget submission we will be recommending how to enable an innovation-driven economic recovery by attracting new private investors in start-ups through increased tax relief for high risk, early stage firms,” she said.

“This is particularly critical as many VCs have accelerated investments to ensure the survival of existing portfolio companies, leaving potentially reduced fund reserves for new investments.This will have an impact on future investment levels, particularly as the Covid-19 pandemic continues to disrupt the economy.”

For the primary six months of the year, venture capital and personal equity funding is 38 per cent in advance of last year at €593 million.

There was a substantial boom in big deals above €30 million level withinside the 2d quarter of the year, with deals between €10 million and €30 million up sixty eight per cent, and deals in the €five million to €10 million up forty per cent.

Deals under €five million fell by 7 per cent.