33 venture capital (VC) deals closed in Ireland in Q2'23, worth $172.5 million, down 17 per cent from Q2’22, according to the Venture Pulse Q2’23 report. However, investors are still looking for innovative companies to invest in, says KPMG’s Head of Technology and Media Anna Scally.

The latest edition of the KPMG Venture Pulse report reveals that venture capital (VC) investment in Ireland experienced a decline of 17 per cent in Q2'23 compared to the same quarter last year.  Economic and geopolitical challenges continue to impact VC investment across regions, including Europe. Meanwhile KPMG’s Pulse of Fintech report for H1’23 has also been released, showing fintech activity also declined significantly in the first half of this year.

According to the quarterly Venture Pulse report, Irish companies secured $172.5 million across 33 deals in Q2'23, down from $207 million recorded in 44 VC deals during Q2'22.

Globally, the VC investment landscape faced its sixth consecutive quarter of decline, with Q2'23 witnessing a drop from $86.2 billion across 10,121 deals in Q1'23 to $77.4 billion across 7,783 deals. VC investment in Europe declined for the 4th consecutive quarter, reaching $13.5 billion in Q2’23, down from $14.4 billion in Q1’23.  

Market challenges and impact on VC investment

The slowdown in VC investment in Ireland is influenced by multiple factors, including increasing interest rates, high inflation, and geopolitical issues such as the protracted war in Ukraine.

Ireland's start-up ecosystem has demonstrated resilience despite the challenging environment, with diverse start-ups attracting VC funding. Three sizeable deals by Dublin-based companies were among the highlights of Q2'23. This quarter's most significant deal was $53 million raised by unified payments company NomuPay. The next biggest deals by size were the $32 million raised by medical device company Neuromod, and renewables-focused energy transmission company SuperNode raised $17 million.

"High-priority areas like alternative energy, medtech, cleantech, fintech, artificial intelligence and generative AI will remain attractive for investment…"

Anna Scally, Head of Technology & Media

Early-stage companies secure investment

But early-stage companies also managed to secure funding this quarter. Nory, the AI-powered operating system for the hospitality industry raised $7.71 and Cilter, which develops embedded child-protection software for smartphones that detects and blocks harmful content, raised $1.84.

Both companies are finalists in the KPMG Global Tech Innovator competition in Ireland this year, the winner of which will be announced in early September. In addition, Irish interest elsewhere in Europe in Q2'23 included Jolt Energy, which raised $165 million this quarter.  Jolt Energy was founded by Irish entrepreneurs, who focused their start-up on the German market given its large EV potential.

The challenging economic environment

Commenting on VC activity in Ireland during Q2'23, Anna Scally, Partner, Head of Technology and Media in Ireland, said:

"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. With a higher interest rate environment, investors have more choice as to where to invest their money.

This environment makes it more challenging for funds to secure investment and ultimately for companies to secure VC investment. However, investors are still looking for that sometimes elusive combination of innovation, value and opportunity, and great businesses will continue to secure funding.”

Trends to watch for in Q3’23

"As VC investors in Ireland continue to adopt a cautious approach, they are expected to keep a close eye on the market's trajectory and anticipate improvements. High-priority areas like alternative energy, medtech, cleantech, fintech, artificial intelligence and generative AI will remain attractive for investment in the coming quarters", said Anna Scally.

Venture Capital: Key global highlights – Q2’23

  • Global VC investment fell for the 6th consecutive quarter – hitting only $77.4 billion in Q2’23—the lowest level of quarterly investment since Q2’20.
  • VC investment in the Americas was $42.9 billion across 3,360 deals in Q2’23, a decline from $47.7 billion across 4,009 deals in Q1’23.
  • VC investment in Asia dropped from $22.9 billion across 3,148 deals to $20.1 billion across 2,395 deals between Q1’23 and Q2’23.
  • In Europe, VC investment fell from $14.4 billion across 2,676 deals in Q1’23 to $13.5 billion across 1,861 deals in Q2’23.
  • Global Corporate Venture Capital-participating investment was also slow in Q2’23, accounting for $39.7 billion in investment, compared to $45.9 billion in Q1’23.
  • Global first-time VC financing remained weak in H1’23, accounting for just $17.1 billion globally.
  • Global exit value increased slightly from a record low of $45.5 billion in exit value in Q1’23 to $51.5 billion in exit value in Q2’23.

The Venture Pulse report produced by KPMG analyse the latest global and Irish trends in investment data and provide insights from both a global and regional perspective. All figures cited are in USD; data for the reports is provided by PitchBook.

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