Rising interest rates, high inflation and the Russian invasion of Ukraine have driven venture capital investment into Ireland down by more than 15 per cent compared with the second quarter of last year and fintech investment down to just $59 million (€54 million), two reports by KPMG show.
The quarterly Venture Pulse report shows that in the second quarter of this year Irish companies raised investment of just $172.5 million, a 17 per cent decrease from the $207 million recorded in the same period of 2022. The number of deals in the sector dropped from 44 last year to 33 in 2023 amid concerns of high inflation and rising interest rates.
The drop in investment mirrors the global trends, which faced a sixth consecutive quarter of declining investment rates. The second quarter saw global venture capital investment drop to $77.4 billion in 7,783 deals from the $86.2 billion of investment across 10,121 seen in the first three months of the year.
The biggest deals in the second quarter were a $53.6 million investment into Dublin-based unified payment platform NomuPay and medical technology company Neuromod Devices, which received $32 million in investment.
KPMG partner and fintech lead Anna Scally 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.”
Ms Scally said that sectors such as alternative energy, medtech and generative AI “will remain attractive for investment in the coming quarters”.
KPMG also released its fintech pulse report for the first six months of the year, which saw Ireland follow global trends, dropping significantly compared with the second half of 2022.
In Ireland the second half of last year saw fintech investment surge to $742 million across nine deals before falling back to $59.22 million in nine deals in the first half of 2023. The investment size in the second half of last year was influenced by a $676 million acquisition by JP Morgan of Cork-based share plan management software company Global Shares.
Ian Nelson, head of financial services at KPMG Ireland said: “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.”
Mr Nelson said that KPMG expect “funding to rebound when market conditions begin to even out”.
