A strong vote of confidence in Irish economy

KPMG has published its Venture Pulse Q4 2017 report, tracking venture capital (VC) activity around the globe. The report analyses the latest global trends in venture capital investment and revealed that 2017 provided decade-high figures with venture-backed companies raising $155 billion globally. Some $46 billion was raised in 2,662 deals during the fourth quarter of the year.

The funding upswing was also driven by a number of billion-dollar mega-deals over the course of the year, including six rounds of more than $1 billion in the last quarter. Overall, venture capital funding was up year-on-year across all regions, including Asia, the Americas and Europe.

This trend was also seen in Ireland. “Venture capital activity in Ireland remained very strong this year,” says KPMG head of technology and media and fintech lead Anna Scally. “This is consistent with what we are seeing internationally. In Europe venture capital investment hit record levels in 2017, with fourth quarter investment in European VC-backed companies raising $5.7 billion in 533 deals.”

A notable trend globally, as well as in Europe and Ireland, has been the significant increase in the median size of deals, according to Scally. “This is occurring because VC investors are continuing to invest in later stage companies. This trend can also be observed in Ireland, where for example Cubic Telecom raised a series C investment of $47 million during the year.”

Activity in the Republic of Ireland during 2017 was spread across a broad range of sectors

Irish companies are attracting larger-scale investments at an early stage too, according to the KPMG report. Examples include Pointy’s seed investment of $8 million, Plynk’s series A of $27 million and Jobbio’s series A of $14 million.

Activity in the Republic of Ireland during 2017 was spread across a broad range of sectors. Standout deals in life sciences included Silvercloud’s $8 million investment earlier this year; Atlantic Therapeutics’ $16 million deal and the $20 million secured during the last quarter by Nuritas which is led by female founder Nora Khaldi. In addition, Irish headquartered Itherum Therapeutics raised $57 million.

Venture capital funding

There was a significant increase in fintech companies securing VC funding in 2017 including student loan company Future Finance ($54 million), the $27 million investment in Plynk, while Corlytics and peer-to-peer lenders Grid Finance and Linked Finance all raised VC funding too.

In the services sector, telecoms company Blueface secured investment of €10 million towards the end of the year with NewsWhip Media raising $6.4 million earlier on.

Another noteworthy deal involved semiconductor company Arralis whose technology is being used in space. The Irish Times Innovation Awards 2016 winner secured €50 million in investment during the first half of 2017.

Scally says the KPMG Venture Pulse Report doesn’t include pre-seed stage investments such as those made by accelerators like NDRC, convertible debt investments, or post-venture and private equity investments. “So, a transaction like Volpi Capital’s €90 million investment in IT services company Version 1 isn’t captured but it is important nonetheless and was an important vote of confidence in an Irish IT services company by foreign investors.”

Another Irish deal not captured was AIB’s €30 million minority interest investment in TransferMate. “Again, this was an important transaction and a vote of confidence in an Irish founded international fintech player,” says Scally. “Ireland is doing well in terms of fintech generally and three Irish companies – Future Finance, Plynk and Leveris – were called out in KPMG’s 2017 Global Fintech 100, released in November 2017.

Financial muscle

Venture capital continues to play a very important role in financing innovative Irish companies, Scally continues. “It provides them with the financial muscle to accelerate their growth and compete internationally. The level of activity we have seen in the past year is a clear vote of confidence in Irish companies; many of the investors are international with deals being syndicated with Irish venture capital firms in many cases.”

Looking outside Ireland, Scally says VC investment into UK based companies was at its second highest level in a decade. “This was somewhat surprising given the economic uncertainty that exists in the UK as a result of Brexit,” she says. “Sectors attracting significant investment in the UK are fintech with TransferWise securing $280 million in the last quarter, life sciences, and other disruptive services including Deliveroo securing $482 million in Series F investment. The fall in the value of sterling may have assisted this, with international investors seeing value in the companies involved, while a number of the later stage deals in the UK is an indicator of VC investors following their money and participating in later stage rounds of investment.”

Turning to the future, she sees the latest EU Payments Services Directive (PSD2) creating new opportunities. “PSD2, which is now live since January 13th, 2018, is expected to cause more disruption in the payments arena and we expect to see new fintech companies exploiting the opportunity provided by open data. We are also likely to see new products and services from incumbent fintechs and indeed the banks upping the ante by offering consumers access to more services in order to compete with the fintechs. This in turn will drive more VC activity in the sector.”