European VC funding rises by 9pc as startup funding grows

Tech and biotech funding increased to €249.4m in Q1, up from €228.9m during the same period last year, according to the Irish Venture Capital Association

A jump in funding to early-stage companies helped grow the overall amount of venture capital (VC) by 9pc in the first three months of the year.

The figures, compiled by the Irish Venture Capital Association in association with William Fry, show that tech and biotech funding increased to €249.4m in Q1, up from €228.9m during the same period last year.

Funding appears to have shaken off any restrictions caused by Covid-19, said Gillian Buckley, chairperson of Irish Venture Capital Association. This is reflected in the fact that the number of deals increased by 65pc to 74, compared to 48 in the same quarter last year, largely driven by a welcome recovery in early-stage funding.

Deals valued at between €1m and €5m climbed by 84pc to €70.3m, while the number of transactions in this funding tier nearly doubled from 18 to 33. Deals of less than €1m rose by 53pc to €12.9m, compared to €8.4m in the same period last year.

Life sciences accounted for over half (€130m) of funding in this quarter, largely due to an €89m round for Dublin-based medical devices firm Mainstay Medical. The next highest category was software at €46.7m, representing 19pc of the funding total. Cybersecurity (€21.9m) was third.

Meanwhile, Irish organisations are to join in a European plan that aims to create 500 new tech unicorns in the coming years.

The initiative, called ‘Action Plan to Make Europe the new Global Powerhouse for Start-ups’, will focus on changing or introducing laws on tax incentives, employee stock options, a new ‘Start-up Green Card’, insolvency reform and public procurement.

The European Commission (EC) estimates there are nearly 80,000 startups in the EU, of which 51 are unicorns. The investments raised by European start-ups totalled $41bn (€33.7bn) in 2020, up from $36.6bn (€30.1bn) in 2019.

The Commission estimates that of 27 recently formed European unicorns, seven are “committed” to remaining within the EU after their funding rounds. This, the Commission says, paints a much bleaker picture of EU startups in comparison to the US, where 67 new unicorns were created in the same period.

Scale Ireland, which represents Irish startups and scale-ups, will join leaders from 26 other EU start-up organisations to present an action plan to EU Commissioner Mariya Gabriel, who has responsibility for innovation, research, culture, education and youth in the EU.

This is an important initiative as it has been drawn up by national start-up organisations across the EU, and it provides the European Commission with a very clear and comprehensive list of measures to help Europe become a global leader for start- ups, said ­Martina Fitzgerald, CEO of Scale Ireland. If most of these recommendations were enacted, it would be a game changer for the ­sector in Europe.