Venture capital funding into Irish small and medium-sized enterprises was overwhelmingly dependent on international investors in the first half of the year, a new study has found, leaving the sector open to shocks from ongoing global geopolitical instability.
The Irish Venture Capital Association (IVCA) VenturePulse survey said a total of €578.4 million was invested into Irish small and medium-sized enterprises in the first six months of the year, a 10 per cent decline year on year. Of that figure, international investors accounted for 82 per cent of the funding, one of the highest levels on record.
IVCA chairman Richard Watson said it was “flashing red warning signals” that could impact future investment.
He also pointed to the heavy concentration in large AI deals in the US as a potential threat. “Just two frontier AI companies, Anthropic and OpenAI, sucked up 43 per cent or $217 billion of global start-up funding in the first half,” he said.
Deals worth less than €5 million fell in the six-month period, with seed funding down 23 per cent to €50 million and deals between €3 million and €5 million down almost 60 per cent to €21.5 million. There were no deals in the €10 million to €30 million range.
IVCA director general Sarah-Jane Larkin said the figures highlighted how a lack of domestic sources of funding is limiting capital formation.
The organisation has previously called for the introduction of a Government-convened fund-of-funds to pool investment, while minimising risk and boosting institutional backing into domestic firms, helping reduce dependence on overseas investors without material cost to the exchequer. The IVCA’s pre-budget submission said the economic impact could be “transformative”.
Among the deals done in the first six months of the year, life sciences and fintech companies were top, accounting for 26 per cent each of the total funding. That was followed by cybersecurity and software, which were both at 14 per cent.
Funding for AI and machine learning was 7 per cent. However, Larkin said this did not mean Ireland was being left behind. “It is unrealistic to expect a small nation like Ireland to produce the giant platform and frontier AI leaders of the US,” she said. “But AI is now embedded in the products and services of the vast majority of local VC-backed SMEs.”
The second quarter of the year showed an increase of more than 200 per cent year on year, reaching €356.7 million. However, the second quarter of 2025 was the worst in 10 years.
Fintech provider Fonoa, which closed a €94.4 million round, and cybersecurity firm Cloudsmith’s €61.5 million funding accounted for almost 44 per cent of total funding in the second quarter.
Among other big deals were SaaS provider CameraMatics, with a €49 million round, and drone delivery company Manna at €43 million.