The Irish Venture Capital Association (IVCA) has warned that venture capital backing for Irish small and medium-sized enterprises (SMEs) is overwhelmingly dependent on international investors, leaving the domestic start-up scene vulnerable to global market turbulence.
Heavy reliance on overseas funding
The IVCA’s VenturePulse survey found that a total of €578.4 million was invested into Irish SMEs in the first six months of the year, a decline of 10% year-on-year. Of that amount, international investors supplied 82% of the capital — one of the highest shares on record, the association said.
IVCA chairman Richard Watson cautioned the concentration of foreign investment was a clear risk to the ecosystem. In the survey response he described the pattern as emitting “flashing red warning signals” that could suppress future funding for locally based companies.
“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,” the chairman said, emphasising the distortion created by very large offshore deals.
Smaller deals have thinned out
The survey highlighted a marked fall-off in smaller transactions: seed funding dropped by 23% to €50 million, while deals in the €3 million–€5 million band fell almost 60% to €21.5 million. The IVCA reported there were no recorded deals in the €10 million–€30 million range during the period.
IVCA director general Sarah-Jane Larkin said the pattern demonstrated how a shortage of domestic sources of capital was limiting the ability of Irish firms to form and scale. The association has previously urged the Irish Government to consider a publicly convened fund-of-funds to deepen institutional backing for domestic ventures while spreading risk.
Sector breakdown
Among the investments made, life sciences and fintech led the way, each accounting for 26% of the total. Cybersecurity and software were both responsible for 14%, while AI and machine learning accounted for 7%.
| Sector | Share of funding |
|---|---|
| Life sciences | 26% |
| Fintech | 26% |
| Cybersecurity | 14% |
| Software | 14% |
| AI / Machine learning | 7% |
What this means for Ireland — and abroad
The IVCA argues that increasing domestic institutional investment would reduce Ireland’s exposure to external shocks and could be achieved without large calls on the exchequer if structured as a fund-of-funds. The association’s pre-budget submission described the potential economic impact as “transformative”.
For international observers and investors, the survey underlines two dynamics: first, the global venture capital market remains highly skewed towards a few very large players and marquee deals — particularly in frontier AI — which can divert capital away from smaller markets; and second, smaller transaction volumes in seed and lower mid-stage bands may choke the pipeline of companies reaching scale.
For South African policy-makers and entrepreneurs watching global capital flows, the Irish case offers a cautionary tale about the limits of relying on foreign investors for start-up capital and the importance of nurturing domestic institutional investors to sustain innovation-led growth.
- €578.4m invested into Irish SMEs in H1, down 10% year-on-year.
- International investors provided 82% of that funding.
- Seed funding and mid-range deals contracted sharply, with no deals recorded in the €10m–€30m band.
The IVCA’s findings will feed into discussions ahead of Ireland’s budget cycle and inform debate on how public policy might mobilise domestic capital without exposing taxpayers to undue risk.
