Sowing the seeds of success: How founders should approach early-stage funding

Although there are more players than ever in the seed capital market, global uncertainty is making investors nervous. Frank Dillon reports

Those seeking seed funding should understand that not all money is good money and that company founders should do due diligence on investors just as investors do on them.

Founders with high-potential ventures often struggle to find the first stage of funding to get their businesses off the ground. That burden has become somewhat easier in the Republic in recent years, however, due mainly to a range of Government supports, along with additional involvement from the private venture capital sector.

Foremost among the State supports is the Seed and Venture Capital Scheme, administered by Enterprise Ireland. Over the past 30 years, this scheme has resulted in Enterprise Ireland becoming the largest venture capital investor in Europe, with analysis showing this has had a significant impact on investee firms in terms of employment, R&D expenditure, company valuations and the likelihood of securing follow-on funding. Its latest allocation for the period 2025-2029 is for a record €250 million.

State-backed schemes have expanded in scale and scope, with an increased focus on targeting high-potential sectors such as AI, climate tech and life sciences, says Ronan Murray, EY Ireland corporate finance partner.

“The Government’s continued commitment to supporting early-stage businesses is evident in the significant increase in funding allocated to the latest cycle of the Seed and Venture Capital Scheme. Alongside government initiatives, private venture firms and angel networks are becoming increasingly prominent, creating a more dynamic and accessible funding environment for early-stage founders. The Employment and Investment Incentive Scheme, meanwhile, is a big driver of the Irish angel network.” 

 Although the State’s support for qualifying early-stage ventures is nailed on, there is concern about private-sector appetite, with a recent report from the Irish Venture Capital Association noting that VC funding to SMEs has declined to its lowest level since 2015. Within that figure, seed funding is down 31 per cent over the past year.

“I think the seed capital market in Ireland has more players and is more dynamic than any time in the last number of years and I think there are a good range of options for companies,” says Irish Venture Capital Association director general Sarah Jane Larkin. “However, the global economic headwinds in the private capital markets are having a knock-on impact and in the short term. There is currently uncertainty and nervousness from investors.” Lorraine Curham, NDRC head of operations at Dogpatch Labs and founder of Fierce, a network backing women founders, acknowledges the huge role of Enterprise Ireland in providing seed capital but notes that founders need to remember that Enterprise Ireland’s remit is ultimately jobs and employment, not just start-up growth.

“Where it becomes more challenging is outside State support,” she says. “Angel capital and friends-and-family rounds are much harder to access, and Ireland is no different from elsewhere in that angel investors often prefer anonymity. Funding is still disproportionately accessible to founders from privileged networks. Female founders, minority founders and those building outside Dublin face higher barriers, and this inequality needs to be acknowledged if we want to strengthen the overall ecosystem.” 

 Curham’s advice for those seeking seed funding is to understand that not all money is good money and founders should do due diligence on investors just as investors do on them. “The right investor can open doors, help bridge rounds, or even join the team. The wrong one can distract or damage to the point that it kills the company.” 

 Protecting long-term interests also means understanding equity norms, she says. “As an example, at seed stage, giving away around 20 per cent is typical. If someone asks for 50 per cent, that’s a red flag – not only because it signals inexperience, but because it makes the company unattractive to later-stage investors.” 

 Curham adds that failing faster should be normalised. “Some start-ups are being artificially propped up with funding when it might actually be healthier for them to fail quickly and try again. A founder who has failed once and comes back brings speed, knowledge and resilience – and that’s exactly why many investors prefer second-time founders.” 

 Fergal McAleavey, corporate finance partner at EY Ireland, says founders should approach seed funding with strategic intent. Timing is critical in this regard, with investors being more receptive when a start-up demonstrates traction, product-market fit and a clear growth strategy that captures the imagination of investors.

“It is important that pitches are compelling and include validated business models, scalable customer acquisition plans and robust financial projections,” he advises. “Founders can be tempted to go with the ‘cheapest capital’, but the potential strategic value the right investor can bring to a business should also be considered.”