'Flashing red warning' as Ireland overexposed to overseas investors

Irish Venture Capital Association Sarah-Jane Larkin, director general, and Richard Watson, chair, IVCA. Picture: Fennell Photography

The high levels of international investment dominating equity funding for Irish SMEs is a "flashing red warning signal" that Ireland is overexposed to overseas investors, according to the Irish Venture Capital Association (IVCA).

The IVCA Venture Pulse survey published on Sunday afternoon showed venture capital funding into Irish SMEs fell by 10% to €578.4m in the first half of 2026. Deals involving two companies, fintech provider Fonoa (€94.4m) and cybersecurity firm Cloudsmith (€61.5m) accounted for almost 44% of the Irish second quarter total. Other major rounds in the quarter were SaaS provider CameraMatics (€49m) and drone delivery company Manna (€43m).

The IVCA report said that while the second quarter showed an increase of over 200% to €356.7m, this compares to the same period last year which was the worst in 10 years.

Richard Watson, IVCA chairperson, said: “International investment as a percentage of the total reached 82% for the first half and 80% for the quarter. These levels are flashing red warning signals as they represent some of the highest on record and emphasise our over exposure to overseas investors.” 

Mr Watson said that ongoing global geopolitical instability, including the Iran war, as well as US capital concentration in mega AI deals, could impact future international VC investment into Ireland. “Just two frontier AI companies, Anthropic and OpenAI, sucked up 43% or $217bn of global start-up funding in the first half," he said.

Deals between €3m-€5m fell by 58% to €21.5m from €50.7m in the same quarter last year. Seed funding, or first rounds by SMEs, fell 23% to €50m.

Life sciences and fintech companies led the way in funding in the first half of the year in Ireland, both accounting for 26% of the €578.4m total, followed by cybersecurity and software (both 14%).

All deal ranges in Ireland below €5m fell in the first half of the year.

“This and the lack of any deals in the €10m-€30m range in the second quarter highlight the extent to which the dearth of domestic sources of funding is limiting capital formation, even with the support of the Seed & Venture Capital Scheme,” said IVCA director general Sarah-Jane Larkin.

AI and machine learning represented 7% of the first half total. “This does not mean we are being left behind in AI,” commented Sarah-Jane Larkin. “It is unrealistic to expect a small nation like Ireland to produce the giant platform and frontier AI leaders of the US. But AI is now embedded in the products and services of the vast majority of local VC-backed SMEs.”

The Irish Venture Capital Association VenturePulse survey published in association with WIlliam Fry is recognised by the venture capital industry, government and international organisations, including the OECD, as the most up-to-date source of fundraising activity in Ireland.

The data covers equity funding raised by Irish SMEs and other SMEs headquartered on the island of Ireland from a broad range of investors.