So far, 2022 has seen a major pullback from investors and venture capitalists towards tech. Known as the “tech slide”, sentiment towards tech stocks and startups has looked gloomy, with comparisons to the dot com bubble at the turn of the century.
Withdrawal from tech is largely attributed to global economic and political factors. Financial stimulus by world governments in response to COVID-19 alongside supply shortages has created an inflationary nightmare. With central banks introducing interest rate hikes, and unease over the invasion of Ukraine, easy capital into more speculative investments such as tech start-ups has begun to dry up.
As Think Business outlines, however, Irish tech startups are doing surprisingly well so far, with proptech and female venture capital also shining. With significant economic pressures at play, however, some downside movement is expected.
Irish VC funding data
According to TechIreland’s latest data, in the first half of 2022, 91 Irish startups have managed to raise €746.2 million between them.
While this is 20 percent down from the highs of 2021, it was always unlikely 2022 would match the amount of funding from that period when “cheap money” from fiscal stimulus was still floating around.
As warned by John Collins, in his recent piece for The Currency, however, this data is somewhat skewed.
Just 3 of these 91 companies – Wayflyer, Flipdish, and TransferMate – make up 40 percent of the amount raised, around €306 million. The remaining 88 companies were responsible for €440 million with most capital for Irish startups flowing to larger companies.
Bigger investments of €10 million or more went up in 2022 with smaller funding rounds dropping. In particular, funding rounds less than €500,000 or less have now reached their lowest levels since 2017.
Despite funding remaining relatively strong for Irish startups, data from the second half of 2022 is expected to show a downward trend. The smaller amount of early-stage funding rounds indicates some companies will find it difficult to scale down the line.
Some hope may come in the form of the Irish Innovation Seed Fund, a €90 million support package provided by the European Investment Fund and Enterprise Ireland. The fund targets pre-seed and seed stage companies and is expected to help, somewhat, when early-stage funding begins to cool.
More Female VCs in Ireland
Irish startups are not bucking the trend either. A new study has also shown that Ireland now has almost twice the number of top-ranking VC and private equity firms than other European countries.
In Ireland, women hold 28 percent of the senior roles in venture capital and private equity. This is almost three times the European average of 10 percent.
The information comes from a not-for-profit organisation, Level 20, that seeks to improve diversity. The study also uncovered that 29 percent of people working in VC in Ireland are women, 7 percent higher than the European average of 22 percent.
Encouragingly, Level 20 also observed that 34 percent of junior-level investment professionals are women. This means that this trend towards more diverse private equity and venture capital in Europe is likely to continue.
PropTech doing well despite tech slide
For the real estate industry, despite the tech slide, there appears to be a silver lining in the guise of proptech.
By 2032, the proptech market is expected to be worth an estimated $86.5 billion USD. If accurate, this estimate means the sector is set for a huge expansion over the next ten years with a compound annual growth rate (CAGR) of 16.8 percent in the US. As it stands, proptech is worth around $18.2 billion.
With lower production costs, higher uptake, and better products hitting the market, demand for proptech is increasing. While AirBnB is put forward as the darling of proptech, there is plenty more to the sector than alternative ways of booking a property. Proptech is considered to be the best way to comply with ESG goals, maintain sustainability, and build smart cities. Customers can save money with sensor devices, make spaces safer, and cut down on emissions through Internet of Things devices and climate tech.
Artificial Intelligence (AI) and virtual reality are generally regarded as the ones the watch but with the entire construction industry in the middle of digitalisation, there is expected to be plenty more “technological upheaval”, according to OpenPR.
While these projections depend on current demand being maintained, Future Market Insight estimates suggest this is likely.
The CAGR of the proptech market is expected to be 23.7 percent in China, 17.1 percent in the UK, and 26.5 percent in Japan alone. The retail arm of proptech is likely to grow at 19.4 percent with services at 18.5 percent.
Despite economic headwinds, Irish startups, VC diversity, and proptech expansion are all taking steps in the right direction but those steps are tentative and require industry support.
Proptech Ireland is leading and facilitating transformation of the property and construction industries by connecting innovators with industry organisations and investors (angel and VC). For real estate companies to be successful, innovation is now a critical competency. Proptech Ireland consultants take on the role of in-house digital transformation and ESG strategists, advising on tech suitability, procurement, and ROI calculations – from vision to operational veracity. www.prop-tech.ie.