Irish Start-ups Face Funding Crisis as Three-Quarters Struggle to Attract Capital
A new Scale Ireland survey reveals that 75% of Irish start-up founders find attracting private capital difficult or very difficult, with funding remaining the biggest obstacle for the fifth consecutive year. The survey also found that over a third of founders are unaware of the EU AI Act and its potential impact on their businesses.
The findings, published in Scale Ireland's State of Start-up Survey 2026, paint a picture of a vibrant but persistently undercapitalised ecosystem — one that is generating significant economic activity but struggling to unlock the private investment needed to scale its most promising companies to global competitiveness.
Background
Ireland's start-up ecosystem is, by many measures, a genuine success story. The country ranks 9th in Western Europe and 16th globally as a start-up hub, with the tech sector alone contributing over €48 billion to the economy and employing around 55,000 people across more than 2,200 companies. New company formations surged by over 14% in the first quarter of 2026, with Dublin remaining the primary hub, complemented by strong regional growth in Cork, Limerick, and Galway.
The government has invested heavily in supporting this ecosystem through agencies including Enterprise Ireland, Local Enterprise Offices, and IDA Ireland, as well as specialised programmes such as the New Frontiers entrepreneur development scheme and the Halo Business Angel Network. Despite this infrastructure, the Scale Ireland survey reveals "considerable and persistent problems with enterprise supports," which founders frequently describe as too complicated and difficult to navigate.
The venture capital landscape has also tightened considerably. VC funding for Irish SMEs fell by 23% in 2025, making access to private capital a more acute challenge at precisely the moment when many start-ups are seeking to scale. A 2025 government report projected a potential €1.1 billion gap in equity financing for Irish scale-ups over the next three to five years — a figure that underscores the structural nature of the problem.
Key Developments
The Scale Ireland survey's headline finding — that nearly three-quarters of founders find it difficult or very difficult to attract private capital — is striking but not surprising to those who work in the sector. What is perhaps more alarming is the persistence of the problem: funding has been identified as the single biggest challenge for Irish start-ups for five consecutive years, suggesting that the policy interventions made to date have not been sufficient to close the gap.
Founders are advocating for specific policy changes to unlock more private capital, including channelling a portion of Ireland's pension savings into domestic venture funds and enhancing incentives for angel investors. The survey also points to the underutilisation of the revised Key Employment Engagement Programme (KEEP) for share options, with 89% of companies not using the scheme — a significant missed opportunity for start-ups trying to compete for talent against larger, better-resourced employers.
The EU AI Act findings are equally concerning. The regulation, which is being phased in through 2027, introduces a comprehensive risk-based framework that significantly impacts companies working with AI systems. Over 35% of Irish founders are unaware of the Act, and a similar number are unsure of its potential impact on their business — a knowledge gap that could leave companies exposed to compliance failures and competitive disadvantage as the regulation comes into full force.
Why It Matters
The funding gap facing Irish start-ups is not merely a business problem — it is a national economic challenge. Ireland's prosperity over the past three decades has been built in significant part on its ability to attract and grow technology companies. If the domestic start-up ecosystem cannot access the capital it needs to scale, the country risks becoming a place where companies are founded but not grown — where the most ambitious founders ultimately relocate to markets with deeper pools of venture capital. Martina Fitzgerald, CEO of Scale Ireland, has been clear that without structural reform to unlock private capital, Ireland's position as a leading European tech hub is at risk.
Local Impact
For the start-up community in Northern Ireland, the findings resonate strongly. While the survey focuses on the Republic, the funding challenges it identifies are equally acute north of the border, where access to venture capital has historically been even more limited. Belfast's growing tech scene — anchored by companies in fintech, cybersecurity, and software development — faces similar structural barriers, and the EU AI Act's compliance requirements will apply equally to Northern Ireland businesses operating in the European market. Invest Northern Ireland and the Department for the Economy have been working to address the funding gap, but the Scale Ireland data suggests that more ambitious intervention is needed across the island.
What's Next
Scale Ireland is calling on the government to implement a series of policy reforms ahead of the next budget, including pension fund investment in domestic VC, enhanced angel investor incentives, and a simplification of enterprise support programmes. The EU AI Act's phased implementation means that companies have a narrowing window to get their compliance frameworks in order. For the full survey findings, see Silicon Republic's coverage and ThinkBusiness.ie's analysis.
