The first three months of the year can tell us a lot of things. For SMEs and Ireland’s tech sector? The clues they give are endless.

Among the thousands of startups in Ireland, only the smallest minority will ever reach the big time. However, the reality is that the proof is often in the very early stages of the pudding. Our Q1 2025 Market Pulse report has just been released, and the findings tell a story of resilience in the SME sector against a backdrop of uncertainty.

Late last year, Forbes predicted that 2025 would be the year start-ups regained their mojo. And, according to the data, which shows that Ireland’s SMEs are navigating a delicate balance between opportunity and constraint, they could be right.

In Q1, economic confidence met sectoral strain. We saw strong GDP growth yet softer consumer sentiment, and ongoing cost pressures. That said, labour markets remain stable, and insolvencies are low, which supports a cautiously optimistic tone. But when we layer in the findings from Scale Ireland’s recently published State of Start-Ups Survey, a more complex picture emerges.

The State of Start-Ups Survey 2025, released in May, captures the views of 235 start-up and scaling company founders, offering a real-time pulse on the innovation economy. While optimism remains in pockets, particularly around AI deployment and productivity gains, the headline challenges haven’t changed:

  • 59% of founders say access to funding is their biggest hurdle, with over 80% saying access to private equity is very difficult
  • The KEEP (Key Employee Engagement Programme) share option scheme remains widely underutilised, with only 10% using it, and many citing the need for major reform
  • And nearly 65% believe Ireland isn’t doing enough to support recruitment and retention in indigenous tech

This echoes what we’re seeing among many of our SME clients. To put it succinctly, it’s a story Ireland knows well; the potential is there, but policy, regulation, and infrastructure need to catch up.

When it comes to AI, the stats are favourable. According to the survey, some 88% of founders are deploying AI, a signal that Irish start-ups are embracing automation and digital transformation. But with the EU AI Act on the horizon, over 40% of respondents still don’t know how it will impact their business. This regulatory knowledge gap poses a risk. We at Fitzgerald Power are always of the opinion that knowledge, support and clarity are essential for maintaining momentum without falling foul of compliance issues. Our recent interview with Jac Dunne of Dimply goes into more detail on this.

The data collated also reflects encouraging signs when it comes to sustainability and diversity.

  • 41% of start-ups now have a sustainability plan (up from 33% last year)
  • And 57.9% report having a female in their leadership team

However, nearly 60% of companies say introducing a sustainability strategy isn’t a priority or is blocked by time or budget constraints, a signal that we need to make these conversations easier, not harder, for early-stage businesses. In reality, government need to provide SME’s with incentives and assistance to help break down some of these administrative barriers businesses will face in implementing sustainability strategies. As anyone will tell you, sustainability and diversity are no longer topics you need to consider; they’re topics that need to be catered to. Consumers today will not buy into a business they don’t believe in. Make plans now and reap the benefits later.

So, what’s next when it comes to the Irish economy? The market has proven remarkably adaptable, but the scale of opportunity in the start-up and SME sector will only be realised if we lower the barriers to growth, be it capital, talent, or clarity around regulation.

As we near the end of Q2 and prepare for Q3, the SME and start-up sectors find themselves at a crossroads. However, one thing is clear: entrepreneurs and their backers are searching for a new narrative here in Ireland. The question is: will they find it?

At Fitzgerald Power, we’re here to help businesses interpret what these findings mean in practice. Whether you’re scaling a tech company or running a long-established SME, we’d be happy to talk through the insights and support your next move. Get in touch today jpower@fitzgeraldpower.ie