€500m in venture capital raised for investing in tech firms

18 Nov 2008

Irish venture capital (VC) funds have over €500m to invest in the Irish SME sector following a recent round of fund-raising, the Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan TD, said today.

Announcing the results of a study conducted by University College Dublin (UCD) into the economic impact of VC in Ireland, Coughlan said that, including an initial Government investment of €175m through Enterprise Ireland, seven new VC funds have raised over €500m, with four other funds expected to report in the next few months.

“At a time of a global liquidity crisis, it is encouraging that this level of VC is available for investment in Ireland in indigenous high-tech companies.”

The Tánaiste also commented favourably on the fact that SMEs were able to raise €174m already in 2008. Sixteen of these SMEs were new start-ups, and firms in this category are now emerging at the rate of approximately two per month.

“It is particularly noteworthy that funding by private investors grew from 4pc of funds raised in 2007 to 22pc in 2008, which means that the economy is now starting to benefit from Angel investors and successful entrepreneurs who can contribute experience as well as capital in helping to create Ireland’s next wave of successful high-tech firms.”

Commenting on the findings of the latest economic impact study conducted by the Centre for Entrepreneurial Studies in UCD, the Tánaiste said, “VC-backed companies continue to provide a substantial impetus to the ongoing development of a knowledge-based economy in Ireland, and to the achievement of public-policy objectives in this regard.”

Professor Frank Roche, head of the Centre for Entrepreneurial Studies in UCD, added that the study found that VC-backed companies continue to invest more in R&D, hire more graduates, export more and grow faster than other firms.

“In this regard, they mirror the requirements of a knowledge-based economy,” he said.

The UCD study found R&D expenditure by VC-backed companies represented 25pc of total Irish indigenous spend on BERD (business expenditure on research & development). R&D expenditure in these companies rose by 25pc in 2007, compared to an increase of 7pc by other indigenous companies.

The UCD study also found that graduates represent just over three quarters (76pc) of the workforce of VC-backed companies, and PhD employment increased by 20pc in 2007.

While employment growth is moderating, the performance of VC-backed companies has been significantly better than in the economy generally.

The annual average increase in employment since 2003 was 19.9pc. This compares with an annual average increase in the same period of 3.7pc in overall employment, and of 6.4pc in employment in the financial and business sector.

In 2007, VC-backed high-tech companies generated exports of €266m, an increase of 18pc on 2006. Exports represent 79pc of total revenues, up from 63pc in 2005.

Joe Concannon, chairman, Irish Venture Capital Association, welcomed the findings of the UCD report.

“As foreign direct investment continues to be increasingly mobile and construction activity falls, it is increasingly important to encourage the growth of a high-value, high-tech indigenous Irish sector,” he said.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years