Big guns dominate Irish venture capital scene

7 Jul 2005

Venture capital (VC) activity in the Irish marketplace during the second quarter of 2005 showed renewed activity of large corporate investors. Irish technology investment attracted €133m so far in 2005, up 17pc on the first half of 2004.

According to the latest Techpulse survey from Ion Equity, the financial and telecoms sectors attracted the greatest level of investment during the second quarter.

Motorola Ventures, Innovacom (the VC arm of France Telecom) and Fidelity Ventures have all contributed to the €57.4m invested this quarter in Irish technology companies, while Cazenove Private Equity made its first investment in an Irish technology company, Ion reports.

The biggest investments this quarter were in telecoms firm Imagine that raised €12m from Cazenove Private Equity and banking and card payment software firm CR2, which secured €10.3m in funding from Irish-based VC firms ACT VC and Trinity VC.

Fidelity Ventures’ investment in Qumas was the next biggest investment in the period. Qumas, the Cork-based developer of enterprise risk and compliance management solutions, raised €8.3m in funding led by Fidelity Ventures and General Catalyst Partners in the US.

“This is part of a continuing trend of US investors investing directly in Irish companies, a trend that was initiated by Ion Equity with the investment in Aran Technologies by Trident Capital earlier this year,” Ulric Kenny, a director at Ion Equity indicated.

The telecoms sector continues to show strength, with 13 companies attracting 70pc of the funding this quarter. In addition to Imagine, telecom companies such as Anam, APT, Mobile Tornado, Shenick and all raised funds this quarter.

“The survey shows that the fundraising market for quality Irish companies continues to be strong, particularly for those in the financial and telecoms sectors,” Kenny added.

Irish technology investment for the first half of 2005 grew by 17pc compared with the same period in 2004. While the €57.4m raised in Q2 2005 is down 35pc on the €75.4m raised in the first quarter of the year, this is attributable to a small number of particularly large fundraisings in the first quarter, including Corvil, Aepona and Irish Broadband that each attracted more than €15m in funding.

The average deal size this quarter was €4.4m, down from €6.3m in quarter one 2005, principally due to the number of smaller follow-on investments made by existing investors this quarter.

Despite the advent of greater international activity in the Irish VC scene, there are serious concerns about the ability of indigenous VC players to continue investing in young Irish companies as well as their ability to raise funds.

At a PricewaterhouseCoopers VC conference in Dublin yesterday, Shay Garvey of the Irish VC Association said the level of investment in 2004 by Irish venture capitalists into Irish companies was €61m, compared with a whopping €255m in 2003.

The need for Irish-based venture capitalists to create a larger funding pool was also highlighted, with the amount raised in 2004 at €47m compared with €60m in 2003. All of this is a pale reflection on the last major funding raising in 2001/2002 when some €411m was raised.

Divestments by Irish VC companies reached record levels in 2004 at €191m, compared with €58m in 2003 and €32m in 2002. Some 93pc of divestments were by way of trade sales, public offerings, debt repayment and sales to other investors. Some €13m or 7pc of divestments were by way of write-offs.

By John Kennedy