Major fall-off in VC activity

15 Apr 2003

There has been a significant fall-off in venture capital (VC) activity in Ireland, a new survey by Ion Equity has discovered. Transactions completed in the first quarter of this year were down materially, with 14 investments in the period compared with 23 the year before, and 30 in 2001.

In terms of the value of the deals, the number of transactions completed in Q1 2003 is €37.2m, much less than the €55.2m in Q1 2002 and one third of the total of €117.5m in Q1 2001.

So far this year, the largest deals have been the €10.2m funding of Corvil Networks by Cisco, Apax Partners and ACT Venture Capital. This was followed by €4.5m invested in Eblana Photonics by TLCom Ventures and ACT, another €4.5m invested in Vordel by Elderstreet Capital, Intel and ICC, and €4m invested in Farran Technologies by Delta Partners, Kernel Capital and Enterprise Ireland.

However, there is some hope in the shape of normalcy returning to tech investing. Ion say that venture activity in Ireland is returning to normal levels that still in fact exceed the level of investment prior to the hype years of 2000 and 2001.

There is a good pipeline of quality deals likely to close in Q2 and Q3 2003, however not to the levels experienced last year of €96.1m and €70.6m, respectively. The typical deals in the pipeline are likely to be in the areas of communications hardware and software and semiconductor technologies. The majority will take place with older technology companies that have established customer bases and revenues.

Dr David Fewer, associate director of Ion Equity explained: “We have seen increasing European VC investment interest in hardware-based deep defensible core technology. This is an area where Irish universities have significant R&D strength and depth, both in microelectronics and optics. Both of Corvil and Eblana are university spinouts, have deep defensible technology and enable hardware platforms in emerging markets – these characteristics are representative of what international VCs are currently looking for.”

By John Kennedy