Seed sown for future tech flotations?

15 Jul 2003

Enterprise Ireland’s decision to pledge €30m in funding to start-up and early stage companies has been welcomed by the local software industry, but the state agency has warned that the funding sector faces continued challenges in the years ahead.

Enterprise Ireland executive director Pat Maher said that five new seed funds focusing on start-up and seed companies were established in the past year, with funds of up to €30m. However, he referred to a report by the Department of Enterprise which found that of 464 companies surveyed, 64pc indicated that they needed equity of less than €750,000. Some 98pc of these companies said it would be difficult to raise these funds.

According to the organisation’s Annual Report into its Seed and Venture Capital Programme, Enterprise Ireland made a total investment of €61m in 31companies to the end of last December, via partnership funds under its Seed & Venture Capital Programme. Some 77pc of this, it was revealed, was invested in seed and early stage companies with a further 28pc going to investments outside Dublin.

Future Human

The news of the €30m seed and start-up funding was welcomed by the IBEC-based Irish Software Association, which represents the interests of 220 indigenous software companies. “The biggest problem facing young Irish technology companies is access to funding and finance at an early stage,” said ISA director Kathryn Raleigh. “The software industry applauds the initiative of Enterprise Ireland in working with private sector firms to boost seed capital.”

In another unexpected boost to market sentiment for young Irish tech players, Irish Stock Exchange chief executive Tom Healy has predicted that while no companies are likely to float on the stock exchange this year, 2004 may see firms from the technology sector joining the market in order to raise funds.

Healy also indicated that the Irish Stock Exchange has no plans to scrap the ITEQ, which could secure new entrants next year if the tech sector is the source of IPO activity in 2004. In recent months the future of the ITEQ was considered uncertain following the delisting of two star players Riverdeep and Alphyra.

Since its launch in September 2000, at the height of the boom, ITEQ has managed to accrue only eight high-tech companies, compared to the 40 initially proposed. Originally it had been envisaged that the list would fulfil the role of a tailor-made market for Irish technology companies undertaking IPOs. It was also intended to allow fast-growing firms to speedily undertake transactions, without having to seek the approval of the shareholder. With a current capitalisation of just €800m and a membership expected to be reduced to six, its original ambitions have had to be seriously scaled back.

By John Kennedy