Slow Irish VC market still outperforms Europe

4 Jun 2003

Irish venture capital companies experience a quiet year in 2002 according to the Annual Review of the Irish Venture Capital Association based on figures compiled by PricewaterhouseCoopers. Investments were down, but the figures compared well to other European markets.

According to the review, Irish VC firms raised €201m in 2002 compared to €210m the previous year. “While the figures are marginally down, Ireland outperformed the rest of Europe where amounts raised by venture capitalists fell by an estimated 59pc,” said Michael Murphy, chairman of the Irish Venture Capital Association. He said that the 2002 figure compares favourably with the five year average of €142m per annum.

“These figures confirm investor support and belief in the long term potential of the Irish venture capital industry and the Irish economy. As valuations have fallen there will be better opportunities to invest at prices that offer investors the prospect of good capital growth,” said Murphy.

The report also found that investment by Irish venture capitalists declined last year to €105m from €144m in 2001. While this represents a fall of 27pc, Murphy said it compared well with the five year average of €120m per annum.

The report suggests that the majority of funds raised (72pc) in 2002 will be allocated to the high tech sector with the balance to other sectors including management buyouts (MBOs). This reflects an 8pc reduction in the expected allocation of funds to the high tech sector in favour of other sectors.

The report also states that an emerging feature of the Irish venture capital market is the success of Irish members in attracting significant inward investment by international VC funds and other investors into their target companies in later funding rounds through syndication and private placements. The IVCA estimates that there is a multiplier effect in operation, calculating that for every €1m invested by local VCs, at least a further €2m is raised from overseas VCs.

According to the review, the €105m invested in 2002 went to 156 companies, of which 87pc was invested in high tech companies. Initial investments represented 30pc and follow-on investments comprised 70pc of funds invested.

By Dick O’Brien