What is the funding future for Irish-based start-ups?

29 Jan 2009

In the US, venture-capital funding has fallen by 71pc and the same can be expected here. Fergus Bolster is partner in the corporate and commercial department at Matheson Ormsby Prentice.

What are the biggest challenges facing Irish firms seeking venture capital (VC) today?

The Irish funding market has stayed consistent over the past number of years. What’s worrying is it hasn’t taken a significant leap forward.

From studying Irish Venture Capital Association (IVCA) reports, the amounts invested in firms and the stage those firms are at are proximate to each other. The industry simply hasn’t attracted the injection that would have taken it to the next level.

What you see today are predominantly Irish-based investors, but few foreign ones.

Irish technology firms seem to get acquired just as they are gaining success. Is this a good thing for the local technology industry?

It certainly is the predominant trend. Firms grow to a certain size and then sell out to bigger players.

By comparison, Israel has been able to create more technology firms that have successfully floated on the NASDAQ exchange.

In Ireland, however, a trade sale is seen as a successful exit, and is by far the most common form of exit.

In terms of areas to invest, what technologies do you see attracting funding going forward?

Renewable energy is an area that is going to attract a lot of investment, and there are lots of very good, young Irish companies in this area.

This mirrors a trend internationally, and this is the one sector that is attracting the lion’s share of VC investment.

Ireland is sitting on the cusp of a revolution in clean-energy technologies. This is certainly the most promising area of investment going forward. Aside from pure software companies, life sciences companies and clean-energy technology firms are the ones to watch.

How bleak is the outlook for young tech firms attracting funding?

All venture capitalists will tell you that the good companies will get funding. The major observation of the Irish Technology Leaders Group (ITLG) and the delegation that came to Dublin from Silicon Valley in November is that some Irish firms seemed to be conditioned to come cap in hand to venture capitalists.

The group felt that Irish entrepreneurs were looking at too small a picture and seemed afraid to pursue a large funding round. This didn’t exactly convey the impression they were trying to build an €800m business.

What’s needed is some form of Silicon Valley spirit and ambition to break through. If you’re looking for US money, you have to have a US-targeted product.

There is a growing number of boutique BES (Business Expansion Schemes) in the market. Will these become the No 1 source of funding for entrepreneurs?

The BES funds have helped companies get off the ground to pursue opportunities and attract further investment.

The expansion of the BES is only a good thing if it encourages start-ups. But the more flexible they are, the better, and if anything they are helping to encourage investment in young firms.

Talented money will follow where the greatest opportunities are. In the past few years that was in property. It’s up to the tech sector now to show itself to be that opportunity.

By John Kennedy