Investment by venture capitalists in Irish technology companies increased during 2004 reached €171.6m, an 11pc increase on investment levels in 2003. According to the latest Techpulse Survey by Ion Equity, 2004 demonstrated a marked return of American investors that had been absent from the local market for at least three years.
The increased investment in 2004 reverses three successive years of falling investment while the Techpulse figures show a trend last year of fewer but larger fundraisings by Irish technology companies. There were a total of 41 fundraisings completed in 2004 compared to 52 in 2003 but there has been a clear shift in emphasis from quantity to quality with the average investment in 2004 of €4.6m more than 50pc higher than the average investment in 2003.
Ion Equity chief executive Neil O’Leary said that while the number of deals is smaller this year, the higher average investment size shows that companies getting the backing have a better chance to grow. He added that the average investment in Irish technology companies is now on a par with the rest of Europe.
It is understood that this increase in valuations is partly due to a sizeable influx of overseas investment in Irish technology companies. Last year, some three quarters of fundraising by Irish companies involved an international element, compared to just 28pc in 2004.
O’Leary said: “There is no doubt that Ireland is gaining more respect in the international venture capital marketplace and this is shown clearly by the quality of international investor willing to commit funds to the Irish market.
“In contrast to the past three years, American investors who previously were absent from the Irish market have shown an increasing appetite to invest directly in Irish companies and in many cases are prepared to bid higher than their European counterparts,” he added.
O’Leary indicated that the past year has also seen a sizeable increase in the prices paid for venture capital-backed (VC) Irish companies with a significant return on their investment for both domestic and international backers. Major sales last year included the US$130m sale of banking software company Eontec to Siebel Systems and the US$103m sale of audio and video conferencing firm Spectel to Avaya Networks for US$103m.
Recent sales may also be influencing Irish VC investment trends and the recent sales of Amphion in June 2004 and Massana in August 2003 has boosted confidence in the semiconductor sector. This improvement in confidence is reflected in three semiconductor deals completed in the final quarter of 2004 – SensL, LightStorm Networks and Intune Technologies.
The single biggest deal in 2004 was the €35m invested in the trading platform Ion Trading by TA Associates. Other double-figure deals included the €12.8m invested in broadband systems manager e-Net by ACT, Anglo Irish Bank and Bank of Ireland and the €10m investment in Web Reservations International by Summit Partners.
By John Kennedy
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