Venture capital activity in the Irish market mirrors that of the US, despite a slowdown in such activity for technology firms across Europe in general. Some 156 Irish companies received VC funding in the past year; of these, 48 companies were start-ups.
“Ireland is firmly backing technology and it is clear that the venture capital community will continue to devote resources to it,” explained Joe Tynan, a partner at PricewaterhouseCoopers’ Irish practice, at the unveiling of a major survey of the European venture capital industry. “Out of €89m invested in the past year, 90pc of the investment went to high-tech firms,” he said. As well as this, some €201m in new funds were raised by Ireland-based venture capitalists.
According to Paul O’Connor, a partner at PricewaterhouseCoopers’ technology practice, out of a total funding of €917m of new funds raised in the Irish market in the past three to four years, some €573m has already been invested. “This means that two-thirds of available funds have been invested, leaving a further third left to invest,” O’Connor said.
Tynan added: “All our figures show that Ireland is one of the most successful venture capital countries in Europe, raising more and more money. As a proportion of the rest of Europe, we are above average.”
Across Europe, it is pretty grim reading, said Jim Maher of PricewaterhouseCoopers. “Overall, funding has decreased across Europe during 2002 amongst European Venture Capital Association (EVCA) members. Early stage companies account for only 7.9pc of overall funds. Technology investment in Europe fell by 29c during 2002. There were 4,800 investments in technology-based sectors, just 8pc less than in 2001.
Across Europe, overall investment by venture capitalist companies in 2002 was up to €27.6bn. Technology investments as a whole were down 29pc to €5.3bn. And the number of technology companies that have received finance overall went up 2pc to 3,850. Technology represented 47pc of all private equity investments made.
In Ireland, investment overall was down 27pc to €105m. Average deal sizes were down 34pc to €0.52m in 2002 from €0.79m in 2001. Follow-on investment increased 18pc in 2002 to 73pc of the total amount invested. “As with the US,” Tynan said, “there is a continued emphasis on the tech sector.”
“Venture capitalists are focusing on products that will deliver a return on investment for organisations. Investments tend to be made in companies that have a proven business model and high quality management.
“As well as this, venture capitalists are still seeking financial performance and seeking exit opportunities. In the past few years they have had to seriously review the performance of their investments and recover their initial investments,” Tynan explained.
“In Ireland, venture capitalists are co-operating and organising mergers and acquisitions as a means to recoup their initial investments. Many of their investment companies will never be capable of recovering the money and achieving their status in terms of global activity. That’s why there is such a move towards merging existing companies.”
Tynan said that the “hot” areas to look at in 2003 for venture capital activity are biotechnology, wireless local area networks and broadband. “Irish biotech firms tend to be at the later stage of the biotech market, such as in the area of biometrics and analytical software. In terms of software opportunities overall, financial and regulatory applications are stimulating the most interest.”
By John Kennedy