Spectre of Govt cutbacks haunts future of venture capital

25 Feb 201059 Views

Despite Irish tech firms’ equity funding increasing 20pc to €288 million in 2009, concerns have been raised that Government cutbacks may impact on future early stage and seed-funding rounds.

Irish companies raised €288 million last year, up 18.6pc on the previous year, according to the latest Irish Venture Capital Association (IVCA) Venture Pulse survey.

“This strong performance was against a backdrop of a severe credit crunch and global banking crisis,” commented John Tracey, chairman IVCA and CEO, TVC Holdings plc.

He said that the record year in Ireland compared with significant falls in activity levels of between 50-70pc in US and UK markets which were back to levels experienced in the late 1990s.

About the IVCA VenturePulse survey

The IVCA VenturePulse survey measures funding raised from domestic and international venture capital funds, from Enterprise Ireland, AIB and Bank of Ireland seed capital funds, and from private investors, including angel investors.

The funds raised in 2009 compared to €242.9 million in 2008 and €225.9 million in 2007. The 18.6pc increase last year followed a rise of 7.5pc in 2008.

Regina Breheny, director general of the IVCA, added that first-round funding in Ireland represented 25pc of funds raised.

“In order to promote and develop the smart economy, these high levels of first-round funding for seed and start-up companies must be maintained.”

She expressed concern that Government spending cuts at agencies like Enterprise Ireland could inhibit the emergence of future innovative companies.

“It would be a false economy as research shows that these companies grow faster, hire more graduates and export more than other indigenous firms.”

She added that Irish software firms will have the opportunity to network and learn how to raise funds at the IVCA/ISA Software Investment Forum on 15 April.

The number of companies that raised funds in 2009 was 139 compared to 93 in 2008 and 82 in 2007.

In the fourth quarter, Irish companies raised €68.5 million from investors in the three months to December 2009. This compares with funds raised of €68.6 million in the same period of 2008 and €84.5 million in 2007. 

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Around 16 Irish-based venture capital funds and private investors were involved (93 investments) and 16 international funds (16 investments).

In the fourth quarter of 2009, 26 companies raised €22.9 million (33pc of funds raised). In 2008, 18 companies raised €33.6 million (49pc of funds raised). In 2007, three companies raised €4.8 million (6pc of funds raised).

For the year 2009, 65 companies raised €71.2 million (25pc). In 2008, 32 companies raised € 51.1 million (21pc of funds raised). In 2007, nine companies raised €13.2 million (6pc of funds raised).

Venture capital allocation in Ireland 2009:

– In the drug delivery and medical device sector, 18 (13pc) companies raised €37.9 million (13pc).

– In the telecoms sector, 11 (8pc) companies raised €22.3 million (8pc).

– In the pharma/biotechnology sector, 11 (8pc) companies raised €81.9 million (28pc).

– In the environmental technology sector, 13 (9pc) companies raised €27.7 million (10pc).

– In other technology (including nanotechnology, fibre optics, photonics and semiconductor chips) servicing a wide range of industries, 27 (19pc) companies raised €65.5 million (23pc).

– In the business service sector, 37 (27pc) companies raised €30.8 million (11pc).

– In other sectors, 22 (16pc) companies raised €21.9 million (8pc).

By John Kennedy

Photo: Regina Breheny, director general of the IVCA

John Kennedy is an award-winning technology journalist who served as editor of Siliconrepublic.com for 17 years.