Charting tech firms on the fast track

27 Nov 2003

Now in its fourth year, the Ireland Deloitte Technology Fast 50 event recognises and ranks the fastest growing-technology companies in the Republic of Ireland and Northern Ireland.

The main sponsor, InterTradeIreland, became involved in the Fast 50 event to communicate its message to companies looking for venture capital (VC) funding. Although InterTradeIreland’s mission is not to provide funding it does provide free, value-added advisory services to businesses to assist in making them ‘investor-ready’.

Gary Stokes, deputy manager of InterTradeIreland, describes the event as a “great opportunity to get our message out to 50 companies every year”.

InterTradeIreland’s helps companies in their first steps towards the VC route. Set up in 2001 out of the Belfast Agreement, InterTradeIreland developed Equity Network to promote awareness of the benefits of using private equity to promote business growth.

The future of the VC market is definitely looking up. Ireland continues to be at the forefront of technology breakthroughs with companies operating in a variety of high-tech sectors from telecoms, software and hardware manufacturing to biotechnology, healthcare and electronics. And according to 3i, an international VC firm, confidence in the business, political and economic climates around Europe is positive for the first time in three years.

Following on from this, Stokes sees the VC market improving. “For the first time in recent years there is a real sense that we have turned the corner.” This view is echoed by the Irish Venture Capital Association (IVCA), which estimates that three quarters of Irish VC companies plan to increase investment in new projects this year.

Part of the recovery is down to the fact that things were never quite as bad as they seemed. “There has been a lot of doom and gloom in the last couple of years” says Stokes, “but deals were still being done, maybe less headline deals and the value of those deals were smaller but there was still investment going on.”

The figures back this up. According to a recent survey by the IVCA more than €600m has been invested in over 500 companies since 1997.

One initiative run by Equity Network to encourage entrepreneurs from across the island to consider VC funding is the Seedcorn competition. The competition came about after Equity Network identified the existence of a funding gap in the €75k-375k band that is hampering the development of new business ideas in both north and south. Although the problem is common throughout the whole of Europe, reflecting the perceived risk of investing in early-stage projects.

Entrants were required to submit a detailed business plan to a panel of experts. Six regional winners received €20k and the overall winner stands to gain €100k.

But Stokes believes that even if companies are not successful in the competition they still draw value from it. “It gets them to think a bit more about what they are trying to sell and how they are trying to do it.”

One practical example that Stokes points to is helping companies make clear their offering. “A lot of business plans we see bury what they are doing in page 50 of the report rather then clearly stating it in the executive summary.”

Of the approximately 150 companies that Equity Network has seen only about 5pc would be ready and suitable for VC funding. The rest might benefit from ‘business angels’ or help with their business plans.

And the need is also well recognised at the coal face. While over 75pc of high-growth small to medium-sized enterprises (SMEs) have made contact with private equity financiers regarding raising funding, 90pc believe they still require additional support. These findings are from a survey carried out by Equity Network and highlight the need for support such as non-executive directors, hands-on support and access to networks to develop business.

For those that are successful in raising funds through venture capitalists the rewards are there. Ireland has one of the largest VC funds in Europe with over €170m raised last year and, thanks to the quality of people involved in the market who are well educated and have the benefit of high-quality foreign investment from large companies, we have become a benchmark for VC funding.

Looking forward to the future, Stokes believes that technology will continue to be a strong growth sector as will biotechnology that made an impact on this year’s Fast 50 event. “The type of returns that a venture capitalist is looking for will not be found in manufacturing,” says Stokes “VCs are looking for rapid growth and an ability to get their money back with appropriate levels of return.”

By Gillian Cope

Pictured: Barry Fitzsimons, chairman of Equity Networks, InterTradeIreland