€1.5bn venture capital shortfall threatens Irish tech firms’ hopes

13 Oct 2011

Irish tech firms raised €161.9m from investors in the six months to June 2011. However, the chairman of the Irish Venture Capital Association warns there could be a shortfall of €1.5bn from 2012 over the next five years, which will affect follow-on investments.

IVCA chairman Maurice Roche, a partner with Delta Partners, said the €161.9m represented a 58pc increase on investments that were made during the same period last year.

“The figures reflect a welcome increase in funds raised despite the global credit crisis,” said Roche.

However, he warned that local venture capital companies would start to run out of funds from next year, which would place a serious brake on future expansion of Ireland’s indigenous tech sector.

The IVCA has estimated there could be a shortfall of €1.5bn from 2012 over the next five years to fund follow-on expansion phases.

First-round funding remained steady at 19pc of funds raised. These funds were provided by seed funds and by private investors.

“Ireland remains a great location for early stage companies with good ideas and management to raise money,” added Roche. “The crisis will come in funding vital future expansion rounds.”

Follow-on/expansion funding represented 81pc of funds raised in the first half. These funds were provided in the main by venture capital firms of which 53pc were Irish and 47pc provided by international VCs through syndicated deals.

“The statistics show that for almost every €1 invested by Irish VCs, an additional €1 is brought in from abroad into Irish SMEs,” commented Regina Breheny, director general, IVCA.

The number of companies that raised funds in the first half of 2011 was 86, compared to 82 in the same period last year and to 66 in 2009. Amounts raised ranged from €100,000 to €20m.

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

Venture capital investment in Ireland (sectors) – first half 2011:

·        In the pharma/biotechnology sector, six companies raised €5.9m (4pc)

·        In the drug delivery and medical-device sector, 13 companies raised €25.5m (16pc)

·        In the communications/telecoms sector, 10 companies raised €25.3m (16pc)

·        In the environment technology sector, eight companies raised €41.0m (25pc)

·        Other technology (including nanotechnology, fibre optics, photonics and semiconductor chips) servicing a wide range of industries, two companies raised €1.9m (1pc)

·        In the business service sector, 40 companies raised €56.8m (35pc).

·        Other: Seven companies raised €5.5m (3pc)

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years