Venture capitalists warn of sharp fall in funding for tech firms in 2012

3 Feb 2012

While Irish technology companies raised €247m in venture capital last year, venture capitalists have warned that there will be a shortfall in future funding.

The €247m raised last year compares with €310.2m raised in the same period of 2010.

“The Irish venture capital community continues to be the main source of funding for Irish high-tech SMEs,” Regina Breheny, director general, IVCA, explained.

Breheny said that since the onset of the credit crunch in 2008, 547 Irish SMEs raised venture capital of €1.1bn.

“These funds were raised almost exclusively by Irish VCs who during this period supported the creation of up to 20,000 jobs.”

She added that since 2008, Irish VCs had attracted more than €450m of capital into Ireland and geared up the State’s investment through the Seed & Venture Capital Programme by almost seven times.

Serious concerns

However, the figures reveal a sharp fall off in funding in the second half of 2011. “This decline is largely due to a pull back by overseas VC investors,” explained Maurice Roche, chairman, IVCA and partner, Delta Partners.

“We have serious concerns that Irish venture capital firms, too, will start to run short of funds in 2012.

“This will place a major brake on the future expansion of Ireland’s indigenous tech sector. In particular, start-ups that have received investment in recent years from the seed funds will have great difficulty raising additional capital,” Roche said.

Funds raised

The IVCA VenturePulse survey shows that high-tech Irish companies raised €274.4m from investors in 2011, despite the continuing global credit crunch. This compares with funds raised of €310.2m in the same period of 2010 and to €288.1m in 2009.

While first half funding in 2011 rose 58pc over 2010 to €161.9m, the second half of 2011 saw a decline of 46pc to €112.5m.

The number of companies that raised funds in this period was 159, compared to 156 in 2010 and to 139 in 2009. Amounts raised ranged from €100K to €20m.

In 2011, some 82 companies raised €104.9m (38pc of funds raised). This compares with 63 companies and €53.6m (17pc of funds raised) in 2010 and with 65 companies and €71.2m (25pc of funds raised) in 2009.

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