Irish venture capital on the upswing

21-06-2004

by Craig Liddell

The Irish Venture Capital Association reported on Monday that investment by Irish venture capital companies recovered in 2003.

The representative body of the venture capital (VC) industry in the Republic and Northern Ireland reported that investment by Irish VC companies recovered in 2003 to EUR255 million made in 187 companies, based on figures compiled by PricewaterhouseCoopers (PwC). Support for the Irish technology sector by Irish VCs remains strong with 96 percent of 2003 investment being made in tech firms, according to the Irish Venture Capital Association (IVCA) Annual Review.

"This is the highest weighting of investment in the tech sector by any European country," said Shay Garvey, the new chairman of the IVCA and a partner in VC company, Delta Partners.

While the EUR60 million raised by Irish venture capitalists was substantially less than the EUR201 million raised in 2002, the amount raised from Irish sources actually increased from EUR17 million in 2002 to EUR60 million in 2003, the IVCA said. This capital was raised from a variety of banks, pension funds, government agencies, individuals and corporate investors.

Many tech start-ups claim that seed funding is a considerable problem in Ireland, partly due to the suspension of the Business Expansion Scheme (BES). In the 2004 Budget, the BES, which allows private investors to invest relatively small amounts in new firms for a tax break, and the Seed Capital Scheme were renewed for a three-year period to 31 December 2006. Since the announcement, however, an investigation of the BES as commenced in Brussels, where regulators are seeking to determine of the scheme breaks EU law.

Previously, several organisations have called for the extension and expansion of early stage funding schemes for the industry. In its pre-budget submission, the Irish Software Association (ISA) said such schemes were needed to sustain the future of the Irish software industry.

Speaking to ElectricNews.net, Garvey voiced his concern about the BES suspension. "Having the scheme in, limbo at the moment deprives early stage entrepreneurs of [much needed] source capital. IVCA have spoken to the government about the matter."

Meanwhile, IVCA's Annual Review showed a consistent pattern of investment in start-ups. VCs invested EUR33 million in 106 start-ups in 2003, by comparison to EUR27 million in 62 companies during 2002.

The Review figures reflect, "continuous strong support for venture capital from Irish funders in the context of a very difficult international fundraising environment," according to Garvey. He believes that the Irish sector is well placed because of the free capital available to invest, while the challenges for VCs are to find good investments and develop better exit strategies.