| Venture capitalists remain positive on outlook |
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| While investment in venture capital funds fell in 2001 and looks likely to fall again in 2002, key industry players are optimistic on the future of the sector, and say that many opportunities exist. |
According to Conor O’Connor, chairman of the Irish Venture Capital Association and investment director at Enterprise Equity Venture Capital Group, Ireland has proportionately the highest level of investment in the technology sector in Europe and statistics compiled by the Irish Venture Capital Association show that investment in the high tech sector is holding up quite well and almost E100 million was invested in the sector last year.
And, of the E124 million in total invested by IVCA members, 77 per cent or E95.3 million went to the high tech sector. Of this total, E68.6 or almost 72 per cent went to software companies. While the overall amounts are down, the proportion of money going into the high tech sector was actually a little more in 2001 than in 2000.
Commenting on the latest developments in the high tech sector Aidan Devenney, an investment executive at Enterprise Equity Venture Capital Group, says that the dramatic reduction in values in the tech sector has been driven by a return to fundamentals. He says that as the high tech sector matures, there will be further consolidation and rationalisation, which will also create opportunities for venture capital investments.
Another trend that has been apparent over the past year is the increase in buy-outs, and Andrew Doyle, a partner at Matheson Ormbsy Prentice, says that domestic and international buy-out funds are very active at the moment in seeking out good opportunities. Pointing to the examples of Green Property and Smurfit, Doyle says the trend is very much in the direction of public to private transactions, and he is surprised that a greater number of transactions have not occurred in the last twelve to twenty-four months. As a proportion of overall M&A activity, buyout transactions are on the increase, and he expects this to continue for the foreseeable future.
Sarah Moores, a director at Alliance Investment Capital, says that although the amount invested in venture capital funds fell in 2001, and will undoubtedly do so again in 2002, venture capital is now an established part of the economic framework and is fundamental to Ireland Inc’s success. An issue that Moores sees as being particularly important to the continuation of this success is the funding of start-ups. Of late, fewer start-ups are receiving seed capital, a view which is supported by the IVCA’s annual report, which reported that only three companies succeeded in securing seed finance from IVCA’s members in 2001, down from 30 in 2000, and 31 in 1999. Moores is urging established venture capitalists to reconsider investing in start-ups rather than later stage financing, as she believes that the potential for attractive returns exists.
Recognising the lack of investment available for start-ups, Brendan Vaughan, a venture capital fund manager with newly established Bank of Ireland Specialist Business Bank, says that the bank’s aim is to become a leading player in this niche sector. |
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| Article appeared in the October 2002 issue.
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