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Tuesday, 4th August 2020
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Venture capital market remains active Back  
Conor O’Connor is chairman of the Irish Venture Capital Association and investment director of the Enterprise Equity (Ireland) fund.

The following points are worth considering in light of the recent turmoil in capital markets. Members of the IVCA invest venture capital for the medium to long term. We know and understand that creating value within companies, particularly within the technology sector, takes time and effort. There was a perception in the public capital markets in recent times (and in particular in 2000) that value could be generated much more rapidly than in fact was the case. ‘Enterprise value’ is not something that can be conjured up overnight and despite this truism, public capital markets have in the past (and no doubt will at some stage in the future) factor such expectations into valuations.

Venture capitalists know that they may, and in all probability will, have to complete a number of funding rounds in a company before exit can be achieved. This is particularly the case in the technology sector where the capability for debt funding is low. This makes an equity partner a vital component in the financing of many companies and absolutely essential one in the tech-sector. The value-added international partnerships/linkages that domestic venture providers bring to client companies can be a key component in this process.

In most instances the only way to exit from client companies is by way of a trade sale. This means that sufficient ‘enterprise value’ will have to be generated to convince a trade purchaser to buy the company at a valuation that gives a reasonable return on their money. This is an entirely different process than exit by way of IPO, which is more common overseas. It results in an entirely different focus by venture providers in Ireland, and should result in more stable returns for institutional investors in venture capital in Ireland.

In summary IVCA members are medium-long term providers of funds. They focus exclusively on creating substantial ‘enterprise value’ in partnership with management. IVCA members raised £182 million (•231 million) from investors and these funds will be deployed in the market place in the current and succeeding years.

Fund: Enterprise Equity Venture Capital Group was established by the International Fund for Ireland in 1987. It operates through two stand-alone companies, Enterprise Equity (Irl.) Limited and Enterprise Equity (NI) Limited. The Enterprise Equity Venture Capital Group provides venture capital finance to growth orientated companies operating within the border and western counties in Ireland and throughout the whole of Northern Ireland. To-date the group has invested over IR£30 million in 60 companies within its territory. The group generally invests from c.IR£250K to IR£1.25 million in client companies but on occasions the upper limit can be higher. It was an investor in BCO Technologies, the first NI venture backed company to be listed on AIM and DCM. It is currently an investor in Amphion, Amicis, Trivirix, Gendel, Datacare Software Group, Ansamed, Iontas.

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