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Venture capital market remains active Back  
David Fassbender, managing director, ICC Venture Capital

The Venture Capital industry in Ireland has made extraordinary progress since it got going in a serious and focused way from about 1994 with investment in early stage companies increasing rapidly from a low figure of •7.8m in 1997 to E73.3m in 2000.

The world has changed significantly since late 2000 and dramatically since September 11th. The level of venture capital being provided in 2001 in Ireland and internationally has reduced significantly. It is too early to predict what amount will be invested in Ireland in 2001, but it may be up to a 50p.c. reduction compared to the level of E208m (IEP164m) in 2000. The reasons for this are obvious, in that a lot of time is being spent on managing existing investments, fewer investment opportunities are available and venture capital organizations are being more selective in the light of their experience in recent years and furthermore the supply of capital to venture capital organizations from financial institutions and pension funds is more difficult to obtain.

Investment sentiment will continue to be weak over the next 12 months and stock market indices will reflect that mood. Realisation opportunities by way of trade sales will be few and not available by way of IPO. These conditions and the uncertain environment, however, will create business and investment opportunities at more realistic prices and venture capital managers will focus even more selectively on management teams with a track record and realism. In the technology sector those businesses with cost saving products and in specialised sectors serving utilities and video conferencing offer opportunities. Venture capital managers will examine proposals with great focus on the reality of sales projections and cash flow, and investment proposals will include valuations which reflect current day conditions which will be at a substantial reduction on valuations which obtained even six or nine months previously.

The business road will be bumpy in the year ahead and while the investment approach by venture capital organisations will be more measured and more selective, there is still a keenness by those organizations to invest in management teams which have a track record of credibility and a sense of reality on valuations.

Fund: ICC Venture Capital is a division of ICC Bank Ltd which is part of the Bank of Scotland Group. It considers all sectors for investment in Ireland except property. Its preferred stage of investment is expansion capital, MBO/MBI and some early stage. Its preferred amount of initial investment is from E634.9 thousand to E1.27 million.

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