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Venture capital market remains active Back  
Neil O’Leary, chairman & chief executive, Ion Equity Ltd

The Irish venture capital market has produced some trends including the fact that most local funds have been successful and their success has enabled them to raise significant funds over the last eighteen months. A larger fund puts pressure on its investment managers to focus more on larger, later stage investments. A significant proportion of deals will remain technology related, though MBO type activity will increase. International venture capitalists are investing directly in Ireland more than before and this trend will increase. There is increasng specialisation with certain funds generating global reputations as being attractive added value investors in their chosen sub-sectors. Venture capital investment managers in Ireland who have invested in technology over the last eighteen-months are currently busy helping to optimise the potential of their investees in today’s challenging markets.

I believe Ireland has been fortunate in having a number of excellent individuals across a number of local funds who have really grasped the opportunity over the last few years to build a strong local venture capital industry. As these funds scale up there is a very clear opportunity for a fund to concentrate on high risk, but potentially high reward, early stage investment opportunities.

An early stage investor needs a number of attributes to push the odds in its favour.

• Experience - its pretty obvious that wisdom is more useful then enthusiasm both in closing and maturing investments.
• Knowledge - continuous information gathering in all its forms is essential requiring team size critical mass, relevant industry experience and ever-more specialisation.
• Momentum - This is hard work and a venture capitalist is no longer a reasonable lifestyle option. Managers with unrelenting drive and ambition will make a difference.
• Luck - always handy.

Until recently there was a perceived wisdom that technology activity and investment at the emerging level had decreased significantly in Ireland. Ion Equity published a survey listing the known investments and the total to date in 2001 of E260m surprised some. Counting unpublished internal rounds and other deals in the pipeline the total for 2001 will be around E350m only down E50m on last year but still exceptional especially as last year’s total contained a number of very large pre IPO type rounds. We see a significant level of investment in technology continuing. Our analysis of the investments suggests that smart investors are looking through the downturn and are investing in product areas that offer buyers a good return on investment or a real competitive advantage as a wireless communications environment reaches reality.

Ion is currently evaluating a number of interesting investment opportunities. Of particular interest are companies with strong core technology generated by world leading research. Our average investment size is IR?0.5m and typically we co-invest with other institutional investors. We would like to make around ten investments of this size in the next twelve to eighteen months. For us we see the quality of projects as being better than before, there is better clarity as to what will succeed, valuations are at a more realistic level and the private investor is largely absent. Early stage investing is high risk, but therein lie the rewards.

Fund: Ion Equity is a new venture capital company focusing on early stage technology investment. Apart from venture capital Ion Equity, has a strong corporate finance advisory business with one of the largest technology focused teams in Ireland and significantly the team with the deepest international expertise and contact base. Whereas our corporate finance business aims to be the number one player in Ireland in terms of reputation, by some distance, we aim to be a focused niche player on the venture capital side.

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