| Venture capital: shift to seed and first round funding |
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| Forty private equity deals were financed in Ireland last year, compared with 52 in 2002, but the volume of deals steadied during the year, with the number of private equity deals remaining largely constant in Q4 2003, compared to Q3 and Q2 of the same year, a new report by Ernst & Young and VentureOne reveals. |
While transaction volumes were down year on year in the first half of 2003, the trend was towards parity year on year in the second halfnda Kelly, a partner with Ernst & Young said that 2003 was a year when early stage investors retreated from new companies and concentrated on their existing portfolio of investments.
‘This raised concerns about whether the next wave of new technology companies would get the support they needed. Given this, the substantial shift back towards seed and first round investing in Q4 is excellent news for entrepreneurs; it marks a turning point in the investment cycle with venture investors regaining their appetite for taking more risk.’
Kelly added that, "Venture capital activity in Europe historically lags behind the U.S. by at least two quarters. With investment holding steady in the U.S. in the most recent quarters, we can expect to see the European market following suit throughout this year. Ireland’s performance last year was indicative of the European scenario as a whole, and I believe the outlook for 2004 is one of cautious optimism with the environment continuing to remain conducive to increased financings’.
In the European venture capital market, deal flow increased by 7 per cent during Q4, 2003, with €855 million invested in 249 financings in Q4 2003, compared to 233 financings and €871 million raised in Q3 2003. The fourth quarter in Europe revealed a renewed interest in early stage investing, with seed and first round deals accounting for 33 per cent of all deals in Q4 2003 - the first time this has occurred in over 12 months.
On a European basis for the year in total, €3.5 billion was invested in 1,039 deals, annual declines of 23 per cent and 31 per cent respectively. However, the yearly rate of decline has reduced from the previous two years. |
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| Article appeared in the February 2004 issue.
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