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Q3 sees decline but industry continues to grow buoyed by life sciences investment Back  
Irish venture capital investment has declined in Q3, according to the latest figures from Ernst & Young, but the year-to-date figures paint a more positive picture, with life sciences emerging as the next major investment sector, according to industry experts.
Venture capital investment in Ireland has declined in the third quarter of this year, according to a recently published report.

The quarterly European venture capital report, which was published by Ernst & Young and Venture One, shows that Irish investment in the third quarter of 2005 is down on the second quarter of this year. The figures for Q3 2005 illustrate lower per quarter investment compared with the same period last year.
Life sciences are driving venture capital investments in Ireland

However the overall picture is positive, according to Garry O’Rourke, a senior manager with Ernst & Young in Ireland. ‘The total amount raised to date in 2005 is actually up on the same nine month period last year. Quarter three 2005 did see a lower total of money raised but there were a greater number of early round deals at the expense of later stage investments,’ he said.

Moreover, quarterly figures give a somewhat limited view of the market. Dermot Berkery, a partner with Delta Partners said, ‘It is hard to look at things on a quarterly basis in this industry as business tends to be quite clumpy throughout the year’.

In the third quarter of 2005, a total of eleven deals were completed. This compares with fourteen deals for the same period in 2004, and corresponds with the European trend. Total deal flow in Europe fell by 20 per cent between Q3 2004 and Q3 2005. European capital investment was down 6 per cent for the same year on year comparison.

First round financing in Ireland remained stable but second round financing registered a decrease for the third quarter. Almost ?22 million in venture capital was invested in young innovative Irish firms in Q3 2005.
Information technology and healthcare continue to lead the sector performance. Healthcare has maintained its position as the strongest investment sector in Europe, accounting for approximately 40 per cent of total investment in Q3. Delta’s Berkery commented on the strong growth in investment in the healthcare sector. ‘Proportionately speaking the percentage invested in the life sciences has increased hugely. This represents a secular shift in the industry in the direction of healthcare research’, he said. Trinity Venture Capital’s CEO, John Tracey, said that two key emerging investment areas are medical devices and drug development.
The software industry still records high investment levels but as Berkery points out, it is a more mature industry and so it has a lower growth potential. However, he added that some sub segments of the industry continue to perform very well and record high growth.

Industry sources say that 2006 looks promising for the Irish venture capital industry. Berkery feels that it is hard to predict which sector the growth opportunities will arise in because each deal is assessed individually on its own merits. He said that the growth depends on the deal flow and the new business generated. Tracey predicted that 2006 would be a good year because ‘there are lots of good companies out there’.

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