| VC set to slow as sector enters fundraising cycle |
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| With Ireland's venture capital sector entering a fundraising cycle, and an increasing range of alternative investment options available to start-up firms, expectations are that 2007 will be a slower year for VC investment. |
One of the most notable features of the Irish venture capital market in 2006 was the involvement of 'non-traditional' players such as NTR's investment in Irish Broadband, with a third of total investment coming from these type of investors, according to Ion Equity's 'Techpulse' survey. In 2006, investment in Irish companies by venture capitalists fell by three per cent in 2006, to ?192.7 million, and by 70 per cent from the dot.com boom year of 2000.
Looking forward to 2007, David Fewer, a director at Ion Equity, expects there to be a fall-off in interest from this type of investor, and when combined with the fact that many VC funds are currently out raising money, he says that the coming year will be considerably slower than 2006.
Many of the largest Irish VC firms are currently in fund raising mode, with ACT, Delta and Trinity all understood to be looking to raise finance for their funds. The primary source of funds is Irish pension funds and international funds of funds.
Shay Garvey, a partner with Delta Partners, says that new investment is falling, with 2nd/3rd round financing still strong. From a sectoral perspective, he is noticing that a lot more is happening in the healthcare and semiconductor sectors, and he expects to see more activity on the environmental side going forward.
Garry O'Rourke, a director with Ernst & Young, also attributes the expected slowdown to the fact that so many Irish venture capital firms are out there fundraising at the moment. Moreover, he adds that many of the funds, which would typically have a ten year life cycle, have come to an end.
He also highlights the role non-traditional investors are having in the sector, citing private clients as competing with venture capital funds in some areas. 'There are a lot more funding alternatives out there now' he says, 'including banks who have become more willing to offer financing to young firms'.
O'Rourke also cites the increasing use of London's Alternative Investment Market (AIM) by firms looking for later stage financing - instead of going back to the venture capitalists for funding firms are now looking for a public listing on this smaller companies market.
However, Fewer, asserts that over the past nine months there has been a slowdown in companies using AIM. 'Several companies have used AIM to raise finance, but when they don't perform as expected, they lose liquidity in their shares and then have to way of raising additional cash,' he says, adding that the exchange has become a bit of a 'graveyard' for tech companies. As a result, with advisers more reluctant to bring tech firms to AIM, he expects this to be less of a feature going forward. |
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| Article appeared in the March 2007 issue.
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