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Tech firms still attract most funding
Wednesday, September 25 2002
by John Cradden


Although overall investment by the Irish venture capital industry in Irish
companies fell in 2001, the proportion of funding to the high tech sector
increased.



Out of EUR124 million that was invested by Irish Venture Capital Association
(IVCA) members up to 31 December 2001, 77 percent, or EUR95.3 million went to
high tech firms, according to the third annual report of the IVCA, which was
produced by law firm Matheson Ormsby Prentice. 





However, as expected overall Irish venture capital investment in 2001 fell to
EUR124 million from EUR208 million in 2000. Andrew Doyle of Matheson Ormsby
Prentice said the fact that overall investment fell by no more than 40 percent
was remarkable, given the dramatic decline in capital markets in the period.







The category receiving the highest level of investment in 2001 was computer
software, accounting for EUR68.6 or 55 percent of the total capital invested.
However, the actual amount invested in this sector has decreased from EUR112.4 to
EUR68.6, in line with the overall decrease in investment in 2001. Computer
hardware received the second highest level of investment on 2001, at EUR15.75
million.





Conor O'Connor, chairman of the IVCA, said that the high proportion of investment
in technology companies reflected the high number of existing companies in
venture capital firm portfolios receiving new funding in the past year.  "This
is significant as technology and the creation of economic return from it will
remain a key driver for the economies of most countries, especially Ireland,"
said O'Connor.



The report also revealed that 36 percent of capital investment went into start up
companies which, when lined up against the overall findings, showed that there
are many good Irish high tech projects worthy of seed funding, noted O'Connor.
"This one third compares with a European average of a mere 15 percent. This
commitment to early stage projects should ensure that Ireland continues to
develop a strong and competitive indigenous technology sector into the future,"
he said.





O'Connor said 2002 remains a harsh operating environment and the outlook for the
year is unlikely to be any better than 2001.

 



The IVCA report broadly concurs with a recent report by PricewaterhouseCoopers,
which showed that investment in the Irish technology companies fell by 31 percent
last year to EUR126 million.  The "Money for Growth 2001" report said
technology investments accounted for 80 percent of total Irish investments,
compared with a European average of 37 percent.