Sharp downturn in venture capital investments

VENTURE capital investment in Irish companies has fallen overall by 22% in the last three months according to the latest Techpulse survey by Ion Equity.

The figure for investment in that period stood at €47.7 million, a 20% fall from the amount raised in the same quarter last year.

In the first half of 2006, venture capital investment fell 21% to €108.8m compared to the first half of 2005.

The survey shows that there were 22 deals since January, a decrease from 27 in the same period last year.

The decrease is partly due to a sharp fall in early-stage first round investments from 13 in the first half of 2005 to just six in the latest half-year.

Ion Equity director David Fewer said: “This is a slightly worrying trend as the number of first round fundraising indicates the level of early stage technology companies getting the traction that enables to them to get that crucial first round finance.”

It is understood that there are two deals valued at nearly €15m in the process of coming to fruition the report notes.

The regular first round venture capital investors such as EVP, 4th Level Ventures, Shannon Development and Street Capital were not involved in any new deals, said Dr Fewer.

Delta Partners has been active in the life sciences area and is reportedly close to two new deals in Britain.

ACT was involved in three separate deals totalling at least €27m.

“Some of Ireland’s larger investors are coming close to the end of their existing funds and new fundraising by these investors may have a positive impact on early stage investments in 2007,” Dr Fewer said.

International investors made up 75% of the €47.7m raised in the second quarter of the year versus just 50% in the same quarter of 2005.

International interest shined a light on Cape Clear and Corvil Networks a number of years ago.

“Cape Clear has raised approximately €35m and Corvil €40m in venture capital. The exit prices for these businesses will have to be very large if their investors are going to achieve their target return multiples of between five and 10 times” Dr Fewer said.

“It is unlikely that we will reach the €200m in venture capital investment we achieved last year,” he added.