Warning as venture capital activity slows

Despite raising over a quarter of a billion euro in funding through venture capital, fears are growing that activity in the Irish funding market is slowing.

Last year Irish firms raised €285m from venture capitalists, a 6% increase on the 2012 figures, according to the annual Irish Venture Capital Association VenturePulse.

The vast majority of the funding went to firms operating in the knowledge-based sectors, including software, medical devices, pharma and biotech.

Chairman of the IVCA Mark Horgan said that venture capital is crucial to growing Ireland’s own indigenous technology companies.

“Venture capital is playing a vital role in fuelling the growth of Ireland’s indigenous technology sector. Venture capital-backed companies tend to grow faster, employ more graduates and generate higher levels of exports than other indigenous SMEs,” he said.

Corporate partner with William Fry, Stephen Keogh, who guided Irish companies through 40 rounds of funding last year, said that activity was slowing. “Irish venture capital firms are entering the end of the investment term within their existing funds. New capital will need to be raised from the private sector to fund SMEs into the future.”

With the existing funds dwindling Mr Keogh believes there is an opportunity for Irish pension funds to invest some of their €80bn in capital into the venture capital space.

“Because of low returns from cash and bonds, pension funds are seeking alternative investments. Right now, as an asset class,venture capital is offering a good investment opportunity.

“Initial public offerings are on the increase and exits are back on the agenda with Tier 1 global tech firms willing to spend their cash on acquiring venture capital-backed tech companies,” he said.

Key to the success of the Irish venture capital sector has been seed funds supported by the banks and Enterprise Ireland. The director general of IVCA, Regina Breheny, said these funds need to be replenished to support entrepreneurs.

“Seed funds supported by the banking sector and Enterprise Ireland’s Seed and Venture Capital Programme of 2006-2012 are close to being fully invested. These funds will need to be renewed if entrepreneurs are to be supported as actively as in the last five years,” she said.


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