Venture capital investment in Irish companies fell 21% to €108.8 million in the first half of 2006 compared with the same period in 2005

Irish
Venture capital investment in Irish companies fell 21% to €108.8 million in the first half of 2006 compared with the same period in 2005
By Finfacts Team
Jul 13, 2006, 13:30

Second quarter fundraising of €47.7 million down 22% on first quarter and down 20% on same quarter in 2005
Number of deals in first half falls from 27 in 2005 to 22
Sharp fall in first round fundraisings “a slightly worrying trend”

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Ion Equity Director David Fewer

Venture capital investment in Irish companies totalled €47.7 million in the second quarter of 2006, a 22% fall on the level of funding in the first quarter of the year and a 20% fall on fundraising in the same quarter of 2005, the latest Techpulse survey by corporate finance specialists Ion Equity reveals. The survey also shows that in the first half of 2006, venture capital investment fell 21% to €108.8 million compared to the first half of 2005. The reduction however, is slightly misleading as it is understood that there are two deals valued at nearly €15m in the process of closing.

The number of actual deals in the first half fell from 27 in first half 2005 to 22 in the latest half-year and this is partly due to a sharp fall in early-stage first round investments from 13 in first half 2005 to just 6 in the latest half year. “This is a slightly worrying trend as the number of first round fundraisings indicates the level of early stage technology companies getting the traction that enables to them to get that crucial first round finance,” Ion Equity Director David Fewer stated.

Dr Fewer added that in the first half of 2006, some of the regular first round venture capital investors such as EVP, 4^th Level Ventures, Shannon Development and Street Capital were not involved in any new deals. Of the three large Irish venture capital companies, Delta Partners has been active in the life sciences area and is reportedly close to two new deals in the UK.

ACT was particularly active in the second quarter and was involved in three separate financings each worth in excess of €9 million while Trinity Venture Capital completed one first round financing and two later round financings in the first half of the year. “Some of Ireland’s larger investors are coming close to the end of their existing funds and new fundraisings by these investors may have a positive impact on early stage investments in 2007,” Dr Fewer said.

The second quarter of the year also showed an increasing commitment by international investors and these accounted for some 75% of the €47.7 million invested compared to just 50% in the same quarter of 2005. Interestingly, of the 9 international investors participating in Q2 financings, 5 were from non-European funds. International venture capital investors in the second quarter included Intel Capital, Atlantic Bridge, ALPS Electric, Interwest, Greylock, Apax Partners, Cisco and Cazenove Private Equity.

Cape Clear and Corvil Networks are two technology companies that garnered huge international investor interest a number of years ago. They both completed what is likely to be their last fundraisings in the second quarter and the next transaction by either company is likely to be a trade sale or an initial public offering, Dr Fewer stated. “Cape Clear has raised approximately €35 million and Corvil €40 million 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 5 and 10 times” Dr Fewer added.

Commenting on the prospects for the second half of 2006, Dr Fewer said: “Despite the fall in the number and the value of deals in the second quarter, investment has remained reasonably strong in the first half. The second half of the year is generally the weaker of the two and it is unlikely that we will reach the €200 million in venture capital investment we achieved last year,” he stated.