Irish
Irish Venture Capital rises to €29.77 million; Larger, later deals drive European venture capital investment up 22% to €1.18 billion in 3rd quarter
By Finfacts Team
Nov 7, 2007, 14:10

Dublin-based Intune Networks, a leading developer of technology for telecommunications networks, completed a €14.77 million deal in August 2007 with a consortium of international investors consisting of Amadeus Capital Partners, Balderton Capital (formerly known as Benchmark Capital Europe) and Spark Capital. Intune Networks was formed in Dublin in 1999 by John Dunne, chief marketing officer, and Tom Farrell, chief technology officer. Over the past eight years, the Intune team has developed a global reputation for their expertise in lasers, and this fund-raising will provide the resources to commercialise their innovations for the telecommunications market.

According to the Quarterly European Venture Capital Report by Ernst & Young and Dow Jones VentureOne, €29.77 million in venture capital was invested in young innovative firms in Ireland in Q3 2007.

This represents an increase of €20.57 million, up sharply from €9.20 million invested during the same period in 2006. The number of deals also increased from four in Q3 2006 to five in Q3 2007.

There was also a substantial increase in the value of late deals in Q3 2007. There were three late stage deals completed compared to one in Q2 2007 and no completed deals in Q3 2006. These late deals raised €19.07 million, a significant increase compared to €3.70 million in Q2 2007. In relation to the first and second rounds, there were two first round deals in Q3 2007, an increase from one in Q2 2007 and no completed deals in Q3 2006. The amount invested in this round totalled €10.70 million, a small decrease compared to €11.65 million in Q2 2007.

“Reflecting the trends in Europe, Irish venture capital investment in Q3 2007 has come from later stage investments and service-focused deals. Late stage deals made up over 60% of Q3 investment. Factors that contributed to this substantial increase in investment include the lengthening time from a company’s initial venture capital funding to a M&A or IPO, requiring investors to fund operations for a longer period,” commented Sinead Munnelly, Transaction Advisory Services Partner at Ernst & Young in Dublin. “Also an increasingly supportive exit environment for venture-backed companies also encourages investors to provide additional resources to high potential late-stage companies.” 

The healthcare sector in Ireland also experienced growth in the form of a single €4 million deal in Q3 2007 after there had been no deals either in Q2 2007 or Q3 2006. The IT sector remained strong with a total of four IT sector deals closed in Q3 2007, the same as Q3 2006 and up from three deals in Q2 2007. The amount invested was €25.77 million in Q3 2007, an increase from €15.80 million in Q2 2007 and €9.20 million in Q3 2006.

The most significant investment of Q3 2007 was made by Intune Networks, a provider of optoelectronics solutions, which completed a €14.77 million deal in August 2007. Intune Networks is a Fiber optic Equipment & Photonics company based in Dublin.

Geographically, Ireland ranked tenth in the number of deals, ahead of Belgium and behind Denmark, and eighth in terms of the amount raised behind Norway and ahead of Denmark.

There were two exits in Q3 2007 and no exits in Q2 2007.

Larger Deals by European Investors
This was a 22% increase over amounts invested during the Q3 last year, despite there being 28 fewer deals. The 210 deals completed during Q3 2007 was the lowest quarterly deal volume for Europe in at least six years.

The report also showed that Europe’s business/consumer/retail industry saw the most dramatic upswing with €214 million invested in 31 rounds during Q3 2007. That was more than four times the amount invested in the space over the same period last year and the industry’s highest quarterly total since the Q1 2002. The bulk of investments, some €126 million, went into 12 rounds for consumer/business services companies.

 “For the second quarter in a row, the median deal size of a European venture capital reached a record €3 million,” said Jessica Canning, Director of Global Research for Dow Jones VentureOne. “The data shows that while venture capitalists are participating in fewer deals than in previous years, they are putting more capital to work and especially in later-stage deals, which saw a 44% increase in euros invested during the third quarter compared to the same period last year.”

Information services the hot IT sector; medical devices drive health care’s growth
European information technology (IT) companies attracted the bulk of the capital overall in Q3 2007 with nearly €557 million invested in 108 deals. And, even though IT deals were down 19% from the 133 completed in Q3 2006, this was a 17% increase over the €477 million put into the space last year and the eighth straight quarter of year-over-year increases in investment.

According to the report, the quarterly growth in IT investments came solely in the information services sector, which includes most of today’s Web-based innovations. Investments in this sector were up more than three-fold, as €161 million was put to work in 29 deals compared to just €49 million invested in 19 deals in Q3 2006. Over half of this capital, some €88 million, was invested in 11 second round deals. The information services sector overall is on pace to see its greatest investment total since 2001.

Overall, health care companies saw 26% fewer deals (48 v. 65) and 12% less capital (€324 million v. €368 million) invested overall compared to Q3 last year. Even so, medical device companies posted substantial gains, with €115 million invested in 20 deals.  That’s a 100% increase over the €57 million invested in the same number of medical device deals in Q3 2006. Nearly 67%, or €77 million, of this capital went into seven later rounds. 

Biopharmaceutical deals once again attracted the majority of venture investments in European health care companies with €192 million invested in 22 deals, down sharply from the €299 million put into 38 deals during the same period last year.

The report also found that European venture capitalists continue to invest in energy companies. There were six energy deals in Q3 2007, one off from the same period last year, but investment rose 38% to €36 million. In just nine months, €189 million has been invested in Europe’s energy sector, on pace to best last year’s annual record of €197 million.

European early-stage investments up but later rounds see more capital
Almost 65% of all venture rounds in Europe during Q3 2007 were seed, first or second rounds. Investments into these rounds grew 18% over Q3 2006 to reach €588 million. However, later-stage rounds accounted for nearly 50%, roughly €593 million, of all venture capital invested in Europe in the quarter. The report found that, through the first nine months of 2007, an unprecedented 49% of all venture investments Europe went to later rounds.

The median amount invested in a first round was €2.94 million, almost equal to the €3.0 million median size for second and later rounds. As said, the overall deal median held steady from second quarter of the year at a quarterly record of €3.0 million.

European activity by country

• France experienced its third consecutive quarter with deal volume surpassing 55 rounds. In fact Q3 2007 saw 5% more capital (€233 million v. €222 million) flow into 26% more deals (58 v. 46) in France than in the same period in 2006. The country is on pace to see its biggest year for venture capital investment since 2001.

• The United Kingdom once again attracted the most deals and euros in Europe; investments climbed 38% over last year to €384 million, although it’s Q3 2007 volume of 62 rounds was off from the 73 raised in the same period last year.

• The amount of venture capital invested in Germany in Q3 grew 25% over last year to €136 million, despite seeing nine fewer deals.