A BYPRODUCT of the Government’s recapitalisation of the main Irish banks has been a significant increase in availability of seed funding for new start-up funds according to Enterprise Ireland.

Both Bank of Ireland and AIB have created or expanded seed capital funds as part of the recapitalisation deal.

AIB has earmarked an additional €23 million for the AIB Seed Capital Fund to bring it to €53 million, while Bank of Ireland will shortly launch a new €25 million seed fund which will be managed by Kernel Capital Partners.

Des Doyle, manager of Enterprise Ireland’s growth capital department, said the new funding was having a “materially significant” impact on the ability of new firms to attract investment.

Mr Doyle was speaking as the State development agency published the annual report for its Seed and Venture Capital programme which made investments worth €34 million in 104 early stage companies last year.

The Enterprise Ireland administered programme makes investments in local venture capital funds if they raise an agreed amount of private sector funding.

Under the current Seed and Venture Capital programme (2007-2012) €175 million in State funding has been committed with Enterprise Ireland saying the investment pipeline “remains strong”.

At the end of last year €98 million had been allocated to five venture capital funds.

Two new funds were established under the programme last year, including the €75 million Fountain Healthcare Partners Fund and the €75 million Ulster Bank Diageo Venture Fund.

Although 27.2 per cent of the value of the investments made by the VCs went into overseas firms Mr Doyle said this was in later stage firms and State money was not involved.

“The rules of the scheme mean the funds are required to at least double our investment in Irish companies but they are also free to invest overseas,” said Mr Doyle.