THE OUTLOOK for the Irish venture capital industry is “very uncertain” according to Peter Sandys, chairman of the Irish Venture Capital Association (IVCA).
The vast majority of local venture firms will need to raise new funds by 2012 but, according to Mr Sandys, their traditional sources of investment – government, banks, defined-benefit pension schemes and the National Pension Reserve Fund – are “all facing their own challenges”.
Mr Sandys said “a proactive approach from government” was required that might include allowing defined contribution pension schemes to invest in venture funds and providing incentives for high net worth individuals.
He warned it would be impossible to get international VCs to invest in Ireland, as the Government is doing with its €250 million Innovation Fund Ireland initiative, if there was not a strong domestic sector to co-invest.
Mr Sandys made his comments as the IVCA launched new research from UCD’s Department of Entrepreneurial Studies showing the economic impact of venture capital investments. The research found VC-backed firms paid payroll taxes of €395 million in the period 2003-2009.
Mr Sandys, also managing partner of VC firm Seroba Kernel Life Sciences, said it was a “no-brainer” for government to invest in VC funds on this basis alone. He said the capital channelled by Enterprise Ireland into VC funds since the mid-1990s had been returned with a premium when start-ups were sold on or floated on the stock market.
Acknowledging that VC was a “long-term illiquid investment”, Mr Sandys said he was “convinced that the returns on the current funds will be very good”.
The UCD report found employment at venture-backed companies increased on average by 18.6 per cent annually since 2003. In 2009 these firms employed a total of 9,733 people directly.
Venture-backed firms invested €134 million in research and development in 2009, representing 28 per cent of RD from the private sector.
