Venture capital in need of funds

Venture capital firms will need to draw on significant sources of new funding next year if investment in the Republic's business sector is to be allowed to develop, according to the Irish Venture Capital Association.

The amount raised by venture capital firms fell from €60 million in 2003 to €47 million in 2004, according to figures compiled by PricewaterhouseCoopers.

Desmond Fahey, chairman of the Irish Venture Capital Association, said that while his members had sufficient capital to see them through the coming 12 to 18 months, they will soon need "significant funding" if the sector is to develop effectively.

Mr Fahey said the last major fundraising by Irish venture capital companies took place in 2001 and 2002, when €411 million was sourced.

A review published by Mr Fahey's association yesterday shows that Irish venture capital firms invested €61 million in Irish companies last year.

This compares to €255 million in 2003, when the figure was boosted by a number of management buyouts.

The association described the decline last year as "disappointing". It pointed out however that there were signs of vibrancy in the technology sector, where 87 per cent of last year's venture capital investment was made.

Mr Fahey also pointed to an increase in investment into the healthcare sector.

He said this was "encouraging" and may reflect the commercialisation of Government-funded healthcare projects.

Investors continue to be particularly interested in start-ups. Some €28 million in venture capital went into 48 start-ups last year, compared to an investment of €33 million in 106 start-ups in 2003.

International venture capital companies invested €113 million in companies based in the Republic in 2004.