Many small tech firms face major funding issues as venture capitalists focus efforts on their own portfolios, but the Irish high-tech sector is faring better than most, a new report shows.

SummIT 2003- Back to Basics says 10 per cent of European venture capital investment was spent in the Republic during 2002, even though it makes up just 1 per cent of European GDP.

There was a 50 per cent fall in venture capital funding in 2001-03 in the Republic, but this compared favourably with a 61 per cent decline in the rest of Europe.

The report, compiled by Goodbody Stockbrokers for its annual technology conference, also found overseas venture capitalists had added vibrancy to the domestic funding market. Overseas funds were responsible for three quarters of the money subscribed in larger fund-raising in 2002, although Irish investors are still involved in five out of six deals.

Domestic funds play a critical role in supplying early stage funding for tech firms, and there is a trend towards Irish funds investing in early rounds and then working with the firm to find international venture capital for subsequent funding rounds, says the Goodbody report.

Goodbody has profiled 13 domestic firms among them Am-Beo, Daon and Macalla.