New firms get €250m backing over last five years

New and developing companies received €250 million in finance from investors backed by State agency Enterprise Ireland over the last five years, the latest figures show.

Enterprise Ireland's Seed and Venture Capital Report for 2006, published yesterday, shows that last year funds supported by the State development agency invested €67 million in start-up and new businesses.

This was an increase of €17 million on 2005. Investors put €32 million into companies raising cash for the first time, while they placed another €35 million into businesses that had raised capital more than once.

Firms normally go through a number of fund raising rounds early in their careers, particularly if they are involved in developing new products and technologies.

The report also shows that between 2001 and 2006, venture capital funds backed by Enterprise Ireland put €250 million into new and developing firms.

Over the five-year period, software accounted for 55 per cent, or €137.5 million of the total invested. Life sciences, that is pharmaceuticals, biotechnology, medical devices and related businesses received 16 per cent, or €40 million; communications businesses were allocated 24 per cent or €50 million, while food, manufacturing and other sectors got €12.5 million, or 5 per cent.

The news follows an earlier report from the Irish Venture Capital Association (IVCA) that the total amount raised by Irish technology companies in the first six months of this year was €62.6 million, down from €83.7 million during the same period in 2005.

However, the IVCA's report acknowledged that the number of companies that received funding during the period was 31, compared with 19 last year. The association produced figures in April to show that investors who put money into Irish venture capital funds between 1994 and 2005 received an average return of 15.7 per cent a year.

There is concern that investors are not giving enough support to new Irish businesses, particularly those which involved technology and life sciences - areas targeted by Government as key to growth.

According to the latest figures, the total invested in those areas in the State fell to €211 million in 2005 from €242 million in 2004.

When it launched its report in April, the IVCA called on Irish pension funds to invest 1 per cent of the €78 billion they have under management in venture capital.

Association chairman Niall Carroll said that the Republic was falling behind the US and UK in terms of the proportion of pension funds invested in these activities.

"In the US, they are putting 15 per cent into private equity. In the UK, 56 per cent of funds are injecting 2.3 per cent of resources into private equity; that includes buyouts and venture capital," he said.

Commenting on yesterday's Enterprise Ireland report, employment minister, Micheál Martin said that venture capital has made a significant contribution to the success of small and medium-sized businesses.

"The sector provides a vital source of funding for early stage and growing Irish companies," he said. "Over the coming months we can look forward to the establishment of several new funds under Enterprise Ireland's €175 million seed and venture capital programme 2007-2012."

Launching the report, Feargal Ó Móráin, Enterprise Ireland's director of corporate services, said 2006 was a strong year for venture capital in Ireland.

"A dynamic and healthy venture capital market is a prerequisite for the growth and development of high potential start-up companies in Ireland," he added.