Northen Business: Northern Ireland has an undeveloped venture capital market but, as Francess McDonnell reports, its venture capital "pioneers" are helping to change that

When Crescent Capital, the Belfast-based company that manages a £14 million sterling (€22.98 million) fund, first emerged in Northern Ireland seven years ago it quickly discovered that it was preaching to the unconverted.

In 1995, venture capital was a new concept in a region where the local economy was traditionally heavily weighted towards manufacturing, textiles and engineering.

A large number of owner or family-managed businesses also dominated the economic landscape at that time and historically these had not been inclined to let control pass outside of the family circle.

Northern Ireland is still essentially a small-business driven economy but the make up of these businesses has changed dramatically over the past seven years.

There has been a move towards more knowledge-led business and the emergence of a growing stable of high-tech start-up spin-outs from the North's two universities has transformed the role of venture capital in Northern Ireland.

According to Mr Colin Walsh, managing director of Crescent Capital, there has been both a significant change in business culture in the North and in how the current generation of entrepreneurs views venture capital.

"When we first established the fund, we found we had to play an almost evangelical role. We had to preach the gospel of venture capital and we really had to work hard to educate people about what it really meant and what it could deliver.

"Northern Ireland has a self-esteem issue which is still evident today but was more prevalent seven years ago.

"Businesses are less in your face in Northern Ireland than they might be in Dublin or in Britain. People are less likely to hard-sell the concept of their business even if they are trying to raise money," according to Mr Walsh.

He said the difference between "old-money" businesses and the new breed of entrepreneur in the North was that the new generation viewed venture capital funding as a "catalyst" for their business.

Crescent Capital has a reputation for backing start-ups at an earlier stage than its contemporaries do.

Its fund investors include the European Union, pension funds, insurance companies and other institutional investors from the United Kingdom to the United States.

Crescent's typical investment is between £250,000 and £750,000 but it tends to underpin any financial investment by also providing a range of expertise and management input to its portfolio of companies.

The nine-strong portfolio now includes some of the North's fastest growing high-tech start-ups such as TriVirix International, the American-owned Northern Ireland-based medical and biotech equipment manufacturer, and Andor Technology, the Belfast scientific equipment manufacturer.

Crescent Capital's other major investments have been in Amtec Medical, an early-stages medical devices business, and Heartsine Technologies, a spin-out university company that focuses on defibrillator technology.

Mr Aidan Langan, investment manager with Crescent Capital, said that 50 per cent of the fund was earmarked to invest in young companies and start-ups.

"We do lean towards life sciences and technology-driven investments. There is a technology theme running through our portfolio and many of the companies are closely identified with Northern Ireland's universities.

"We see great ideas coming out of the universities and world-class scientists developing exciting new research projects which can be taken from a conceptual idea to a real business," Mr Langan said.

He believes that because Crescent Capital is Northern Ireland- based, it can see potential that larger capital venture companies may not even know about.

"Northern Ireland suffers in this respect because it cannot get the big national venture capital players interested in anything less than a £5 million deal and there is a gap to be filled in that market.

"We invest at a very early stage but when it comes to second-round funding for a lot of these companies, then we are talking to a whole range of potential partners and that's when they hit the radar screens," he added.

According to Mr Langan, Crescent is currently completing second-round funding for a number of its portfolio companies that shows there is growing confidence in Northern Ireland-based start-ups.

"There are opportunities in Northern Ireland and we have seen investors coming on board with some companies now because they want to get an opportunity to invest in them again in the future.

"We are well on our way to investing our £14 million fund in a portfolio of companies, some of which will seek a listing in the future," Mr Langan said.