The level of venture capital investment has fallen sharply in the last year, but there should be a significant improvement in 2004, according to a survey from Ion Equity.
The company said venture capital investment in Irish technology and life science companies had fallen by 44 per cent in 2003.
About €154 million was invested last year, whereas during the boom years, investment often exceeded €620 million.
The major Irish venture capitalists, ACT, Trinity, Delta and Bank of Scotland (Ireland) made few new technology investments in 2003, although they did provide finance to existing clients.
The poor results in 2003 were largely the result of weak investment activity in the final two quarters with less than €20 million invested in each quarter. This represented the lowest quarterly investment figures since 1998.
Mr Ulric Kenny, director of Ion Equity, said: "We are surprised by the low volume of completed investments in the second half of the year. All deals where Ion Equity was adviser were completed but a number of small fund-raisings fell victim to lengthened timescales. At €20 million a quarter, we believe that Irish technology investment has reached a floor level and we expect an improvement in 2004.
The fall in investment in the Republic reflects a general decline across Europe and the US, although the decline in Ireland has so far been less severe. "The rate of decline in venture capital investment in the US and Europe, however, stabilised in 2003 although the usual lag effect has meant that investment is continuing to fall in Ireland during the year," said Mr Kenny.
He said more stringent investment criteria were a factor, but other issues were also at play.
"Low valuations have driven many strong Irish technology companies to seek profitability rather than raise funds and expand more rapidly. While difficult trading conditions have meant that many of the companies who need funding the most have fallen short of investment grade, there remains a substantial amount of investment available from Irish and international investors for good quality investment propositions," he added.
