Tech-focused corporate financiers Whitebridge Capital is seeking €21 million in venture capital funding for three client companies. However, director Mark Fenelon will not be knocking on the doors of Irish VCs and instead will be focusing his search in Europe and the US.
"The US and Europe is where our network is strongest, but given where Irish venture capital is at the moment - there's no money in the coffers - we would have been pushed down that road anyway," says Fenelon.
Ireland's largest venture capitalists are currently in fundraising mode, so they can draw down matching funds from Enterprise Ireland. That process has been complicated by a number of factors, not least the success of other asset classes such as leveraged private equity buyout funds.
Despite claiming to have deep links with foreign VCs, Fenelon is not under any illusions about the difficulty in raising funding for Irish firms. In the last 10 years, VC funding invested in Israeli technology start-ups has delivered a 350 per cent return. In contrast, €1 billion has been pumped into Irish firms in that period but, based on his analysis of trade sales and stock market flotations, Fenelon believes venture capital "would be struggling to make a 100 per cent return".
"Venture capitalists track their investments by geography and there is just not enough successes coming out of Ireland," says Fenelon. "Irish companies need to work twice as hard to get the right international investment compared to companies in other regions such as the UK."
Fenelon believes Israeli firms are much more focused on global markets and typically establish a US office within six months of being founded. They also devote senior management to what continues to be the largest technology market in the world.
"The growth strategy of Irish companies is weak - you need a vision and a strong steer to get into international markets," says Fenelon. "Early-stage companies don't always recognise the barriers to doing that."
One of the firms Whitebridge is seeking funding for is a financial services software company that will achieve revenues of €8 million this year. It is also working with an early-stage medical technology company that has been spun out of an Irish university and has potentially a very "disruptive" technology, according to Fenelon. The third firm provides software for the delivery of mobile content.
FUNDING TIPS
Whitebridge Capital says Irish firms looking for international VC funding need to be aware of the following trends:
• As the VC industry becomes global, the main focus is on geographies that are generating returns such as Israel, China and India rather than traditional technology centres like Ireland.
• For early stage companies, VCs want to see disruptive technology, a billion dollar market and a heavily experienced management team as a minimum.
• Positions taken during the tech boom are being traded for new opportunities in biopharmaceuticals, medical devices, semiconductors, electronics, Web 2.0 and energy technologies.
• Internet portals continue to attract attention driven by the likes of Skype and YouTube.
• Rather than big-ticket enterprise software sales, VC focus is on recurring revenue models that deliver a high degree of predictability.
• VCs want much tighter control on their investee companies; unless they have a cluster of investments in a certain geography they are reluctant to make new investments.
