Irish Venture Capital Association Annual Review Finds Need for New Funding

- Tech sector continues to dominate investment at 87%
- Record year for divestment at €191m

Dublin; Wednesday 29th June, 2005:

Irish venture capital companies will require significant funding in 2006 if the level of investment in Irish industry is to continue to develop. This is one of the findings of the Irish Venture Capital Association Annual Review which is published today.

FUNDS RAISED BY VC INDUSTRY

The IVCA Annual Review reports that the amount raised in 2004 by Irish VCs was €47m compared with €60m in 2003 based on figures compiled by PwC. The last major fundraising by Irish VCs took place in 2001/2002 when €411m was raised in this two-year period.

“We estimate that at the end of 2004 we have enough capital to service investment needs over the following 12–18 months,” commented Desmond Fahey, chairman, Irish Venture Capital Association. “But the implication of this is that Irish VCs will require significant funding in 2006 if the Venture Capital sector is to continue to develop and support Irish entrepreneurs and industry.”

DIVESTMENTS

Divestments by Irish venture capital companies reached record levels in 2004 at € 191m. This compares to € 58m in 2003 and € 32m in 2002. 93% of divestments were by way of trade sales, public offerings, debt repayment and sales to other investors. €13 million or 7% of the divestments were by way of write offs.

“While an increase in divestments is to be expected at this stage of the venture capital company’s life cycle, 2004 is an exceptional year. This level of activity indicates that an exit market is developing providing the essential disposal mechanisms to the venture capital industry,” added Desmond Fahey.

INVESTMENTS

The level of investment in 2004 by Irish VCs into Irish companies was € 61m. This compares with € 255m in 2003. While the 2003 figure reflects €176m of MBOs, the Review says that a 23% fall in investment levels in 2004 is disappointing. The Irish technology sector continues to demonstrate vibrancy with 87% of investment in 2004 being made in tech firms.

Mr Fahey commented, “An encouraging sectoral shift may be emerging with an increase in the investment into the healthcare sector reflecting the coming on stream and the beginning of commercialisation of projects funded by the Government through its various research initiatives.”

The IVCA Review indicated a continuing shift away from expansion/other type companies towards start-ups. VCs invested € 28m in 48 start-ups in 2004 versus € 33m in 106 start-ups in 2003. VCs invested € 33m in 42 expansions/other type companies in 2004 versus € 47m in 86 expansion/other type companies in 2003.

International VCs invested € 113m in 2004 into Irish based companies. “This reflects the strong performance of Irish companies in attracting international investors particularly in their later investment rounds,” added the IVCA chairman.

The IVCA, which was established in 1985, represents members who professionally manage over 95% of the €1 billion managed by venture capital funds in Ireland.

Ends

Press queries to:
Desmond Fahey, Chairman, IVCA, Tel: 01- 671 3111
Regina Breheny, Director General, IVCA, Tel: 01- 276 46 47
Ciara Burrowes, Administrator, Tel: 01- 276 46 47
Ronnie Simpson, Simpson Financial & Technology PR Tel: 01-260 5300