Irish venture capitalists are reluctant to play investment computer game

When your kids file their requests for Christmas, PlayStation, Nintendo or Dreamcast may figure highly in the letters to the jolly old codger and his reindeer friends.

The Republic has the highest level of proliferation of Sony PlayStations in the world outside Japan and it was announced last Monday that there are now 500,000 units in Irish homes.

However, the games sector seems to have been ignored by successive Irish governments who claim to be bent on developing the Republic into a technology platform for the rest of the world.

In Scotland, independent game designers had to come together and form an alliance six years ago to lobby the British government to invest in one of the world's fastest growing industries. Now their collective turnover is in excess of £500 million sterling (€792 million).

The software sector is the fastest growing part of the entertainment industry, with expected growth of 25 per cent annually over the next few years compared to 9 per cent at the big screen box office.

Many people around the world have upgraded their machines or bought new ones over the last 10 years to be able to run new graphics, games and entertainment software.

The fact that Sony's five-year old computer entertainment arm now produces 45 per cent of the company's overall operating profits, outstripping its musical and theatrical arm combined, underscores the amount of money the industry is generating.

Mr Michael Maguire, creative development director of Taintech, a small Irish games company looking for capital investment, says venture capitalists will not risk money in such firms.

He said that because venture capitalists here won't invest, either because they do not understand the games industry or are unwilling to take a risk, the company has now been forced to look abroad for funding.

Mr Dermot Berkery, a partner in venture capital company, Delta Partners, said that there is a lot of investment in software companies but not all companies will receive investment. Each company is considered on its own merits, he said. He said that when a venture capital company invests in a firm or start-up, it expects to see revenues within a year or less. Taintech's own business plan would not see it producing revenues for about 2 1/2 years following the initial investment. An IDA Ireland spokesman said the best explanation as to why the computer games industry has not developed here is that the focus has been on business related activities and developing software for the business sector.

He said Enterprise Ireland has identified the area as having growth potential and would be putting more emphasis on the entertainment and multimedia software industry over the coming years.

There is currently a variety of platforms including Nintendo, Sega, and PlayStation but they are expected to converge in the next year and that is where agencies here see the potential.

Taintech did receive some seed capital from Bank of Ireland and the Enterprise 2000 fund, but to even market a game to the large manufacturers a company has to produce a working demo which means developing 90 per cent of the game itself. Independent companies involved in game design are practically non-existent in the Republic, and Mr Maguire said any new Irish companies would have to compete with exceptionally well-funded competitors around the world.

He said this will mean much of the money he is confident the company will make will flow out of the State as long as investment is not available for games companies. He added that the exodus of the many Irish people who work in the industry will also continue.

Mr Maguire said: "We have what it takes, the only thing is, it takes cash." However, as long as the sector remains the black sheep of the silicon enhanced flock, this will not be forthcoming.

The much hyped opening of Titanic as the biggest box office smash in history was itself smashed by the opening weekend of new game Final Fantasy 7, which sold three million units in its first two days, pulling in around $150 million (€148 million).

According to Mr Maguire, if Taintech had included "net" or "web" in their name the investment would be flowing in. Although his company provides content for the Web, its main business is games. A new generation is emerging - people who have not only grown up with computers but also computer games. In fact, the gateway to computers for many children is through playing games.

The growth in the games industry promises not to be a transient phenomenon. For many, now in their 20s and early 30s, electronic games are as much a part of their lives as taking the bus.

Santa's sleigh will continue to be laden with computer products over the coming years, but whether the guaranteed Irish mark will be present on any of them is very doubtful.