Efforts to foster an indigenous biosciences sector are likely to prove fruitless unless a state-of-the-art "bio-incubator" laboratory is built reasonably soon, a venture capital firm charged with nurturing biotech start-ups has warned.

A €1 million "clean room" bio-incubator is a prerequisite if the State is to capitalise on its expertise in pharmaceuticals and medical device manufacture by encouraging investment in the sibling field of biosciences, said Mr Michael Donnelly, chief executive of Dublin-based Growcorp.

His comments came as Growcorp unveiled a €25 million seed capital project, which will support domestic enterprises and encourage foreign start-ups to locate here. Five campus-based Irish companies are already moving towards production with the aid of Growcorp backing. The firm is also on the verge of closing a deal with two US investors.

Underscoring the Government's determination to encourage a diverse biotech sector, Enterprise Ireland has offered €750,000 grants to universities which host biotech start-ups.

The Republic was ideally placed to transform itself into a world class biosciences hub but only through adequate infrastructure funding, Mr Donnelly said.

Biotechnology is defined as the application of knowledge about living organisms, and their components, to make new products and to develop new industrial processes.

Speaking at the launch of the Growcorp programme yesterday the Tánaiste, Ms Harney, said the success of the seed fund could prove pivotal as Ireland attempts to establish itself as a leading biosciences player.

While the State has a responsibility to foster a pro-investment culture, the long-term source of funding in biotech must be the private sector, she added. "The commercialisation of research in Ireland, a critical component for its future economic development, needs the participation of a vibrant venture capital industry."