Following the announcement that AIB's Seed Capital Fund has received State funding from Enterprise Ireland, executives at the State development authority say they are close to announcing co-funding arrangements with three other seed and venture capital funds.
This will be a major boost for Irish technology start-ups which have been effectively operating without access to a source of seed capital for the last nine months.
Willie O'Brien, manager of the venture capital unit with Enterprise Ireland, said a total of nine investment houses had been approved for co-funding under the Seed and Venture Capital Scheme 2007-2012.
Three of these have now raised their private sector funding and are in legal negotiations with Enterprise Ireland regarding how much State money it will provide to them.
Mr O'Brien admitted that the current fundraising environment for venture capital is tough. "Anyone will tell you the funding market is challenging," said Mr O'Brien, adding he was confident that once all funds closed €800-€900 million would be available to Irish start-ups over the next five years.
He also confirmed that Enterprise Ireland has included Atlantic Bridge Ventures' current fund in the scheme. "It is a much younger fund so it doesn't make sense for them to have to go out and raise a new fund to be included," he says.
The new AIB Seed Capital Fund has €30 million to invest at an early stage in "knowledge-intensive firms in emerging sectors", according to John Kelly, head of customer strategy with the bank. Half the funding has been provided by Enterprise Ireland and half from AIB. The average investment to be made by the fund will be €250,000 but smaller investments of about €100,000 will also be considered.
Mr Kelly said AIB decided to establish the fund because "report after report" found that there was a lack of availability of seed investment money for Irish start-ups.
"The levels of Irish start-ups are unprecedented - there are about 18,000 such firms in the country at the moment," said Mr Kelly. "About 60-70 firms graduate from Enterprise Ireland's high-potential unit each year and they fit the profile of who we will look to invest in."
He says AIB will primarily look at companies in the data management, e-services, IT, biotech, healthcare and e-tailing areas.
Administration of the funds and evaluation of the proposals will be carried out by Enterprise Equity, which has offices in Athlone, Cork, Dundalk and Galway, and the Dublin Business Innovation Centre.
According to Mr O'Brien, the regional aspect and the focus on seed funding were the main reasons that Enterprise Ireland had committed to providing 50 per cent of the total fund. The seed fund had already received a number of proposals for funding from start-ups, and he expected that its investment committee would meet in the next two months to decide on which firms to back.
"We are an incubation fund, so we expect other VCs to move in in later rounds," he said.
"We have got to learn to let go because if we don't we will get heavily diluted."
