Five Irish start-ups net Delta Partners investment

DELTA PARTNERS has invested in five Irish start-ups since the launch of the Bank of Ireland Start-up and Emerging Sectors Equity Fund 2010 at the beginning of the year.

The limited partners or investors in the fund are Bank of Ireland, which has invested €15 million, and Enterprise Ireland, which has provided €2 million. Bank of Ireland has committed €49 million to funding for early stage firms as part of the recapitalisation mandate.

It also has a €10 million medical technology fund and a €26 million seed and early stage fund, both of which are managed by Kernel Capital.

Delta Partners’s Shay Garvey said managing the new fund had seen a significant increase in activity by the venture capital firm as it is making a larger number of small investments.

He said Delta had been contacted by 150 start-ups looking to raise capital in the first six months of the year, met 70-80 of those applicants and ultimately made five investments.

“The €105 million Delta Equity Fund III, which was raised in 2007, typically makes two or three investments a year,” said Mr Garvey, “but the partners take a much more hands on role with those portfolio companies”.

The investments are made in the form of convertible loan notes which are repayable when the company raises more venture capital or is sold.

Companies backed by the new fund include cloud infrastructure provider Digital Mines, online wedding planner Eventovate, trading platform Zignals, supply chain specialists Lighthouse BCS, and an unnamed fifth start-up details of which will be announced later this month.

The companies backed by Delta have typically raised rounds of €700-800,000 with the venture capital firm providing approximately half. The balance is predominantly made up by angel investors; high net-worth individuals investing in a personal capacity.

Dermot Daly, head of Enterprise Ireland relations with Bank of Ireland, said all three funds were a “catalyst for the process of angel investing” and, on average, across the portfolio of 13 firms backed to date, Bank of Ireland’s investment has leveraged 1.5 times that amount from other investors.

Mr Daly said that while the creation of the funds was mandated as part of the recapitalisation, the bank was using its investments to “try and understand these types of companies so we can provide them with other banking services they might need”.

He said Bank of Ireland was investing on a commercial basis and expected to make a return on the funds, although he declined to say exactly what that might be. Delta is paid a management fee by Bank of Ireland to run the fund and a further payment depending on how successful it is over its seven year life.

Delta expects to complete a similar number of investments in the second half of the year and is encouraging interested companies to apply through its website.

According to Mr Garvey there are three criteria for investment; a good management team, the investment should be able to fund the venture for at least one year, and they must operate in the high-tech sectors that Delta traditionally invests in.

While there had been a significant increase in seed funding available from VCs and angels, larger sums of venture capital were available for later stage firms, he said.