ALTHOUGH INVESTMENTS and corporate activity in the knowledge economy are holding up in the face of the slowing economy, funding for high-tech start-ups is a major concern, according to the authors of a new technology funding review.

Neil Pope, director of Who42, the high-tech advisers who have just published their equity funding review for the third quarter, says there is likely to be more attention focused on the indigenous technology sector as a result of the economic slowdown.

Who42's survey shows that €1.4 billion of investments, acquisitions, disposals, management buy-outs and mergers occurred in Ireland's knowledge economy in July, August and September.

The authors track deals in information and communications technology, life sciences, digital media and environmental technology.

"The figures show there is very much still a pulse in the sector," says Pope.

"It's by no means a surge in activity but people are still investing and others are getting exits."

The €55.9 million invested in firms during the quarter involved just 12 transactions, and was mostly in later-stage companies rather than start-ups.

Pope suggests the "funnel is not being fed at the top" and the next generation of companies are finding it hard to get funded.

The vast majority of investments came from international VCs, with 10 involved locally in the third quarter.

"When you have so few VCs active in the market they will be drawn to later-stage investments and the current conditions will drive that further," says Pope. "The traditional businesses won't be able to get debt from banks so they will go to the VCs for equity."

Who42 lodged a pre-budget submission which called for tax breaks to support those willing to take a risk on establishing a knowledge-based start-up.

With VC money at a premium, Pope believes private investors will fill the gap for start-ups.