Venture capitalists increased their activity this summer, sealing deals with broadband and semiconductor firms, writes Caroline Madden

Venture capitalists were unusually active in the Irish technology sector over the summer months, closing 15 deals and investing a total of €53.9 million. That represents a 118 per cent leap from the same period last year.

Dr David Fewer, director at Ion Equity, says investment levels in the third quarter of each year tend to drop below other quarters. Typically the third quarter total falls to 50 per cent of the second quarter level. However, this year a 13 per cent rise from the second quarter total of €47.7 million was recorded.

In addition, the number of deals which took place during the summer period was the highest recorded since the second quarter of 2003.

Moritz Holdings sealed the landmark deal of the quarter, providing funding of €20 million to broadband provider Digiweb. According to Fewer, Digiweb has been successfully building its business in a capital efficient manner over the past few years and the financing it has now received will enable it to launch its service countrywide.

So far this year, 28 per cent of funds raised by technology companies in the State has gone to either Digiweb or Irish Broadband, but Fewer says that, while Digiweb continues to attract funding, investor interest in Irish Broadband seems to be waning.

"This significant investment in Digiweb from Moritz Holding is in contrast to National Toll Road's [ NTR's] plans for Irish Broadband, one of Digiweb's competitors," Fewer says.

"Having invested circa €50 million in Irish Broadband over the last couple of years, NTR has reportedly expressed an interest in selling its stake for €60 million."

A key driver of the frenetic investment activity during the summer was the unusually high number of semiconductor-related deals. Fewer says five semiconductor deals were completed during the three-month period.

"This is in contrast to the previous 18 months when there were only four semiconductor deals completed in total," he says. "This could be indicative of a partial revival of this segment in Ireland."

Fewer says Parthus Ireland, an Irish semiconductor pioneer, had downsized its Dublin office from 300 employees in 2001 to just 12. Many ex-Parthus staff have either founded or are now employed by the companies involved in these deals.

"There's a lot of skills, semi-conductor hardware designers out there, and clearly they're contributing to building some of these other companies, like Duolog and Redmere," he says.

Another notable development involved an early investment by Enterprise Ireland and eTen in Nubiq, which plans to establish social networking in the mobile environment, and hopes to emulate the success of companies such as MySpace in the US and Friends Reunited in the UK.

Nanotechnology firm nTera, which was founded in UCD and specialises in advanced display technology, received financing of €4 million from three investors.

Although the third quarter was an exceptionally strong period for the technology sector, Fewer expects the total funds raised in 2006 will remain in line with last year's total of just under €200 million.

"While quarter three has been positive, I don't see a ramp in activity. It's a positive development but it's not indicative of a future ramp," Fewer says.

"The major VC funds in Ireland - ACT, Delta and Trinity - are all coming to the end of their funds and will therefore be reducing investment activity as they embark on the process of raising new funds. This will undoubtedly have an impact on the overall level of investment activity."