Key role for private sector in venture capital

Private sector organisations should become the "lead players" in the venture capital business, the Tanaiste, Ms Harney, said yesterday.

Welcoming new figures which said Enterprise Ireland invested £20.1 million in venture capital funds in 1999, she said such support was necessary to achieve sustainable growth in Irish-owned industry.

"It is equally important that the private sector should become the lead players in providing such important funding at these vital points in the lives of success-driven businesses," Ms Harney added.

"Every successful economy has a thriving venture capital market supportive of entrepreneurs prepared to take risks to achieve greater success."

The investment last year by Enterprise Ireland was almost twice the £11.85 million it invested in 1998. Some £4.7 million of the sum invested last year was in companies based in the regions.

While some observers have questioned the logic of the State investing in private industry at a time when there is no shortage of private capital, Enterprise Ireland said it was negotiating more funding from the EU to invest in venture capital funds.

The existing funds - worth some ECU90 million (£72 million) since 1995 - will be fully invested by the end of this year, said Enterprise Ireland's director of investment services, Mr Gerry Maloney. These were co-financed by the European Regional Development Fund and further funding was needed to ensure that "exceptional progress" in bridging the "equity gap" continued to meet entrepreneurial demand, he added.

The body supports 15 independently managed venture capital funds, which had investments last year in 51 companies, 20 more than in 1998.

Of these, 32 investments targeted new companies with 19 follow-on investments. Some 70 per cent of the investments were in the software sector. Other high-tech investments were in the multimedia and biotechnology industries, in addition to firms in the manufacturing, communications and services sectors.

High-tech firms supported by the funds include Kental Teo., which makes advanced environmental control systems; Macalla Software, which supplies "real time" financial information to WAP phones; and software development company Datalex.

Other companies supported by the funds included Gum Busters, which makes machinery to remove chewing gum, and Food Brokers Ltd, which makes pre-packed sandwiches.

Of the funds, the largest was the Trinity Venture fund, worth £16 million at the end of last year. Launched in September 1997, the fund had invested some £5.97 million in 11 technology companies by the end of 1999.

The second-largest fund was ICC Software Fund Limited Partnership, which was worth some £15 million at the end of 1999. Enterprise invested £6.96 million in the fund last year. The fund had £12.71 million invested in 13 companies by the end of last year - in the form of ordinary shares, redeemable shares and loan stock.