Venture capital tech funding falls in 2006

Investment in Irish technology companies dropped slightly last year, with the number of deals and the level of investment tailing off in the final quarter.

The Ion Equity Techpulse venture capital survey shows that technology companies raised €192 million during 2006, down 3 per cent on the previous year's figure of €198 million.

Despite the slight reduction in the level of investment, Ion Equity director David Fewer the figure was still well ahead of the 2003 and 2004 funding figures.

The three big Irish venture capital funds - ACT, Delta and Trinity - led only eight deals last year compared to 16 in 2005.

"This reflects the fact that the three big Irish VC funds have reached the end of their current funds and are now in the process of raising fresh capital for new funds," said Mr Fewer.

As these fundraisings will not be completed until later this year, Ion Equity has forecast a lull in venture capital funding this year.

"Overall venture capital investment is unlikely to return to more normal levels until late 2007 or early 2008," said Mr Fewer.

But while big domestic funds cut VC activity, a new trend emerged last year - significant investment by non-traditional investors such as Kilsaran Concrete, NTR, Redstone Capital, FF&P and Moritz Holdings, the investment company for the Maplewood Homes Whelan family.

These non-traditional players more than trebled their Irish investments to €65 million in 2006, which more than compensated for the €40 million fall-off in investment from the three major Irish venture capital funds, according to Ion Equity.

The first quarter accounted for the most money raised, a total of €61.1 million. This was boosted by a €25 million investment into broadband service provider Irish Broadband by existing investors NTR and Kilsaran, which was the biggest single fundraising. The first quarter also saw Redstone Capital invest €4.3 million in Global Mobile Encryption, which develops encryption software for mobile devices.

London-based investment management firm FF&P led the €14 million round of funding by Anam Mobile, which develops messaging platforms for mobile phone operators.

The third quarter was busiest in terms of the number of deals completed, with 11 disclosed and five undisclosed investments totalling €53.9 million. The largest investment was that by Moritz Holdings in broadband service provider Digiweb.

The final quarter was quietest in the number of deals completed and funds raised, €30.1 million. However, it saw the largest single international investment, the €20 investment in prepaid voucher company 3V by Atlas Ventures and Benchmark Capital.

Although the value of international investments was down slightly at €69 million in 2006, Ion Equity said international investors remain an important contributor to Irish venture capital funding. Benchmark is one of the most active investors in the Irish technology sector with investments in Alphyra, Openet and Globeforce, Innerworkings and NewBay.