Venture fund boost for Irish tech groups

Only two to three years ago, venture funds for technology companies - or any companies - were few on the ground in the Republic. Now, many financiers say money is flooding in, and some even believe we are over-invested.

But Mr William West, a partner in a new, US-based, $125 million (#137 million) venture fund targeting digital convergence technology companies, thinks the Republic is ripe for investment. He is bringing together US and European investors for TriKal Global Funds, which will seek out companies with global market potential in the Republic. An additional fund has Indian technology companies in its sights, and similar funds for Poland and Israel are part of TriKal's plans.

"We're only going to invest in companies that focus on convergent technologies," says Mr West. Convergent technologies are those that will help drive and link the Internet, mobile, remote access and voice networks, and are predicted to become an $80 billion market in the US by the end of the decade.

For the Irish fund, two focus areas will be companies in wireless communications - a growing area of Irish productivity - and financial services. Financial services includes billing systems, which Mr West says need to be redesigned to handle the many new service offerings from financial companies, and technologies that help companies integrate disparate computing systems. On the wireless end, he points to security, databases behind networks, and integration technologies as key areas.

"I think the technology being developed here is on par with the technology developed in other markets, which means it can become a global standard," he says. "We're certainly attracted to the Irish story." The success of the economy is well known, he says, and he likes the strength of the educational system here. The high representation of Fortune 500 companies in the Republic means employees "have strong training on top of their academic training". Finally, "in terms of potential entrepreneurs, it's very promising".

"Global" is the functional word for TriKal. "It's important that we find companies with global potential," says Mr West. "Our main goal is to help companies maintain a global vision. That's really what distinguishes us from an indigenous venture capital firm." Irish companies need to be thinking from the outset about approaching the US market, says Mr West, and TriKal would expect companies to put management into Boston or the US east coast.

Even the structure of TriKal incorporates a global angle. TriKal will be using what Mr West terms a "triangular strategy" - investing in Irish companies, supplying their developer needs with Indian expertise, then going after the US market, although Europe is also considered an important market. TriKal has a division called IndStar, which works with Indian development houses to source Indian developers. Mr West - whose partners in TriKal are Indian nationals - stresses that IndStar is not a headhunting firm but sources developers who can then work in the Republic on two- to three-year contracts. Ideally, says Mr West, the Republic will streamline its visa process so that Indian nationals can carry out work here, but IndStar can set up offshore development teams as well.

While Mr West acknowledges that there are many country-specific funds in the Republic and elsewhere - particularly funds launched by expatriates - he notes: "What we're doing is a little unusual in that we're multi-country." They are still in the process of raising the Irish fund, but are also ready to invest. Mr West says TriKal prefers to invest with Irish partners and is actively looking to expand partner relationships here. "We prefer to co-invest with local partners because we prefer local partners to focus on early stage development and then the fund can come in at the second stage."

It's "an attractive time for foreign investors to get in the Irish market", even if the economy slows or goes into recession. Relative growth in the euro is likely to remain small, he believes. "For the US investor, the dollar is likely to remain strong, even if the economy contracts." He also disagrees that the value has gone out of the Irish market. There's a national tendency here for deals to be priced too highly, he says. But that has begun to change, although not to the extent that some have argued. "VCs [venture capital companies] here say that over the last six months deals have been cut in half and now Ireland is on par with the United States", he says, but he disagrees that the drop has been that extensive.

He also says that many funds, both here and in the US, believe the Republic is now "over-invested". But he says that the value of investments will be written down due to the current economic slowdown and resulting devaluation of many technology companies. "It's a fantastic opportunity for new venture firms like ours," he says. "It's harder for firms that have been here a few years."

Klillington@irish-times.ie