Irish venture capital funds have over €500m to invest in the Irish SME sector following a recent round of fund raising. The figures were announced by An Tánaiste, Mary Coughlan TD, Minister for Enterprise, Trade & Employment when she announced the results of a study conducted by UCD into the economic impact of venture capital in Ireland.

 
“At a time of a global liquidity crisis, it is encouraging that this level of VC capital is available for investment in Ireland in indigenous high tech companies,” commented the Tánaiste.

 
Including an initial Government investment of €175m through Enterprise Ireland she said that seven new venture capital funds have raised over €500m with four other funds expected to report in the next few months.
 

The Tánaiste also commented favourably on the fact that SMEs were able to raise €174m already in 2008. Sixteen (16) of these SMEs were new start ups which are emerging at the rate of approximately two per month. “It is particularly noteworthy that funding by private investors grew from 4% of funds raised in 2007 to 22% in 2008 which means that the economy is now starting to benefit from Angel investors and successful entrepreneurs who can contribute experience as well as capital in helping to create Ireland’s next wave of successful high tech firms.”
 

Commenting on the findings of the latest economic impact study conducted by the Centre for Entrepreneurial Studies in UCD, the Tánaiste said, “Venture capital backed companies continue to provide a substantial impetus to the ongoing development of a knowledge-based economy in Ireland and to the achievement of public policy objectives in this regard.”
 

Professor Frank Roche, head of the Centre for Entrepreneurial Studies in UCD added, “Our study finds that VC backed companies continue to invest more in R&D, hire more graduates, export more and grow faster than other firms. In this regard they mirror the requirements of a knowledge based economy.”
 

The UCD study finds that R&D expenditure by IVCA backed companies represents 25% of total Irish indigenous spend on BERD (Business Expenditure on Research & Development). R&D expenditure in these companies rose by 25% in 2007 compared to an increase of 7% by other indigenous companies.

 
The UCD study also finds that graduates represent just over three quarters (76%) of the workforce of VC backed companies and PhD employment increased by 20% in 2007.
 

Whilst employment growth is moderating, the performance of venture capital backed companies has been significantly better than in the economy generally. The annual average increase in employment since 2003 was 19.9%. This compares with an annual average increase in the same period of 3.7% in overall employment and of 6.4% in employment in the financial and business sector.

 
In 2007 IVCA backed high tech companies generated exports of €266m, an increase of 18% on 2006. Exports represent 79% of total revenues, up from 63% in 2005.

 

Joe Concannon, chairman, Irish Venture Capital Association (pictured), welcomed the findings of the UCD report. “As foreign direct investment continues to be increasingly mobile and construction activity falls, it is increasingly important to encourage the growth of a high value, high tech indigenous Irish sector.”