Venture capital shows slowdown

VENTURE capital investment slowed dramatically in this country in the opening quarter and was very much out of kilter with the trend around Europe.

Just 4.2m was invested in young innovative firms in Ireland between January and March, significantly down from 26.3m in quarter four last year and the 28.6m invested in the corresponding opening quarter of 2006. Only one deal was completed in Q1 this year, down from four deals in Q4 and seven in Q1 last year.

Coming off the strong growth in 2006, venture capital investment into European companies overall flattened a bit in the first quarter, when 1.07bn was invested in 207 financings, according to the quarterly European Venture Capital Report released by Dow Jones VentureOne and Ernst & Young.

Compared year-on-year, both capital and deal flow decreased 11pc from the first quarter of 2006.

"The Irish market is quite small, therefore quarterly numbers need to be treated with caution as they can be skewed by cyclical patterns and by the small number of deals. More meaningful data should emerge with respect to the underlying trend for 2007 as we complete the second quarter," said Garry O'Rourke, Transaction Advisory Services director at Ernst & Young in Dublin.

There were no Irish seed, first or second-round deals in Q1, which represents a decrease from three deals in Q4 and from one deal in Q1 of 2006. A single later stage deal was completed in the opening three months of this year, just as in Q4, compared to five in Q1 last year, raising the 4.2m total, compared with 2.6m in Q4 and 27.4m in Q1 last year.

No investments were made in the healthcare sector in the opening quarter this year; there was only one IT sector deal closed, down from the seven deals in Q1 last year.