Written Answers. - Venture Capital.
Dan Wallace
Ceist:
23
Mr. D. Wallace
asked the
Minister for Enterprise and Employment
the five main sources of venture capital available in this country; if he will give an estimate of the total amount of venture capital moneys provided each year by our ten leading financial institutions.
[1587/96]
There are two main channels of venture capital investment in Ireland, private sector investment and public sector investment. Within the private sector, investment can be broken down into two main sources:
(i) Direct investment by venture capital companies themselves. The main venture capital providers in this respect would include Allied Combined Trust (ACT), the Smurfit Job Creation Enterprise Fund, Development Capital Corporation (DCC) and Delta Partners. Additionally, there is increasing evidence that UK venture capital companies are becoming interested as prospective investors in the Irish economy.
Beside these main providers there are a number of smaller organisations providing equity and quasi equity funding to the higher risk seed capital segment of the venture capital market. Typical of these organisations would be First Step, the Bolton Trust and the Business Innovation Fund.
(ii) Venture capital investment by the pension fund industry. A report on pension fund investment in venture capital was commissioned in 1993 and recommended that some pension fund moneys should be made available for investment in venture type businesses. The report found that it would not be unreasonable for pension funds to invest £10 million per annum in the venture capital sector. This recommendation has been implemented and the bulk of this pension fund investment in venture capital has been channelled through intermediary companies specialising in venture capital investment.
Within the public sector, venture capital investment, and similar types of financial assistance to early stage companies, take a number of forms of which two of the most prominent are: (i) Investment by the State-owned Industrial Credit Corporation-ICC is a long established and significant member of the Irish venture capital market; (ii) The Business Expansion Scheme — although not classified as venture capital the Business Expansion Scheme has, since its inception in 1984 and to the end of the 1994/1995 tax year, resulted in £348 million in risk capital being invested in unquoted Irish businesses.
Although also not classified as venture capital, Forbairt, as part of its indigenous industry development mandate, makes equity investments in Irish businesses, usually through preference shareholdings. In 1994 this amounted to £11.8 million invested in 84 businesses. In effect this Forbairt investment has a similar impact to venture capital. That is, providing development funds of growth oriented SME's.
In addition, the nation-wide network of county enterprise boards are effectively providing seed capital to small start ups and early stage companies. Since their inception in 1993 and to the end of 1995 county enterprise boards have approved grants totalling £36.8 million to 4,339 approved business projects.
I also want to mention two other measures that should become major sources of venture capital in the future. In 1995 Forbairt established a data base of individuals with capital resources who wish to invest equity capital in small private companies. Known inter-nationally as "Business Angels", the individuals on the Forbairt database have indicated the availability of approximately £10 million for investment in early stage businesses. Secondly, I announced the establishment of an early stage equity investment fund of £60 million over the period of the Operational Programme for Industrial Development for investment in growth orientated firms which will be made available through approved seed/ venture funds with 50 per cent of the funding being provided from the European Regional Development Fund and the balance coming from private sector participants. It is anticipated that this measure will become operational during 1996.
Regarding an estimate of the total amount of venture capital moneys provided each year by Ireland's ten leading financial institutions, I do not think it appropriate or feasible to make such an estimate for a number of reasons. Some of Ireland's leading financial institutions, for instance building societies, are not involved in venture capital. Other leading financial institutions, such as the pension funds, make venture capital investments indirectly through intermediary companies in recognition of the specialised nature of and risks associated with venture capital investment. Furthermore the main banking institutions in Ireland also tend not to become directly involved in venture capital investment as they do not regard venture capital investment, which is a specialist, high risk function, as part of their core business. Accordingly, as outlined above it is not possible to provide the estimate sought by the Deputy. I would assure the Deputy however, and I and my Department take every opportunity to impress on the financial community the need for, and the desirability of, increasing the level of venture captial available to our developing businesses.
An estimate of the total amount of venture capital invested each year in Ireland is available through the yearly handbooks of the European Venture Capital Association to which the Irish Venture Capital Association is affiliated. This publication indicates the following level of venture capital investment in Ireland for 1992, 1993 and 1994; 1992, £16.6 million; 1993, £17.6 million; 1994, £19.7 million.
