ICC Venture capital is to invest £1.5 million in Sunday newspaper Ireland on Sunday in return for a 25 per cent stake. Meanwhile, it is understood that the IOS talks with the Daily Mail on forming a joint venture to publish a daily newspaper have been abandoned.

Staff at the newspaper were briefed yesterday about the proposal, but were not told the investor's name. However, Mr David Fassbender, of ICC, confirmed last night that the company was very interested in taking a stake in the newspaper, but the deal was not finally signed. "We have had detailed discussions," he said.

Other sources said the deal now meant the company was fully funded. The newspaper had hoped to raise £4 million before its launch 18 months ago, but sources said the figure had fallen short. "This new investment brings it up to about £4 million," said one source.

It is understood that the current shareholdings will not be diluted, as the 25 per cent stake had been held since the paper's foundation for a new investor. Shareholders include the editor and founder, Mr Liam Hayes, and co-founder, Mr Cathal Dervan, who oversees The Title, the newspaper's sports supplement, and businessman Mr Paschal Taggart. There are also a number of BES investors.

IOS executives are reported to be delighted with the investment, which they believe secures the company's future. ICC Venture Capital invested about £15 million in various companies last year. The overall value of its investments last year was about £70 million.

Ireland on Sunday's latest average weekly sales figures for July to December last year show it is selling 63,476 copies per week. One source said the paper had sold 70,000 copies last week, the first time it had hit such a figure since its launch. It is believed that some of the money will be used to take on some "heavyhitter" contributors and to beef up certain sections of the paper.

The deal with the Daily Mail is off, staff were told yesterday. However, a senior source told The Irish Times that IOS sees it as a postponement rather than a rejection of launching a daily newspaper with a suitable partner.

"Talks went on and on, but in the end a deal proved impossible to tie down," said the source.

It is understood that as news began to filter out that the British deal was faltering, a number of investors started to express an interest. IOS had initially hoped to sell 50,000 copies per week.

It was born out of The Title, Ireland's first weekly sports paper. That paper never achieved sufficient critical mass from a circulation viewpoint and is now carried in the main newspaper.