THERE is something wrong when three of the country's leading fund managers complain about being shut out of a start up fund raising on the same day as a report from the European Venture Capital Association states that venture capital funding in Ireland dropped by 29 per cent last year.
The enthusiasm of Irish institutions for start up and venture projects has always been lukewarm at best. As a result it is surprising to hear institutions such as Standard Life, Scottish Provident and Friends Provident complaining that they were not approached by Stentor, the latest arrival in the private telecommunications sector, which floated on the Alternative Investment Market (AIM) in London at the end of last month.
What was not surprising was the comment from Stentor director Mr Patrick Cruise O'Brien, who said the company had opted for AIM after taking soundings in Dublin.
It is an all too familiar picture. The Irish investment community's allergy to venture capital manifests itself in two main forms. Over the last 10 years a succession of high tech, high risk companies have evolved in Ireland and been forced to raise money elsewhere.
So far this year three Irish companies have listed on foreign stock exchanges while there has not even been a hint of a new listing in Dublin. Stentor has listed on AIM, the packaging group ILP has listed on the London Exchange and Q-Zar has listed on Nasdaq.
Most of the companies seeking foreign listings have a number of common characteristics. They are young and technologically based, have few tangible assets but considerable growth potential.
Given the experiences of these companies, it is hardly any wonder that Stentor did not waste too much time in Dublin. By the same token there is little surprise that Esat Telecom Holdings is seeking to raise $30 million (£19.2 million) in the US to expand its network and fund its share of the new mobile phone licence. With the exception of Dermot Desmond's International Investment and Underwriting, professional Irish investors would appear to have passed up the opportunity of investing in the second GSM mobile phone company - a high tech money spinner if ever one existed.
The other main manifestation of the nervousness of the Irish institutions has been the number of British venture capital companies active in the Irish market. Over the last 10 years the major management buy outs in Ireland have been funded by British groups such as NatWest Ventures. They include the £32.9 million buyout of Novun from Fitzwilton, the £14 million buyout of Lowe Alpine and the £11 million buyout of Dakota.
Three years ago it appeared that things were about to change. After being threatened with legislation to make them do it, the Irish investment institutions agreed to commit a certain amount of money to venture capital. Three funds were established, including ACT Venture Capital, which was backed by AIB and the ICC Venture Capital Fund, which was backed by a number of the life and pension institutions. Bank of Ireland threw its weight behind Delta Partners. Between them they had more than £100 million to invest over five years.
The rebirth of the Irish venture capital industry has turned out to be a false dawn. According to the European Venture Capital Association, Irish companies raised £16 million in venture capital last year, compared to £21 million in 1994. Of the 30 projects funded, only eight were start up companies.
The problem was that the Irish institutions had to be pushed into doing something that should be second nature to organisations keen to secure the long term future of the economy and the market they serve. When the recent track record of the Irish institutions is taken into account, the complaints voiced by Scottish Provident, Standard Life and Friends Provident last week rind a little hollow.
