Venture capital investment in Ireland fell in the third quarter, reversing a previous growth trend. However, the outlook remains strong and investment so far this year is ahead of the year-earlier period.

As much as €21.9 million was invested by venture capitalists in Irish firms in the three months ended September, according to a survey released yesterday by Ernst & Young and Venture One. This compares with €28.4 million in the prior quarter and €30.6 million in the same period last year.

Garry O'Rourke, senior manager at Ernst & Young Ireland, said the third quarter was usually a quieter period because it includes the traditional holiday months. He added that the fourth quarter was looking much stronger.

During the period, 11 deals were completed. This is an increase on the eight in the second quarter of the year, but fewer than the 14 deals undertaken in the third quarter of 2004.

According to Mr O'Rourke there was an increased tendency towards smaller financing deals to the detriment of larger later stage financing arrangements. He said that, while it is too early to say whether this is a new trend, it is good news for young Irish start-up companies who are seeking funding.

Across Europe, €798.2 million was invested in 224 deals, according to the poll. This is an increase on the prior quarter, but a decline on the year-earlier period.

In Ireland, the strongest investment was seen in the information technology sector, where input increased to €17.5 million, with a particular focus on the software segment. By contrast, in Europe IT investment actually declined and the healthcare sector attracted the most investment.

Ireland was ranked joint fifth with Norway in Europe as a destination for investment.