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Aug 26, 2001
Start-ups
need not panic over funding - VC firm
By Brian Skelly (Irish
Computer)
Technology
start-ups worried that the downturn in the technology market will
affect their chances of securing venture capital funding may be
significantly more attractive to investors than they think, according
to a leading venture capitalist.
Paul
Sutton, managing director of Crucible Corporation, a Dublin-based
early stage technology investment company, says that the downturn
is better news for start-ups than for companies which may be seeking
subsequent rounds of funding.
"The
market conditions are good news for start-ups for a couple of reasons.
Firstly, a company in a start-up phase now will not be looking to
bring products to market for another 12 to 18 months, by which time
the market conditions might have improved. Secondly, from the investor's
point of view, companies are now more realistic about their valuations
- the dot-com 'get rich quick' mentality is firmly behind us. On
the other hand, companies which have already secured initial funding
are finding it more difficult to raise money."
Sutton
added that while technology may be out of favour with analysts,
market-watchers and hard-done-by retail investors, "nobody for a
minute thinks that technology is not the future. The investors are
still there."
However,
while VC firms such as Crucible, Trinity and ACT have seed capital
available to invest, the investment criteria used have generally
tightened. "Venture capital firms are more discerning about the
type of company they invest in," said Sutton.
For
Crucible to invest in it, a start-up should have a strong management
team, plan to target the US market and have patentable technology
or can build technical barriers to entry. Its area of specialisation
should also fall within Crucible's own pre-defined target investment
sectors which include the areas of nanotechnology and enabling technology
for e-commerce.
Crucible
has currently nine young technology companies in its portfolio,
including Openet Telecom, Marrakech, Nanomat and Interactive Enterprise.
The company recently launched a new $12.8 million fund to invest
which will allow it to invest in seven or eight new projects.
As
well as its Dublin base, Crucible opened a Belfast office earlier
this year. Sutton believes there is a virgin market north of the
border ready to be tapped. "Start-ups there have a grant-aided mentality;
venture capital is virtually unknown," he said.
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