"While VC funds in the UK and US are struggling, the Irish funds have all made money," says Regina Breheny of the Irish Venture Capital Association (IVCA).

Levels of investment here have also held steady: total VC funds raised last year hit over €242m, up 7.5 per cent on 2007 and 26 per cent on 2006. But the figures are based on funds raised in boom times.

Going forward, however, "some stagnation" is likely, according to one senior VC partner. Nobody wants to make any big money moves, he says, until things bottom out in the US economy. That end is not yet in sight, though many see it happening by the close of this year.

Skewing the Irish figures further is the government's mission to plough money into innovative start-ups via the VC sector. A further €500m has been committed to this goal, with Enterprise Ireland (EI) partnering with VC firms on seed capital funds. This boosts early stage investment in a time when VCs might otherwise stick to driving bigger chunks of their money into existing projects.

This month, EI matched money with VC Seroba Kernel and closed a fund on €75m, below its target of €100m and a hard cap of €120m. So some degree of struggle to garner money is evident, but these schemes are a lifeline for early stagers now.

Banking's difficulty is proving to be VC's opportunity. The frigid attitude of lending institutions is driving entrepreneurs to consider parting with precious equity for investment. "There's a definite return to an equity culture in terms of growing companies," partner with ACT VC firm Walter Hobbs says. "It's going to be back in fashion as we're not competing with cheap debt any longer."

But VC activity here is, if not drowning, not waving either. It is mostly about treading water. "Most VCs are concentrating on existing funds rather than new stuff," Hobbs reports. "In the second half of this year, we think there's going to be a rise in activity. Nearly all the main players have raised funds, so there's a fairly significant amount of money around."

The immediate outlook is hard to predict. "Things are," Hobbs says, "very defensive at the moment." But many of the big players are doing a bit of shopping. Delta raised a fund back in 1997, "so we're actively looking for investment in two to three years", says Roche. "We're open for business, as are two or three other VCs."

Seroba Kernel is also looking for action. "We've got fresh money, which is a rarity at present," says managing partner Peter Sandys. "We have to see if it's sufficient money to take a company to exit or a good stage. The biggest difficulty is longer financing, as there are less exits."

"Ireland rates highly for us," Maloney says of Balderton's position. "It's going to be more difficult now. Some VCs are not going to raise another fund. But with less capital available, those who do have it are seeking more action."

So while they survey the recession landscape and re-group, what will attract VCs when the tide turns?

It largely falls to the innovations that original and far-thinking innovators will come up with. Bad times can make for creative companies.

For example, Digital's closure in 1993 spawned a score of innovative tech start-ups, while Iona Technologies, founded in 1991, emerged from research at Trinity College in the lean Eighties.

"It brings in a Darwinian situation -- strong companies will survive, companies with weaknesses won't," Maurice Roche of Delta Partners explains. "Good companies are created in recessions; companies have to develop unique products to survive."

The Irish companies attracting venture capital have very high R&D -- significantly higher than other countries, according to European Venture Capital Association research.

Balderton Capital, one of the largest VCs in Europe, manages $1.7bn in committed money. It doesn't, says general partner Barry Maloney, target sectors, but ideas and people. "Being sector-focused is not the right way to look at our business. It's all about when you back the right entrepreneur."

So veteran campaigners will be in demand. "One of the key issues now is quality of management," says VC consultant at William Fry, Brendan Heneghan.

"There are guys who got VC funding around 2000, and sold say around 2006; they have their money, maybe a few €100m in their back pocket. They've been there, done that, people with a proven track record; they will be putting together new businesses and they will be attractive."

Life Sciences

The lion's share of venture captial investment in Ireland is in technology -- making up 88 per cent in 2007 and in 2006, compared with a European average of 18 per cent. But with €40bn or so worth of pharma, biopharma, chemical, medical device and diagnostic companies here, the life science space is attracting attention.

"Traditionally, venture capitalists have tended to stay away from these things as they are more difficult to understand, but they will move up the value chain, I suspect," Heneghan says.

Drug development company Ospona Therapeutics recently scored an €18m investment from a venture capital syndicate -- more money than it initially was seeking. Meanwhile, the Seroba Kernel fund that closed this month will invest in around a dozen life science companies at early to mid-stage, at around €5m to €7m per company.

Start-ups

Balderton does 60 to 70 per cent early stage investment, and Maloney thinks series A investments make sense. "It's time now for investing from an engineering and technology perspective. Companies at R&D stage now are worth putting €3m to €4m into, with a view to their being product- ready in a year to 18 months."

"Lots of successful companies started in recessions," says Hobbs, but being in too early can be a risk. "One of the failures of capitalism is that the guys who are last in make more money -- the original investors tend to get a hard time of it."

In this climate, Hobbs feels there's a lot to be said for "companies that are up and running, that don't need leverage, just need to grow".

"We do invest in start-ups, but it's much more difficult," says Delta's Maurice Roche. "We've just completed investment in two indigenous start-ups in the last two weeks."

Tech media

As convergence powers on, TV, PC, Mobile and MP3 media crossover is thriving and it's no surprise that companies with big ideas in this space are hot properties. Balderton has €300m invested in tech media companies in Ireland, representing 25 per cent of its funds, attracted by their sense of the bigger picture.

"Where firms in larger countries such as France and Germany can be slow to see the international picture, Irish firms realise they have to be global because their own market is small," Maloney says.

Business and Consumer services

The sector is a catch-all space, taking in cinema, TV, radio, sport, telecoms, post and courier services, insurance services and more.

"It can be very promising," says Hobbs. ACT's portfolio includes Adeptra, the Gift Voucher Shop and directski.com.

Balderton has invested early and followed the journey of a dazzling roll-call, including Betfair, Bebo, Newbay, globoforce and openet.

Clean/green tech

"There is a lot of buzz, but a lot of money has already been lost," cautions Maloney. "The trick is not to be too early from a VC perspective."

"The technology can take a long time [to bear fruit], and a lot of capital," Roche at Delta Partners says. "We've looked at wave power, for example, and the time when the technology is sophisticated and there is a large-scale domestic product may be some way off."

In Q4 of last year, VC spending in the sector fell by 35 per cent globally, according to consulting firm Cleantech Group. What happens next may hinge on the Obama government's follow-through on commitment to carbon caps and alternative energy. The US market is a serious potential opportunity for Irish companies.

Enterprise software

The changed investment climate means that some areas have less of a gloss right now, as returns are less certain or further away. This sector is a prime example.

The likes of SAP, Sun Microsystems and Oracle introduced organisational software staples to businesses, but the mode of selling in these products has completely changed. As rental and subscription becomes the norm, replacing whopping licensing fees, the sector is slower to show revenues while still requiring a large lump sum to build up.

Capital-intensive technology

"There's a lot of concern over how rewarding investment in semiconductor [ie, silicon chip] technology will be going forward, as it is very capital intensive," says Hobbs.

Roche agrees: "You need a €30-€40m investment before you can get returns."