Venture capital companies invested 33 per cent less in Irish technology firms over the first quarter of this year than in the same months of 2002, a survey has shown.

The research, produced by corporate finance firm ION Equity, finds that venture capital firms pumped €37.2 million into indigenous Irish technology firms over the first three months of this year, down from €55.2 million in 2002.

The number of investment transactions also dropped, falling by 40 per cent from 23 to 14.

ION acknowledges that companies seeking to raise capital at the moment are facing "a difficult and painful process" but maintains that operations with a strong emphasis on research and development are "absolutely fundable".

ION has established that venture capital firms are interested in early stage technology firms and those that have "weathered the storm well" over the past two to three years.

"It is the companies that are medium-stage opportunities, where revenue growth has slowed, that may struggle to attract venture capital in the short term," ION notes in an analysis of survey results.

The research highlights the €10.2 million funding injection received by Dublin-based technology firm Corvil Networks from Cisco Systems, Apax Partners and ACT Venture Capital as the "most exceptional" deal of the year. Corvil was established by a team from the Dublin Institute for Advanced Studies three years ago.

Another "notable deal", according to ION, was the 4.5 million funding received by Eblana Photonics from TLCom Ventures and ACT Venture Capital. Eblana originated in Trinity College Dublin and the Irish National Microelectronics Centre in Cork.

ION chief executive Mr Neil O'Leary said the funding successes of firms established in Irish universities offered "a sign that our IT base is maturing and beginning to offer substance to investors".

Mr O'Leary said ION had recorded particular interest in hardware-based "deep defensible core technology".

Looking to the remainder of the year, the firm has detected "a good pipeline of quality deals" likely to close before the end of the third quarter.

These transactions will involve communications hardware, semiconductor and communications software companies in a mature stage of development, according to ION. Some early stage biotechnology and medical devices investments will also occur, the firm believes.