International economic uncertainty has provoked wide-ranging job and salary cuts in the client firms of venture capital (VC) companies, according to new research.
Almost 90 per cent of venture capital firms active in the Irish market have told the Irish Venture Capital Association (IVCA) that companies within their portfolio have reduced their staff numbers over recent months.
Some client firms have also implemented pay cuts, according to 60 per cent of respondent companies, while 86 per cent reported a reduction in general overheads.
The findings come in the second part of the annual survey of association members.
The first section, released earlier this week, played down the prospects of Irish companies going public in the next 12 months.
Close to two-thirds of respondents in this latest publication said some clients had cut back on their marketing budgets, although 20 per cent said their portfolio companies had increased their marketing spend.
The association suggests that this trend could reflect "the current priority to drive revenues".
While a third of the companies surveyed said their clients had reduced their outlay on research and development, 47 per cent said investment in this area had been maintained.
The Venture Capital Outlook 2003 concludes that an international economic recovery is the most significant external factor affecting the operations of respondents' clients.
Looking forward, the survey finds that three-quarters of venture capital companies plan to maintain or increase spending in the IT sector this year. One-fifth of respondents said they would be reducing their investment in the sector.
The association interprets this as a recognition that IT companies still present "significant opportunity" for a return on investment through a trade sale. "It may also reflect the fact that Ireland is starting to develop a critical mass of indigenous tech firms," the survey notes.
Opposing trends were evident earlier this week, however, when it emerged that the British private-equity group, 3i, had closed its Dublin office because of concerns over the ailing economy.
Slightly more than half the firms surveyed by the association said they expected to increase their investment in non-technology companies. "This suggests that while there is no flight from IT, VC firms are looking for opportunities in non-technology sectors as well," the association says.
Access to "senior, experienced management" is also highlighted as a concern in the survey, which was conducted in February and March.
