Invest in emerging firms or else risk getting left behind

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Claire Carroll

May 02 2021 02:30 AM

If we think back 20 years, sectors such as fintech, agtech and digital health were unknown. The pace of technological innovation is exponential, and Ireland must not only be ready to participate, but also to lead or risk getting left behind.

Since 1994, Irish governments, through Enterprise Ireland (EI), have committed €565m from five Seed and Venture Capital schemes to venture funds to help ensure that there is an effective overall funding ecosystem here. To date, four new funds have been supported under the most recent €175m scheme, and a call is currently open seeking to deploy up to €82m to both domestic and international fund managers with funds that will support the next generation of Irish tech companies.

Vision

The vision of the scheme is to foster a strong pipeline of high-growth and innovative indigenous companies that are supported both early and further along in their later scaling journey.

Raising capital is often a challenge for Irish early-stage companies. EI can now invest up to 70pc of the fund where the investment strategy is to invest at pre-seed/seed stage. This was increased from 50pc in recognition of the challenges that managers face in raising early-stage seed funds, helping managers to close their funds faster.

However, what EI aims for is the maximum leverage of our investment. Venture managers need to raise additional capital alongside our stake. EI would typically prefer to be 20pc of a €100m Irish focused fund than 70pc of a €20m fund, as the former will have a greater impact on the local ecosystem than a smaller fund.

However, we also factor in the investment strategy and how that aligns with EI client needs, as well as our developmental mandate for newer sectors and managers.

Through the schemes, EI also seeks to influence wider mandates such as women in business and regional development. In applying to EI for funding, managers must set out their policies around support for women in business and how they will help develop companies operating regionally.

Success stories

The €565m funding we have provided through the schemes to date has leveraged substantial additional external funding of over €1bn, directly benefiting over 740 Irish companies.

Looking back on some of the success stories, we can see many examples of multinationals gaining a presence in Ireland through the acquisition of an Irish business, and thereafter, continuing to build a stronger presence, supporting more jobs and the development of skills and experience which will lead to the next generation of Irish entrepreneurial activity. Some great examples of companies backed by EI directly and EI-supported Venture Capital (VC) funds include:

Semiconductor company Decawave, was acquired by Apple supplier Qorvo in 2020 in a deal estimated at €363m. Similarly, Irish games company DIGIT was acquired by LA-based interactive entertainment company Scopely.

More recently, in March 2021, Irish data analytics company Boxever, was acquired in a multi-million-euro deal by US customer experience developer Sitecore.

No one scaling model fits all and many companies go on to raise later and larger funding rounds. For example, AMCS, a leading provider of solutions to the environmental waste sector, was initially backed by an EI-supported VC fund and more recently by international investors and the Irish Strategic Investment Fund. Similarly, Luzern, the e-commerce platform, was initially supported by an Irish VC fund and more recently by the Cardinal Carlyle private equity fund.

Additionality

In the current open call, we want to attract the best venture managers who can demonstrate that they have the skills, experience and expertise to mentor and guide these companies and bring genuine additionality to the Irish market to further drive Ireland’s reputation for quality and innovation which, post-pandemic, will be more important than ever.

Claire Carroll is Senior Investment Manager at Enterprise Ireland. Full details and guidelines can be found at enterprise-ireland.com/svcapital