Monday 15 July 2019

Dublin wins most of Enterprise Ireland-backed VC investment

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Shawn Pogatchnik

Nearly three out of every four euro of venture capital (VC) investment backed by Enterprise Ireland has gone to businesses in Dublin, an Irish Independent analysis reveals.

The figures - distilled from the business development agency's new Seed and Venture Capital 2018 Report - show that EI's private fund partners have invested €938m in Irish companies from the 1994 start of the strategy to the end of 2018. Businesses within Co Dublin devoured €645m, or 68.8pc, of that pie.

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The picture grows more lopsided in EI's 2013-18 programme figures. These show Dublin companies receiving 79.5pc of all individual deals, and 74.3pc of the money, from Irish investments made by EI-backed funds.

In contrast, EI-backed VC in the Border region since 1994 totals €7.6m, and the midlands €8.5m. Cork and the south-west have attracted €86.8m, some 9.3pc over the past quarter-century, including a single €250,000 investment from the 2013-2018 programme.

Galway and the west fare better, winning €117.2m or 12.5pc since 1994, including 18.4pc from the 2013-2018 programme. Other regions eke out low single-digit shares of VC interest.

Donnchadh Cullinan, EI's manager of growth capital and banking relations, said the agency "would like to see a better spread and we actively work with each of our managers to ensure they look at deals across all sources and locations".

The Dublin-centric appetite of funds considering Ireland, he said, reflects the reality "that venture capital is a specific investment instrument for a specific type of company". These congregate around the Irish capital, home to many tech innovators.

"VC is appropriate for high-growth software companies. It is not appropriate for steady-growth assets such as heavy engineering companies, of which we have many in regional locations," he said.

Mr Cullinan emphasised that VC is "only one of a set of tools we use" and several other EI schemes provide stronger support for Ireland's regions, where 64pc of EI-supported jobs are.

These include a disproportionate number of investments in Galway, Shannon and Waterford driven by regional accelerator programmes, as well as direct financial support for Irish firms designated as High Potential Start-Ups or receiving Competitive Start Funds. These EI programmes last year invested €23m into 132 start-ups, 42pc of them in the south, west or north-west of Ireland.

Mr Cullinan noted that EI's VC programme for 2019-2024 puts a focus on regional and agri-food companies.

EI's VC strategy uses taxpayer funds to leverage larger investment gains for Ireland. Partner funds, some of which invest globally, are contractually required to invest at least twice the sum of EI's stake into Irish enterprises.

"If we commit to their fund, they have to look at our deal flow - and they discover great deals. We stimulate investment that never would have happened otherwise," he said.

For the 2013-2018 programme, Mr Cullinan says EI has invested €44m into 10 partner funds, and these in turn have injected at least €141m already into Irish firms - 3.2 times that EI investment.

EI makes up to €175m available for each six-year programme, though investments may take longer and often increase as start-ups in the funds' portfolios scale up and compete overseas.

"Venture is a long game," Mr Cullinan said.

Enterprise Ireland receives annual confidential returns from its fund investments too.

Irish Independent

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