Enterprise Ireland, the enterprise support agency owned by the Irish government, is one of the most active startup investors Global Government Venturing tracks. In 2016 the agency supported a record 229 startups, an increase of about 5% over the previous year. A total of €32m ($34m) was spent on these startups, up from €31m in 2015, via two key initiatives – Competitive Start Funds (CSF), which injects early-stage funding into new businesses, and High Potential Start-Up programs (HPSU), which backs startups with the potential to create 10 new jobs and €1m in sales within three to four years of being founded.
CSF injected early-stage capital into 128 companies, while HPSU made 101 investments. From a diversity standpoint there are signs of progress. 63 of these investments, or about 28%, were in businesses led by women – 19 of these startups were supported by HPSU and 44 by CSF, a slight improvement over 2015’s total of 61 startups led by women (for more on diversity, see comment).
Enterprise Ireland has also worked to promote a startup culture outside the Irish capital – more than half, or 53%, of new portfolio companies are outside Dublin. The agency has welcomed more overseas talent as well – 33 startups were formed by entrepreneurs who moved to Ireland from abroad, including mainland Europe, the US and Russia, up from 15 startups the previous year.
Fintech, a key sector for the Irish economy, attracted 17 investments, made up of seven through HPSU and 10 through a dedicated CSF fund. Fintech is especially important to Ireland in the wake of Britain’s vote last June to leave the EU, as the country is making a play for financial services firms currently based in London’s City district. Indeed, Xavier Rolet, chief executive of the London Stock Exchange, warned British MPs on the treasury select committee in January that the City could lose more than 230,000 jobs to other EU countries amid continuing uncertainty over Brexit.
Ireland is already benefiting from this uncertainty. Cyril Roux, deputy governor of Ireland’s central bank, told the Guardian in December 2016: “Since the UK referendum, there has been a material increase in the number of authorisation queries from UK-authorised entities.
“We are seeing applications throughout the whole spectrum. We have applications for new business, the licensing of firms who are not present here, but we also see very significant indications from regulated firms that are small today but want to be big tomorrow.”
These moves are set to increase following UK Prime Minister Theresa May’s admission in January that she would seek to remove the country from the single market, the institution that enables banks in one EU country to operate freely in another without the need to open separate offices there.
To boost fintech investments, Enterprise Ireland in February committed capital to the Suir Valley Venture Fund of Suir Valley Funds, launched by investment firm Shard Capital Partners. Suir Valley Funds is the first in the country to feature a regulated fund with a fully regulated alternative investment fund manager.
Suir Valley, which has achieved a first close with commitments of up to €20m from Enterprise Ireland, the Irish Government Agency and Shard Capital, will focus on fintech startups as well as the internet of things, augmented reality and virtual reality. Fund management will be led by Barry Downes, founder of mobile app development platform FeedHenry, acquired by software developer RedHat in 2014 for €63.5m. It will operate out of Waterford Institute of Technology’s Research and Innovation Campus.
Enterprise Ireland has also announced an investment in AIB Startup Accelerator Fund 2, established by VC firm ACT Venture Capital, which targets early to expansion-stage businesses. The fund, which is supported by ACT’s main expansion fund, is in turn backed by financial services firm Allied Irish Banks (AIB) and private investors, and will focus on seed-stage startups in sectors including software, internet, digital media, communications and mobile.
Suir Valley and AIB Startup Accelerator Fund 2 are not the only funds receiving Enterprise Ireland support. Also in February, the agency said it was backing two other new funds – the $65m Frontline Ventures Fund II, managed by VC firm Frontline Ventures, which targets early-stage businesses, and a $107m fund managed by Seroba Life Sciences, an investment firm that focuses on healthcare technologies. These four new funds combined are generating, on their first closings, €188m of fresh capital.
The good news for Ireland? Its efforts to foster a startup culture are paying off, and the results can be seen in international rankings such as the Global Entrepreneurship Index (GEI), which measures the health of entrepreneurship ecosystems in 137 countries. Ireland vaulted to ninth place in 2017, up from 12th place in 2016 – the US is top of the list. The UK meanwhile is eighth in the world, having slipped from fourth place in 2015.
Zoltan Acs, director of the centre for entrepreneurship and public policy at George Mason University and co-author of the GEI report, said: “Ireland’s showing on the 2017 GEI is almost all due to a marked improvement in entrepreneurial aspirations. While there was an improvement in several of the pillars [used to measure entrepreneurial health], the marked improvement was in innovation, high-growth companies, internationalisation and venture capital. These are the pillars an innovative economy would want to improve to enhance its entrepreneurial ecosystem.
“Whatever Ireland is doing, it seems to be doing the right thing,” he said.
