Sarah-Jane Larkin, IVCA director-general. Image: Fennell Photography
Sarah-Jane Larkin of the IVCA said that Irish tech start-ups often ‘fall into overseas ownership’ due to trade sales long before they have ‘reached their potential’.
Ireland is too dependent on foreign investors to scale domestic start-ups that are doing well, according to the Irish Venture Capital Association (IVCA).
Sarah-Jane Larkin, director-general of the IVCA, said that Ireland has the potential to create a “stable” of unicorns – start-ups valued at more than $1bn – if this absence of domestic funding is addressed.
Her comments come as Minister for Enterprise, Trade and Employment Peter Burke, TD announced the establishment of a committee this month to work on recommendations about how to assist high potential start-ups to access scaling finance.
“Ireland has huge potential to create a stable of unicorns, and baby unicorns if the scaling problem can be tackled,” Larkin said in a statement today (17 July).
According to her, the Irish ecosystem is largely working well in terms of getting companies off the ground thanks to government and state bodies such as Enterprise Ireland and the Irish Strategic Investment Fund.
“The big problem is that, because of a lack of local scaling finance, these innovative, tech-based indigenous companies often fall into overseas ownership due to trade sales long before they have reached their potential,” Larkin said.
“The challenge, recognised in the Minister’s announcement, is our over-dependence on unpredictable international investors in taking these start-ups to the next level of growth.”
Earlier this month, Minister Burke published a report authored by the cross departmental Finance for Scale Ups Working Group and chaired by his department on the use of finance as a catalyst to develop a scaling ecosystem in Ireland.
The group’s aim was to develop actionable recommendations to support high potential firms to access scaling finance, which would in turn allow them to internationalise and increase exports.
One of the recommendations was to ensure that scaling finance is available by introducing and promoting funds that will provide scaling finance options to founders and start-ups.
The group also called for an investigation of options for pension fund and institutional investor participation in scaling equity funds and encourage corporate venturing in Ireland, as well as a review the state’s tax model and design instruments that incentivise investment into scaling companies.
“Innovative businesses require risk capital to help fund their growth, and this report provides important information to us on the key role that the State has in helping our high potential and innovative firms reach their maximum potential,” Burke said at the time.
“Finance is an important catalyst for further development of the Irish scaling ecosystem. With more scale-up capital and the expertise from scale-up investors, high potential firms could continue to grow significantly and deliver considerable benefit to the Irish economy.
“The successful implementation of the recommendations in this report will increase scale-up activity in the Irish funding ecosystem by improving access to appropriate finance.”
According to the IVCA, international funding into Irish SMEs fell by 57pc in the first quarter of this year, slipping to €184m from €425m in the same period last year.
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