The tech sector in Ireland has a growing reputation, but the transition from start-up to established brand remains a significant challenge for firms when compared to their neighbours in the UK. Whilst Ireland has recognised the impact the tech sector can have in creating jobs and growing the economy, there is more that can be done to create an effective eco-system for home-grown start-ups to scale up into global companies.
The Irish tech scene goes from strength to strength
Unlike the UK, that is seen to focus on fintech, Irish entrepreneurs are more diverse, developing martech, SaaS and environmental technologies. Ireland’s start-ups have a proven track record for developing devices with potential revenue from the patents on these technologies, this lays a strong platform for economic growth. This was recognised by the Irish government who have continued to update the national IP protocol to ensure that competitive companies are able to scale and grow by creating a mutually beneficial environment in which enterprise and researchers can access and share knowledge, expertise, technology and IP.
Irish med-tech is leading the way and according to med-tech news (opens in new tab), Ireland now hosts 18 of the world’s top 25 medtech firms, exporting more than €12 billion of medical products every year. Medtech and associated sectors such as health-tech and bio-tech have grown rapidly thanks to Ireland’s strong life sciences sector and support from academic institutions.
Ireland’s ability to develop and monetise academic research is a model for universities and entrepreneurs internationally. Ensuring open collaboration both within Ireland and globally through research partnerships and other means shows that Ireland can establish thriving sector hubs. Take a company like AmbiSense, a company that develops smart environmental technology that monitors real time conditions through smart sensors. The company and its technology have come out of the globally recognised research centre at Dublin City University. This type of partnership provides a path to success that can be copied internationally.
Growing technology sector is good for the economy
More than 1,400 Irish SMEs have raised venture capital of €4.8bn since the economic downturn in 2008, the Irish Venture Capital Association noted that these funds were raised almost exclusively by Irish VC fund. The result of the funding has been the creation of up to 20,000 jobs and over €2bn of capital into Ireland and, in turn this geared up the State’s investment through the Seed & Venture Capital Programme.
According to the Seed & Venture Capital Programme 2017 report, the Irish Government approved €175 million for investment to support the development of high-growth Irish companies focusing on the need to grow jobs and generate large amounts of additional exports. As of December 2017, 9 funds supported under the Scheme had a combined total fund size of €700 million.
Despite these strong foundations, and other headline grabbing moves such as large investments from globally recognised brands like Amazon, the Irish technology cluster sits in the shadow of the UK, and London in particular, as the place to go for venture capital and growth finance.
Growth capital is the next step
In September, the Irish Venture Capital Association published their Ventureplus survey which showed that venture capital funding fell by 9 per cent in the first half of 2018 to €453m. This was triggered by a fall of over 50 per cent in the second quarter compared to the same period the previous year. The fall was not attributed to any single factor, but it was noted that a number of large deals had disguised a softening in the market in the second half of 2017.
Brexit may be an opportunity for Irish start-ups looking to capitalise on EU funding and UK funds who are looking to diversify. UK VCs continue to be supported by the European Investment Fund, despite a 90 per cent reduction funding, whilst there is no official policy for funds to invest in the European Union, there does seem to be a general trend. For example, it is rumoured that funds the UK have been ringfenced for European Union projects at the exclusion of those in the UK. Even outside of these funds, many are eager to diversify their funds with European investments meaning there is an appetite in the UK to invest in Irish Tech.
Last month, we at Moore Stephens hosted start-ups looking for more than €150m of funds pitching to UK VCs worth in excess of £1 billion. The enthusiasm to participate in this venture clearly demonstrates that the UK is ready and able to offer the necessary growth capital funding to enable Irish companies to build and grow.
What more can be done to grow tech start-ups
Like their Irish counterparts, the UK government recognised that nurturing businesses from within brings jobs and enhanced tax receipts from profitable, sustainable growth. Enabling entrepreneurs to build, sell and reinvest in new companies creates a self-sustaining ecosystem that ultimately ensures long term economic growth. By creating funding schemes like Innovate UK which has invested around £2.5bn since 2007 that has been matched by £1.8bn from UK Business and has returned an estimated £18bn to the UK economy. This collaboration between both industry and government investment has seen the UK develop a world class research base capable of realising innovation into strong, growing companies.
In continental Europe there are more lessons to be found. In Sweden, capital gains tax incentives are used to promote companies seeking an IPO which in turn adds liquidity to their Stock Exchange, the result was Sweden leading Europe in IPOs with 115 companies listing in 2017.
In the long term, it is essential for Ireland to put further provision in place to invigorate its own investor community. Developing serial entrepreneurs and investors domestically ensures that precious capital and jobs remain in Ireland. In the meantime, events such as our own Tech Trailblazers is putting the very best of Irish tech in touch with leading UK funds to ensure companies are getting the growth capital they need. Irish companies are pushing the boundaries of technology and will continue to be an attractive cluster, with the right support and investment.
Ned Murphy, Managing Partner, Moore Stephens (opens in new tab)
Image source: Shutterstock/violetkaipa