Breeding Irish unicorns

A new term entered the business lexicon in 2013. In searching for a word to describe companies which reached billion dollar valuations within a few years of starting up, venture capitalist Aileen Lee hit upon “unicorn”, and it stuck. Household names which fall into the category include Uber, Airbnb, Dropbox, and Spotify.

"Ideally, everyone wants to have a business based on a disruptive product or service that grows quickly and makes a difference for Ireland, " says Science Foundation Ireland (SFI) director general Prof Mark Ferguson. "Everyone hopes that the next Facebook or Uber will be started up in Ireland."

He points out that the average length of time it takes a Fortune 500 company to grow to a valuation of $1 billion is 20 years. “The average for the latest generation of so-called unicorn companies is 1.7 years from first funding to $1 billion. We don’t have any unicorns in this country yet but they are very rare, hence the name. However, they are doable with the right products and the right support. We have to ask ourselves if it is practical to think of doing it here. Our role is to help companies innovate and accelerate their growth and increase the prospect of having future unicorns starting up in Ireland.”

He bases this belief on the very strong track record of Irish SMEs when it comes to research, development and innovation. Indeed, SMEs actually outnumber multinationals when it comes to collaborative research projects with SFI-supported researchers.

“At present, there are just under 400 SMEs working with SFI-funded researchers while around 250 to 300 multinational companies are involved in about 500 projects,” says Ferguson. “The SMEs are mainly involved in one-to-one projects while multinationals can be involved in several at one time.”

Collaborative projects

SMEs are also involved in a large number of collaborative projects with SFI’s network of research centres. “There are 12 of these research centres at present and this will soon grow to 16,” he points out. “They are focused on areas of strategic importance to Ireland, including pharmaceutical manufacturing, data analytics, medical devices, nanotechnology, marine and renewable energy, food, geosciences, and software. To date, the centres have signed collaborative research agreements with over 300 industry partners representing cumulative company commitments of over €120 million. The split is about 50/50 between SMEs and multinational firms.”

While the project outcomes are important, SMEs who participate in collaborative projects with SFI-supported researchers and research centres gain in a number of other ways. “They get the opportunity to work with some of the best researchers in the world on questions which are important to their company,” says Ferguson. “They also get a platform to engage in EU Horizon 2020-funded projects. SFI research centres have secured more than €100 million in Horizon 2020-funding to date and there has been very strong SME participation in that. They get more than just collaboration on industrial research from the research centres. They get information and knowledge on how to get EU funding as well.”

A further gain is the access to multinationals such collaborations can offer. “The projects can often lead to people from SMEs meeting their technical and scientific counterparts in multinationals,” Ferguson notes. “These multinationals can be their customers already but very often the SME won’t have a clue who the right individual is in the company to talk to if they want to work on a project together. The introductions to those people can be very important. The multinationals are interested in SMEs and the collaboration might result in them putting work their way or even acquiring technology from them.”

Of course, it’s a big step from collaborating with a research centre or multinational to becoming a unicorn. “SFI recognises the challenges faced by SMEs in terms of funding and so on in this regard,” says Ferguson. “It’s really important that they are innovative. Our sister agency Enterprise Ireland provides innovation vouchers and other supports to SMEs in this regard. This is a very good example of State agencies working in tandem to support SMEs to innovate. The idea is to be complementary to one another in order to make a difference for these companies. I believe it is possible for Irish companies to become unicorns and we do have the right support systems in place to help them achieve that.”