New €90m seed fund to ‘help create the next Irish tech unicorns’

A new €90 million State-backed fund for Irish start-ups will help lead to the creation of more home-grown tech unicorns, Tánaiste and Minister for Enterprise Leo Varadkar has said.

At the official launch of the Irish Innovation Seed Fund on Wednesday, Mr Varadkar said the fund aims to ensure that innovative start-ups not only establish their companies in Ireland, but also remain here as they scale.

“This is all about respecting Irish entrepreneurs and their ideas at a very early stage and giving them a much-needed boost from the beginning,” the Tánaiste said.

“We want to see more start-ups, more scale-ups, more Irish companies who go global,” he added.

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The Irish Innovation Seed Fund is based on a €30 million contribution from the Department of Enterprise, matched by the European Investment Fund (EIF). The Irish Strategic Investment Fund (ISIF) is co-investing a further €30 million.

The fund has been established to focus on sectors that typically experience difficulty in attracting early stage investment, including life sciences and women-led enterprises.

Mr Varadkar said he was keen to see more tech unicorns being created locally.

A tech unicorn is a privately owned company that is valued at more than $1billion (€875 million). The State has six home-grown unicorns currently: Intercom, Workhuman, Fenergo, LetsGetChecked, Flipdish and Wayflyer. Stripe, which is among the highest valued companies in the world at $95 billion, is co-headquartered in Dublin but was founded in San Francisco.

Go global

The Tánaiste said the fund intends to back “at least 45 companies to go global” although it is expected more companies than this could receive backing.

“Investment in innovation is an essential component of supporting an enterprising and productive economy. Traditionally, Ireland has lagged other economies in our ability to scale up SMEs,” he said.

“Many good Irish start-ups begin their life here in Ireland but have to go to other parts of the world, often the US, to get the funding they need to really make that leap to the next level. That is something we want to change,” Mr Varadkar added.

He said the “well-documented shortcomings” in terms of seed funding in Ireland have led high-potential companies to look for investment outside the State in a move that often leads to a brain drain.

“We want those skills and ideas to stay here,” the Tánaiste said.

The first call on the fund, details of which emerged in Budget 2022, will be announced later this week. All investments are expected to be made within three years and the fund itself is seen existing for a 10-year period. It will be structured on a "fund of funds" basis led by Enterprise Ireland, with the EIF acting as fund manager.

EIF chief executive Alain Godard said he hoped that with private investors participating, every €1 in the new fund could be worth €3 to €4 with input from such third parties.

Minister for Finance Paschal Donohoe told the event the Government was looking at additional supports to boost early stage companies, including reform of the Key Employee Engagement Programme (KEEP) to enable start-ups to better reward employees with share options.

Solid commitment

Scale Ireland, a lobby group campaigning for increased support for tech-focused companies, welcomed the new fund, calling is a “solid commitment to improving the prospects of early stage start-ups.”

A recent survey carried out by the organisation found that 79 per cent of founders see raising capital the biggest challenge to their business.

"This fund will bolster investment in early stage start-ups, which is critical as these companies cannot scale and expand without sufficient capital," said Scale Ireland chairman, Brian Caulfield. Along with the initiative in Budget 2022to allow a wider range of investors access to the Employment Investment Incentive Scheme (EIIS), the fund is " very positive", he added.