State commits €85m to US venture capital fund

Investment expected to result in €250 million being pledged to Irish software firms

 Paschal Donohoe: the Minister said  €1.5bn from ISIF’s estimated €8.5bn total pot will be allocated for the establishment of the State’s planned rainy day fund. Photograph: RollingNews.ie

Paschal Donohoe: the Minister said €1.5bn from ISIF’s estimated €8.5bn total pot will be allocated for the establishment of the State’s planned rainy day fund. Photograph: RollingNews.ie

 

The State’s sovereign development fund has committed $100 million (€85 million) to a technology fund being raised by New York-based venture capital firm Insight Venture Partners, which may result in more than €250 million being invested in Irish companies.

The pledge by the Ireland Strategic Investment Fund (ISIF), the successor to the National Pension Reserve Fund, to Insight’s fund is aimed at filling an existing funding gap for established and growing Irish software businesses.

“This investment is a major step in developing Ireland as a world leader in the growth-stage software sector, with more Irish companies succeeding and more international businesses establishing operations here,” said Fergal McAleavey, head of private equity with ISIF.

“Insight’s capital, expertise and network open opportunities to support Irish software companies as they grow in scale.”

Insight, which is reportedly seeking to raise as much as $5.5 billion for its latest fund, has a long-established track record of supporting Irish software entrepreneurs, acquiring a minority stake in car rental technology firm CarTrawler in 2014 as European private equity firm BC Partners took a majority interest in the business.

New clients

It has also invested in Fenergo, which specialises in technology enabling financial firms to meet regulatory compliance and date requirements when taking on new clients, and AMCS, the Limerick-based waste management software company, in recent years.

Insight’s portfolio companies collectively employ about 1,500 people in Ireland at present, including overseas-headquartered groups such as Twitter, Cyclane and SolarWinds.

Insight has to date attracted co-investment from other investors of more than €2 million for every €1 million it has invested in Irish companies. ISIF’s €2.8 billion of investment commitments to date has been matched by €5.3 billion of third parties.

Both track records would suggest that the €85 million being committed by ISIF to Insight’s new fund will deliver more than €250 million of investments in Irish software firms, according to sources.

Stock market

ISIF has seen some of the firms it has invested in floating on the stock market in the past 15 months, including venture capital investment firm Draper Esprit and fledgling wind energy company Greencoat Renewables. ISIF continues to own 19.6 per cent of Draper Esprit and more than 28 per cent of Greencoat Renewables.

Meanwhile, Minister for Finance Paschal Donohoe said in his budget speech earlier this month that €1.5 billion from ISIF’s estimated €8.5 billion total pot will be allocated for the establishment of the State’s planned rainy day fund, which will begin to receive €500 million annually from 2019.

This contingency fund is “vital in supporting policy responses to future economic downturns and shocks”, according to the Department of Finance.