Ireland’s ability to develop indigenous world-class technology companies is seriously threatened by an over-reliance on foreign investors, according to the Irish Venture Capital Association (IVCA).
IVCA, in its pre-budget submission to the Government, said 57 per cent of venture capital funding in Irish companies last year came from investors outside Ireland.
It called on the Government to introduce an opportunity for new pension schemes to invest a small percentage of funds into indigenous enterprises. It said this measure would be “revenue neutral”, and would increase the number of start-ups in Ireland before helping them to “scale up” here.
IVCA chairman Leo Hamill said Ireland was lagging behind international peers in terms of venture capital investment from pension funds.
“Irish pension funds seriously lag the rest of world when it comes to VC investment,” he said. “Public pension funds contribute 65 per cent of the capital in the US VC market, 18 per cent in Europe and 12 per cent in the UK. Here it is estimated to be significantly less than 1 per cent.
“We must find new sources of capital if we are to fund the growth of indigenous post start-up enterprises. Last week’s exchequer returns highlight our reliance on corporation tax generated by a small number of multinational companies and the need to grow our own large enterprises.”
The IVCA pre-budget submission argued that artificial intelligence, blockchain, digital, and deep-tech technologies will propel Ireland’s “digital economic future”.
“Ireland has shown itself capable of creating world class companies in these areas, but not in providing scaling funding for them,” it said.
IVCA director general Sarah-Jane Larkin said: “Other EU countries and the UK have already implemented or are planning to source VC investment through pension funds.
“For example, Germany has just announced a scheme to invest €30 billion into venture capital through pension fund assets and institutional investors.”
The submission pointed to a scheme in France which mandated that corporate employee savings schemes offer a solidarity investment funds option. “This resulted in significant growth in the amount of capital allocated from €200 million to €6 billion between 2002 and 2016,” it said.
“We are not only witnessing a global economic slowdown but also the weaponisation of international trade. Russia’s invasion of Ukraine has accelerated this trend.
“Chinese and US trade tensions, combined with potential UK and EU ones will impact the availability of scaling capital for Irish companies. If we are unable to fund our own leaders in these areas, we risk having our economic future dictated by interests outside Ireland.”