A new €30 million seed venture fund for start-ups that is backed by a number of Irish tech veterans and several institutional investors is to launch in the coming months.
The Ireland Smart Tech Fund is the brainchild of Dublin Business Innovation Centre (Dublin BIC), which is marking its 30th year in operation.
The initiative is intended to address a chronic shortage of funding options for early-stage entrepreneurs in Ireland by backing up to 30 Irish companies over a four- to five-year period.
Details of the fund have been revealed by Dublin BIC's chief executive Michael Culligan. He also told The Irish Times the organisation is scouting for more locations in the capital as it looks to build on the success of Space@DublinBIC, a start-up hub and co-working facility it established a year ago.
Figures published by the Irish Venture Capital Association earlier this month show that while the amount of money raised by tech companies increased by a third in the first quarter, seed investments made up just 1 per cent of the total, and were down 50 per cent on the same period a year earlier.
Seed capital is an investment that is typically made in early-stage companies who are in the funding gap between business angels and venture capitalists.
Dublin BIC offers a broad range of supports for Irish entrepreneurs, including investor-ready preparation, access to finance, incubation space and networking/collaboration opportunities.
Need for intervention
Culligan said the organisation, which has played a role in the success of companies including Storyful, Brown Bag, Newswhip and SilverCloud Health, was in a good position to spot the need for intervention to bring about new funding opportunities for tech start-ups.
“During the recession we had four seed venture funds available, each of which was doing about 10 investments a year and which, combined, led to north of €100 million being made available to companies, This had a very positive impact locally,” he said.
“In recent years though a gap has emerged as VC firms gravitated towards larger deals. However, seed investment is of critical importance in ensuring the future of the next generation of entrepreneurs. We’re hoping that our fund will serve as a catalyst and encourage other investors to create funds,” Culligan added.
Dublin BIC was set-up in 1988. The organisation, which has been a big backer of Irish start-ups, offers a broad range of supports for entrepreneurs, including investor-ready preparation, access to finance, incubation space and networking/collaboration opportunities.
Overall, Dublin BIC has provided more than €100 million in direct funding to more than 350 companies through its management of initiatives such as the Halo Business Angel Network (HBAN) and the AIB Seed Capital Fund. In addition, the body has responsibility for the award-winning Guinness Enterprise Centre (GEC) in the Liberties, and it is the organiser of the FutureScope conference, which takes place next week.
Culligan said financing for the Ireland Smart Tech Fund comes in part from Irish tech entrepreneurs.
“We’ve brought together private individuals who have previously build and sold tech companies and who understand the risk and reward of the journey start-ups go on. The fund has over 12 people putting between €500,000 and €1 million each in and we envisage opportunities for the Irish diaspora to come on board for the second close of the fund,” he said.
The fund is initially looking to raise €20 million at first close, with this figure expected to reach over €30 million. Culligan said a number of institutional investors are also on board for the fund but would not confirm names as paperwork has still to be signed.
Industry sources speculate that Enterprise Ireland, which has been a big supporter of organisations looking to bring seed funds to market, could be a likely investor. Dublin BIC has also previously collaborated with AIB on a similar fund.
Culligan said the fund will primarily target companies in the business-to-business space working in areas such as software, medical devices and fintech, as well as newer technologies such as the Internet of Things, augmented reality/virtual reality and cybersecurity.
"Two-thirds of all net jobs are from companies who have set up in the last five years, according to Central Bank research. A lot of focus is on the impact of foreign direct investment to Ireland but indigenous entrepreneurship is huge and it is vital that it is supported," he said.
Culligan, who had a background in international business development prior to taking over as head of Dublin BIC in 2016, said fledgling firms were at least benefiting from HBAN, a joint initiative of InterTradeIreland and Enterprise Ireland, which serves as a go-between to bring start-ups and investors together.
Angel investors have ploughed almost €85 million in Irish start-ups over the last decade via HBAN. The organisation is now looking to double the number of angel investors in Ireland with the aim of increasing the amount going into Irish start-ups to €25 million a year by 2020.
Culligan said he “strongly refuted” suggestions that the Government does not do enough to back entrepreneurs, pointing out the role that Enterprise Ireland plays in helping start-ups. However, he did say that tax incentivisation is an issue, particularly given moves by the UK in the last budget.
“We absolutely need to reward people who are putting capital into early-stage high-risk companies because they are likely to roll over any money they make into other investments,” he said.
Culligan added that in many instances soft supports were just as vital as access to finance.
He said Dublin BIC does its part in this regard through initiatives such as its investor-ready programme and in the provision of incubation space, particularly at GEC.
The centre, which is involved in collaborations with 23 of the top 50 business schools, is currently the largest single building enterprise centre in Ireland with more than 90 companies, and an additional 100 firms operating from its CoWork@GEC co-working space.
“GEC is well placed to become an entrepreneurial superhub,” said Culligan.
In addition to GEC, Dublin BIC last year introduced Space@DublinBIC, an affordable co-working space on Dawson Street that has capacity for more than 200 people,
“We are at full capacity with a number of scaling companies such as Black Shamrock there. The game development studio started out with us in GEC with just two people. In three years its headcount has grown so much that it is now based in Dawson Street in an office kitted out for 50 people.”
Culligan revealed the organisation is now scouting for other locations in the capital to grow Space@DublinBic. “We’re looking to engage with property owners for medium-term lettings in what would be a win-win for everyone,” he said.
There has been a sharp rise in the number of co-working spaces in Ireland in recent years with even behemoths such as We Work entering the market.
“We aren’t looking to compete with the We Works of this world. Incubation as we see it isn’t just about providing space but about building a community and aiding collaboration,” said Culligan.
Collaboration is also at the heart of FutureScope, which seeks to build bridges between entrepreneurs and large enterprises. “We set up FutureScope because we could see the benefits for start-ups of engaging with established companies. At the same time, multinationals here were also recognising that it was to their benefit to engage with innovative firms,” said Culligan.
The annual event, which attracted 1,200 attendees last year, grew out of an earlier initiative known as Silicon Stroll. Next week's FutureScope, will hear from speakers from organisations that include Google, Microsoft, Facebook and the European Space Agency.
“FutureScope has been an important addition and we’re hoping that it is also something that will attract SMEs who are scaling,” he said.
“The event is popular enough that we could continue to grow it but what has helped make it so successful are the networking opportunities it gives rise to. That is why we’re keen to keep it at the current size so that chances to collaborate remain strong,” Culligan added.