Nurturing the growth of innovation
Bank of Ireland’s intimate relationship with Enterprise Ireland affords them the opportunity to nurture start-ups throughout their lifecycle
THE IMPORTANCE of innovation to economic growth is undisputed. Increasingly, governments around the world are seeking ways to maximise innovative capacity and performance within their economies. And it is generally accepted that innovation will play a critical role in Ireland’s economic recovery.
The figures speak for themselves in this regard. Enterprises involved in innovative activity are far more productive and profitable than those that aren’t. Companies active in innovation have an average gross value add (GVA) per person of more than €164,000 per annum, compared to €89,000 for non-innovative firms. Furthermore, innovative enterprises are twice as likely to be engaged in export (66 per cent) as non-innovative enterprises (33 per cent).
Innovation also delivers competitive advantage to companies that engage in it and it is increasingly crucial to the success of all firms, large or small and regardless of the sector in which they operate.
It is little wonder that the OECD in its Innovation Strategy 2010 report stated: “Innovation is essential if countries and firms are to recover from the economic downturn and thrive in today’s highly competitive and connected global economy.”
Forfás, Ireland’s national policy advisory body for enterprise and science, in Making it Happen – Growing Enterprise for Ireland, points out that innovation is relevant to all firms regardless of size and sector.
“Innovation is a broad concept that is relevant to all aspects of a business,” it is stated in the report. “Innovation enables firms to differentiate their product and services offerings, to develop new ways to reach customers and markets, and to improve business and operational processes and organisational structures. Innovation plays a critical role in creating competitive advantage, enhancing productivity, and ultimately, increasing profitability. It is increasingly crucial for all firms, whether trading in local or international markets, whether large or small and regardless of the sector in which they operate.”
In other words, innovation is not something that happens exclusively in the lab or in large multinational corporations; it is relevant to start-ups, SMEs and firms right across the spectrum of services and manufacturing.
The good news for Ireland is that Irish firms rank reasonably well in an EU context in terms of innovative activity. Overall, Ireland ranks seventh in terms of innovative activity – Germany, Belgium and Finland occupy the top three places. However, despite this strong ranking more than half (55 per cent) of Irish firms are not engaged in innovation.
The state agency with primary responsibility for fostering innovation in Irish firms and assisting in the establishment of new innovative enterprises is Enterprise Ireland. Bank of Ireland recently reinforced its strong relationship with Enterprise Ireland by appointing Donal Duffy to a new position within the group – head of Enterprise Ireland relations.
In this new role, Duffy is responsible for Bank of Ireland’s ongoing relationship with Enterprise Ireland, including working with the agency on identifying and meeting the needs of emerging sectors and proactively supporting the creation, preservation and growth of Irish businesses both at home and aboard. The role also involves the management of all Bank of Ireland venture capital and seed equityl funds.
Unsurprisingly, the appointment has received a strong welcome from Enterprise Ireland. “Enterprise Ireland is delighted that Bank of Ireland is running the National Enterprise Week as it is essential that small and medium enterprises are supported by the banking sector in these very challenging times,” says Eamonn May, department manager investment services, with Enterprise Ireland.
“Exports by Enterprise Ireland clients have been holding up well and the Irish banks have a central role in supporting export growth. Enterprise Ireland is working closely with the bank across a range of fronts including increased knowledge sharing activity on new technology sectors, seed funding for start-ups and the inclusion of bank representatives in events including trade missions and sectoral workshops.
“The bank has shown its commitment to this agenda with the recent appointment of Donal Duffy as head of Enterprise Ireland relations, which is a very welcome development from Enterprise Ireland’s perspective and we look forward to working closely with Donal and his team.”
The principal barriers to innovation for innovative firms have been identified as lack of funds, the high costs involved, and markets dominated by established enterprises. The funding issue is even more critical in times of economic crisis and Bank of Ireland is anxious to play its role in resolving this issue, says Duffy.
“It’s not only through setting up seed and venture capital funds that we can help though,” he points out. “What we are doing is building up a bank of knowledge within the base in relation to innovative and emerging sectors of the economy. Banks by definition tend not to have knowledge of these sectors and we are working closely with Enterprise Ireland on developing the understanding required to properly support innovative businesses.”
He explains that the Bank of Ireland seed capital funds are part of an overall lifecycle approach the bank is taking to supporting innovative businesses.
Seed funding is for early stage and start-up enterprises, venture funding for more mature firms, and the normal suite of bank credit and other products applies to them once they are fully established.
“People often misunderstand seed funding,” Duffy points out. “They think the only difference is that it is smaller in scale to venture funding. This is not the case. Seed funding is a different type of funding altogether with a different ethos to venture funding. It is for small start-ups and every effort has been made to make the application process for the Bank of Ireland Seed Early Stage Equity Fund managed by Kernel Capital as easy as possible for firms. We want to attract people to apply for the fund and we have recognised the need to make the application process as straightforward as possible in this regard.”
The commercial bar tends not to be set as high for seed funded firms. “We are talking about innovative enterprises here,” says Duffy. “Naturally this means there is a degree of risk involved. And this risk is higher at the earlier stages in a firm’s development. When a firm has progressed and matured the risk tends to be a bit lower and that tends to be when they require the larger scale funding that a larger venture capital fund can provide.
“Interestingly, we have had a number of applicants for seed funding who were deemed innovativeenough and to have sufficient commercial prospects to qualify for funding from the more mature Bank of Ireland funds.”
He is also anxious to point out that entrepreneurs involved in such enterprises should not fear failure. “It’s inevitable that some start-ups will not succeed, that’s the nature of innovative enterprises and it is no reflection on the person involved. In fact, we would be interested in seeing new projects from those same promoters as they will have learned from earlier experiences – and this usually enhances prospects of success.”
Enterprise Week offers Duffy and his team in Bank of Ireland the opportunity to demonstrate their long-term commitment to innovation in enterprise.
“Enterprise Week enables us to get the message across that we are in the business of supporting innovative companies,” he says.
“By funding early-stage innovative businesses we are helping grow the next generation of Irish enterprise – and they will also hopefully be the next generation of Bank of Ireland customers. We will be there to support entrepreneurs with innovative businesses from start-up, right the way through their lifecycle.”
To find out more about Bank of Ireland’s Seed and Early Stage Equity Fund and how to apply, see bankofireland.com/business. For more information on the events being held during Bank of Irelands National Enterprise Week, see allaboutbusiness.ie or contact your local branch