Kernel Capital announces €10m seed fund for medical and technology start-ups

VENTURE CAPITAL firm Kernel Capital has launched a €10 million seed fund exclusively aimed at medical devices and technology start-ups. The Bank of Ireland MedTech Accelerator Fund will provide €100,000-€500,000 to selected companies and is likely to make its first investment by the end of March.

Co-investors in the fund are Bank of Ireland, NUI Galway, University of Limerick and Enterprise Ireland.

Niall Olden, founder and managing partner of Kernel Capital, said Ireland already had a strong international reputation in the area and the fund aimed to build on that.

“There’s a strong cluster of medical device companies in the west of the country which would be recognised across Europe,” he said.

“The core idea behind this is to generate and stimulate activity in high potential start up companies and give them a platform to either raise other funds or get natural growth from there.”

Currently, nine of the top 10 medical technology companies have made significant investments in Ireland with the industry estimated to be worth $300 billion worldwide.

However, Mr Olden said that until now, there had been no Irish funds available to medical devices companies below the €1 million mark, despite this being a “dynamic” aspect of the economy.

The Kernel fund will only focus on the medical hardware and software side of things and will not be open to drug delivery start-ups, however. Mr Olden said this is because the money on offer simply would not be enough to be effective to such operations.

Kernel will give companies an investment in the form of a convertible loan, which according to Olden allows for far greater flexibility than a direct investment for shares.

After five years, companies will be asked to enter an agreement to repay the loan or instead turn it into equity.

“For companies, their dilution is less but the protection for us is that we have a loan note,” he said. “It also means we can put more into the company than it might be worth right now.”

Kernel also hopes to leverage its Early State Equity fund for ICT, which invests in the €2 million to €5 million range, so that start-up companies could later pick up larger investments from there.

“The way we look at it is it’s important to help the companies get off the ground and get started,” Mr Olden said. “The aim is to stimulate the economy with the right kind of companies.”