Venture capital behind 20,000 new Irish jobs since 2003, study shows

Companies backed by venture funds grow more quickly, DCU study finds

The DCU Business School report found that, since 2012, Irish venture-capital-backed companies had increased exports by almost 25 per cent. Photograph: Cyril Byrne

The DCU Business School report found that, since 2012, Irish venture-capital-backed companies had increased exports by almost 25 per cent. Photograph: Cyril Byrne

 

Companies backed by venture capital (VC) have created about 20,000 jobs since 2003, an average of 1,600 a year, a new study has claimed.

According to the research from DCU Business School, the companies also grow more quickly, have higher exports and greater research and development activity than other similarly-sized companies.

While overall employment rose by 3.4 per cent last year, VC-backed firms saw their employment increase by almost 20 per cent in the same period. In the 2013-2015 period, overall employment rose 2.8 per cent, but VCs increased by 14.4 per cent, adding more than 3,600 jobs.

“We found that VC-backed companies grow faster, create more jobs and exports and invest more in R&D than other SMEs,” said report author Dr Eric Clinton. “VC-backed firms are an important constituent in helping to build a knowledge economy. We found that high-tech companies account for 98 per cent of funds raised, which is the highest technology weighting in Europe and more equivalent to Silicon Valley.”

Since 2012, the companies had put in a growth rate of almost 30 per cent a year, with exports accounting for more than 80 per cent of this. The report found that, since 2012, VC-backed companies had increased exports by almost 25 per cent, against a backdrop of a 7 per cent increase in total Irish exports in the same period.

Development

High-tech firms were also stepping up the amount of money they were putting into development, increasing spending on research and development by 21 per cent over the three-year period. The report found that younger high-tech companies – those under three years old – had R&D intensity of 73 per cent, compared with 12 per cent in companies older than 10 years.

There was also a high number of graduates employed in firms backed by venture capital, representing 71 per cent of employment. That figure rose by 15 per cent in 2015, the report found.

Over the 2013-2015 period, Irish small and medium-sized enterprises raised €1.2 billion in funding across 462 rounds. Last year, activity levels reached a high of 165 rounds raising €522 million.

High-tech companies accounted the majority of funds raised, at 98 per cent.

“The level of venture-capital investment and the added value that it brings has been due to the well capitalised Irish venture capital infrastructure which has been developed over many years,” said Michael Murphy, chairman of the Irish Venture Capital Association (IVCA).

“This has enabled Irish VCs to nurture quality companies from start-up through early and expansion stages of development and to attract overseas investment.”

However, Ireland fell behind in the proportion of this cash that was invested in early-stage companies. Only 13 per cent of the capital was invested in start-up and early-stage companies against a European average of 23 per cent.

“An active local venture-capital market plays an important role in leveraging the success of the Government support for the IDA in attracting FDI,” said IVCA director general Regina Breheny.

“These organisations are often breeding grounds for the entrepreneurs of tomorrow and regularly spin out new ideas and companies from existing operations with venture-capital support.”