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Irish Independent
Irish Independent
Jon Ihle

Rising interest rates fail to dampen Enterprise Ireland funding flows

Leo Clancy of Enterprise Ireland

Enterprise Ireland (EI) funding for start-ups accelerated into the end of last year as dozens of new firms applied for financing from the new Pre-Seed Start Fund it launched in September.

The agency supported 161 early-stage companies last year, with 44 coming through the pre-seed fund in the last quarter alone, on top of activity from high-potential start-up and seed stage programmes.

EI chief executive Leo Clancy said it was “a great result, given the global challenges last year”, when rapidly rising interest rates severely dampened investment, most notably in the technology sector, where the agency is historically very active.

“What would give you a lot of confidence is the 91 HPSU [high-potential start-ups] we funded last year at a time when capital was more constrained than it probably has been in five or six years,” Mr Clancy said. “It’s a growth story for us, and it’s accelerating really fast.”

The Pre-Seed Start Fund is designed for very early-stage businesses in manufacturing or international traded services that need a small injection of capital to even make it to a seed funding round.

EI puts in up to €100,000 per firm, with the founders contributing just €5,000 or €10,000 initially. Mr Clancy described it as “giving people a ramp” to other funders. HPSU funding is typically a 50-50 split, with EI and the company owners taking equal risk.

Enterprise Ireland is coming off the back of a year in which its client companies – high-growth firms with export potential, from start-ups to large enterprises – added nearly 20,000 new jobs.

The 5pc employment growth among EI-funded companies compares favourably with the 3.4pc growth in overall employment at the end of the third-quarter last year.

Jobs are the agency’s preferred metric. Although Enterprise Ireland is Europe’s most active domestic venture capital investor, financial returns are a secondary concern to economic outcomes such as employment and supporting growth more generally.

Nonetheless, Mr Clancy said the agency has grown cautious in the last year as private capital has pulled back, noting the risks in the market.

“We feel the same caution,” he said. “We haven’t changed our investment approach to try and fill the gap, because that’s the opposite of what we should do as a State agency.”

Despite the general wariness in investment markets and high-risk sectors like tech, Irish investors – many of whom have grown and sold successful ventures themselves – are now stepping up to help the next generation of start-ups, investing alongside EI

“We’re seeing a lot of those people coming in and influencing the market, doing good things, mentoring people, encouraging them,” said Mr Clancy.

“Even some of the people who have built businesses relatively recently in the past four or five years are already investors in their own right.”

While this wave of angels, entrepreneurs and family offices is not quite big enough to sustain the Irish start-up scene independent of State help at this stage, Mr Clancy sees Enterprise Ireland’s exit from the stage as a long-term objective.

“Our ultimate goal is to invest nothing in Irish enterprises because there should be a vibrant enough seed stage investment ecosystem that no one needs our money.”

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