Enterprise Ireland plan major investment policy shift

9 Feb 2004

“Enterprise Ireland is going back into the food chain”, a senior executive at Enterprise Ireland has told siliconrepublic.com, indicating that in the years ahead the state agency will be directing its investments towards grooming cutting edge technology companies in terms of creating products through well-funded R&D, ensuring adequate sales and management training and gaining reference customers for young companies.

Pat Maher, executive director at Enterprise Ireland, told siliconrepublic.com that it is no longer enough to have large numbers of technology companies vying for venture capital investment in environment where willingness to invest has slowed down.

“There is a big policy change ahead for Enterprise Ireland in terms of how we will invest in companies going forward,” Maher said, indicating that much of this policy shift will be determined by the soon-to-be-released recommendations of the Enterprise Strategy Group headed by Eoin O’Driscoll.

“It is getting harder for companies to get investment despite how promising they are and we believe that our role goes beyond giving them money but helping them to achieve important milestones that future investors are looking for,” Maher continued.

He said: “We are going back into the food chain and aim to have worked with the companies before the venture capitalists even get there. We believe that our resources would be better employed in helping companies conduct adequate research and development to have proprietary products and have customers in place.

“The aim is to use our resources wisely so that milestones like real customers and real products are achieved. To this end, as well as good enough products, they need management with good sales training and management skills,” Maher told siliconrepublic.com.Up until lately, Enterprise Ireland has primarily helped companies to target overseas markets and has co-invested with venture capitalists and other investors in funding rounds with numerous Irish technology companies. “The reality is that today venture capitalists won’t even look at a company unless it has real products and real customers and solid proprietary technologies.

“This time we aim to be helping the companies in areas like sales, management and R&D before they even meet venture capitalists. We are skipping back to where we used to be in the cycle and will focus on developing companies to achieve important business milestones so they can succeed in the marketplace,” he said.

Maher argued that in burgeoning areas like wireless technologies, for example, there is a growing number of “me too” companies that often end up taking business off each other. “Export potential is what we are interested in. Companies need to develop the traction that impresses future customers and investors.”

Enterprise Ireland revealed that in 2003 alone it had invested approximately €75m in 61 start-up companies. Some 20pc of these companies came from the third level sector. The state agency predicted that the 61 companies are capable of generating 1,900 jobs in three years.

However, Enterprise Ireland and its client companies have been operating in difficult conditions for the past three years and a year ago the agency recorded its first financial losses in 10 years. In 2003, Enterprise Ireland-supported businesses employed 150,000 people, spend €17bn on wages, raw materials and services, and had exports of €11bn. The agency helped 120 companies enter new markets, 80 of which were exporting for the first time, and helped client firms secure 600 new customers distributors and partners.

Maher’s views were mirrored by John Tracey of Trinity Venture Capital. “The wireless space is littered with ‘me too’ players and we need to see more diversity and originality in Irish technology companies. We will definitely see more investment in young technology companies in Ireland by venture capitalists in 2004.

“We are seeing spending budgets come back. But we are interested in investing in companies that have something that end customers want, something original. Ireland is still seen as an important technology centre,” Tracey said.

By John Kennedy