Is it time to fix Ireland’s venture funding imbalance?

12 Sep 2016

Dublin is Ireland’s venture capital, but what does that mean for the rest of the country? Photo of Dublin’s Ha’penny Bridge by Leonid Andronov via Shutterstock

Not only Ireland’s capital, Dublin is Ireland’s ‘venture capital’, attracting the lion’s share of investment in the country. It’s time to ensure a more level playing field for the nation’s start-ups, says John Kennedy.

Ireland has a venture funding problem. No, not a problem with getting venture capital because funding levels and investments are actually on the rise if various reports are anything to go by. The problem is that the funding appears to be mostly going to one place: Dublin.

There are lots reports that attempt to quantify the amount of funding raised by companies in Europe, all with varying degrees of accuracy.

‘Instead of Silicon Docks or Rebel Valley, we need to cop on to the fact that we are a small country and we need to work together. Creating little fiefdoms will achieve nothing’

Future Human

In May, the Irish Venture Capital Association (IVCA) reported that Dublin firms attracted more than 80pc of all disclosed funding in the first three months of 2016, followed by Galway (which, thanks to its large life sciences cohort, attracted around 11pc of funding).

On Friday, the IVCA reported the latest figures for the second quarter of the year showing a new record high of €486m for the first half of 2016. The bulk of this investment – some €196m – went into life sciences companies, followed by software (€97m), fintech (€91m) and telecoms (€49m).

Outstanding investments included Mainstay Medical, which raised €30m; Intercom, which raised €44m (but one could argue why it is on the list at all since it is not an Irish SME but was founded in San Francisco); and fintech player Circle, which raised €53m. All of these companies have Dublin operations.

Another report this week, based on  figures derived from EY’s Start-up Barometer Germany report, listed Dublin in sixth place among Europe’s top seven start-up cities in terms of funding levels in the first half of 2016.

By this chart’s reckoning, Ireland amassed €238m in venture capital – quite a remove from the IVCA report’s figure – up from €69m the previous year. And, according to this particular report, €229m of that money went into start-ups in Dublin.

Readers on Twitter over the weekend were quick to point out that this equated to 97pc of funding raised in Ireland going to Dublin start-ups.

While we can’t vouch for the accuracy of either report over the other, they both signal one thing. If 80pc to 97pc of venture capital funding in Ireland is going to Dublin, that is a serious problem for start-ups in Cork, Limerick, Galway and elsewhere.

But let’s be pragmatic and fair rather than territorial.

A river of money runs through it

There are lots of logical reasons for Dublin to amass the lion’s share of funding.

Firstly, it’s the biggest city on the island by population and start-ups coalesce around cities and communities. It’s part of the chemistry. It’s how ideas are formed and people are hired. One of the reasons Dublin is warmly regarded as a global high-tech hub – aside from the presence of players like Google and Facebook – is because there is a certain intimacy to the city. Everyone knows each other.

Secondly, Dublin has the highest concentration of universities and colleges, which are in truth the engine rooms for most of the world’s start-up ventures. Thanks to the efforts of the likes of NDRC, academic research is being right-purposed and spun out to create credible, compelling start-ups as academics and students are transformed into entrepreneurs. All of the other cities in Ireland have their universities and colleges with their own entrepreneurial programmes, incubators and accelerators, but Dublin just happens to have the highest concentration of these resources.

Thirdly, Dublin is on the map in terms of international transport. And, let’s be fair, the Web Summit in its five-year sojourn in the city helped to raise this profile enormously. Even though the event has departed for sunny Lisbon, its administrative nerve centre is still in Dublin.

So, if the logic is that Dublin’s scale, profile and population dictate where funding investment goes, what are we to do about other cities that have abundant entrepreneurial talent?

Cork, for example, has spawned international companies such as Trustev and Teamwork. Last year, Limerick-based AMCS raised €45m in a funding round. In recent weeks, Galway firm Bluedrop Medical bagged €600,000 in funding while another member of the Galway start-up tribe – Vivasure Medical – raised a whopping €16m.

One island, one people, one community

Lots of companies outside of Dublin are raising investment and doing their own thing. Look at Waterford software start-up NearForm, which last year announced 100 new jobs. Or another Waterford tech firm, FeedHenry, which was acquired by software giant Red Hat for €63.5m.

Things are happening outside of Dublin – incredible things.

While we have to conclude that, due to size and scale, Dublin is producing monsters (look at Movidius, which was acquired by Intel for an estimated €300m), is it good enough to accept the funding imbalance as the natural order of things?

Actually, I would argue that some tech firms are gaining by not being in Dublin.

In fact, AMCS’s Austin Ryan argues, not being in Dublin has been critical to the company’s ability to secure funding and retain employees.

“In Dublin, companies have huge staff churn and start-ups lose people to multinationals. A lot of indigenous companies wake up and hear the news that Google or Facebook are creating 200 new jobs and they just sigh,” Ryan said in a recent interview.

This view was backed up by David Coallier of security software start-up Barricade, who also pointed out that being in Cork rather than Dublin has been key to the company attracting talent.

“Instead of Silicon Docks or Rebel Valley, we need to cop on to the fact that we are a small country and we need to work together. Creating little fiefdoms will achieve nothing,” he said.

Ultimately, I would take stock in Coallier’s assertion. We need to think of Ireland less as a collection of cities with distinct start-up tribes and more as one location where everyone is within driving distance of an international airport and, thus, within hours or a day’s reach of Europe or San Francisco.

Funding imbalances will occur due to the logic of scale. But it should not be that genuine entrepreneurs and job creation opportunities in regional locations are being overlooked by a Dublin-centric funding community that rarely ventures outside the city walls.

The regions themselves aren’t being slouches. The city of Cork, for example, will be the first location in Europe to host the international Startup Nations Summit, which will take place during the 2016 Global Start-up Gathering (GSG2016) from 18 to 20 November. This is a fundamental opportunity to showcase not only the city and county of Cork’s start-up community and expertise, but the entire country’s potential.

If a funding imbalance exists on paper, that’s fine. But let’s not let it become a mental block that will prevent all the nation’s start-ups and entrepreneurs from standing up and being counted.

River Liffey image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years