Picking winners earlier

6 Oct 2011

Enterprise Ireland’s €50,000 Competitive Start Fund (CSF) is based on international best practice models such as the Y Combinator model in the US, which involves investing relatively smaller amounts in start-ups at an earlier stage.

The fund supports highly innovative early stage start-ups that have the ability to succeed in global markets. It was structured to fund companies to focus on lean, fast upfront product development followed by customer validation of the prototype as early as possible.
Developed in close association with industry experts from the target sectors, the fund’s assessment process was designed to include significant input from external industry practitioners active in the target sectors.

Tom Cusack, head of telecoms and new media start-ups in the High Potential Start-up (HPSU) unit in Enterprise Ireland, says it was launched earlier this year in response to market and client demand.

“It’s about picking winners at an earlier stage. The CSF aims to catch early stage entrepreneurs and give them the shot in the arm they need post the feasibility stage to achieve market validation and assist them to raise seed funds,” he explains. “The kind of path we would like to see is CSF-approved companies coming back to us six to 18 months later looking for HPS U approval. Already two companies have come back around in this way.”

Companies go through a competitive process to achieve CSF approval. The €50,000 is delivered in two tranches against €5,000 matched by the promoter. The company mustn’t have raised in excess of €100,000 before applying for the funding.

There have been three CSF calls so far. Ten companies were approved as part of the internet and gaming call; there were 15 approvals in the wider ICT call; and 15 approved as part of the life sciences and clean-tech round. Cusack says Enterprise Ireland expects 55 start-ups to be CSF approved by the end of 2011.

On an annual basis, Enterprise Ireland reviews more than 1,500 applications or enquiries from potential promoters, provides soft supports, such as mentoring, to around 300 between 80 and 90 HPSU a year.

A HPSU is defined as a company less than six years old with an innovative or unique product or service, an experienced management team and the ability to employ 10 people and reach exports of €1m within three to four years of starting up.

“Stimulating the flow of new HPSUs and supporting their growth is one of the fundamental building blocks in Enterprise Ireland’s overall strategy for indigenous industry,” says Cusack, adding that it is seeing a really strong pipeline of start-ups coming through.

“We expect 2011 to be a strong year; we will make 85 to 90 equity investments in HPSUs, 55 CSF investments and around 200-300 feasibility investments. There are a lot of start-ups in internet and gaming, consumer web, life sciences, clean tech and software as a service, as well as a number coming from overseas.

“Enterprise Ireland is placing a huge emphasis now on international promoters, encouraging them to start a business in Ireland. We have already invested in six and expect to have supported more than 10 by the end of the year.

“Globally, a lot of countries such as the US, Chile and Germany are chasing the mobile entrepreneur as they bring greater diversity into the skill-set of the local start-up community.

“We believe the ecosystem here offers companies the opportunity to fast track and build international and scalable businesses out of Ireland.”