VCs want to raise €1.5bn to invest in tech firms

6 Oct 2014

Venture capitalists in Ireland are in the process of raising €750m in new funds that can be leveraged up to €1.5bn to invest in promising young tech companies.

Addressing the annual dinner of the Irish Venture Capital Association, the organisation’s chairman John Flynn said the local industry in Ireland is focused on turning indigenous tech companies into serious global players.

Flynn also called on indigenous companies to be more ambitious about growing large companies rather than being attracted to early exits.

“Ten times the employment growth occurs in the five years post-IPO, so the prize for the Irish economy in building independent sector leaders is significant.”

He said opportunities for the indigenous Irish technology sector have never been greater.

“It has become easier to launch a business. Prototypes can now be developed with two to five-person teams over six months with investment of less than €1m versus the €5m which was commonplace not so long ago.”

He added that the growth of new categories such as big data, mobile, cloud computing and the internet of things open up significant new opportunities for Ireland.

Irish VCs had earned record strong double-digit percentage growth per annum as a result of more than 100 exits in the past five years.

Risky business

“In addition, the pipeline is encouraging. Over €200m has been invested in the first half of 2014 and our start-up entrepreneurs are better supported and funded than in any other European country.”

However, he feared that Irish risk takers in future could be enticed to Northern Ireland or the UK, where entrepreneurs’ relief reduces the rate of Capital Gains Tax (CGT) to 10pc compared to 33pc in Ireland. 

He said that apart from discouraging start-ups, the Irish taxation rate was in danger of “choking off” serial entrepreneurs who would be more inclined to invest across the border or in the UK mainland.

He called for a reduction in CGT to 12.5pc or 15pc for innovation activities as defined under existing tax legislation. 

“A higher rate could be maintained for speculative non productive gains such as property investment. This should result in no cost to the State for the next five years as it takes at least that to develop a company to the stage where an exit or sale is feasible.”

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