A new report published by the Department of Enterprise, Trade and Employment could hold the key to unlocking crucial capital for scaling Irish companies, writes Sarah-Jane Larkin
The Irish Venture Capital Association welcomes the report, The Use of Finance as a Catalyst to Develop a Scaling Ecosystem, published recently by Peter Burke, FCA, TD, Minister for Enterprise, Trade and Employment.
This comprehensive report highlights the critical role access to finance plays in the growth and development of businesses in Ireland. We commend the government for its focus on enhancing financial support mechanisms to empower Irish enterprises to scale and compete on a global stage.
We are also pleased to see the commitment to establish an implementation committee to immediately start work on recommendations to help high potential start-ups access scaling finance.
The recommendation to investigate options for pension fund participation in scaling equity funds, and encourage corporate venturing in Ireland, is particularly welcome.
This report has been published at a time when Ireland’s economy stands as one of the most dynamic and robust in Europe, comparing favourably to other small, advanced economies worldwide.
However, it has become evident for Irish companies seeking larger rounds of capital that the dramatic transformation in our economic fortunes in the last 30 years cannot outrun the impact of our longer-term economic history.
The measures suggested in The Use of Finance as a Catalyst to Develop a Scaling Ecosystem, if implemented, would contribute to rectifying the deficits caused by this history.
Ireland’s economic history has been marked by periods of colonisation, famine and political upheaval. All have contributed to some of the financial challenges we now face in terms of the capital available to our SMEs today.
During British rule, Ireland’s economy was heavily controlled, leaving little room for the accumulation of private wealth. The Great Famine further decimated the population and weakened economic structures, leading to widespread poverty and emigration.
Up until the 1970s and in the early stages of the boom in foreign direct investment (FDI), Ireland remained largely agrarian.
Our relatively recent prosperity, rooted in an open FDI-oriented economy, has resulted in a shortfall in the institutional and corporate investment typically seen in other European countries.
Unlike other nations, Ireland did not undergo a transformative industrial revolution in the late 18th and early 19th centuries, nor have we had the same opportunity to create domestic multinationals or intergenerational wealth.
As a result, there are very few domestic multinationals in Ireland that typically deploy assets in domestic venture capital funds or direct investment in start-ups.
Over the last 30 years, successive Irish governments have implemented various policies to address these challenges, such as encouraging entrepreneurship, providing grants and subsidies for small businesses, investing in education and innovation and seeding a domestic venture capital and private equity industry.
These measures have met with mixed success due to deep-rooted structural issues, however, and the lack of sources of private capital.
What The Use of Finance as a Catalyst to Develop a Scaling Ecosystem shows is that, while Ireland’s economic history has been shaped by a persistent lack of private funds, understanding these historical and structural challenges is crucial in developing strategies to overcome them.
The report’s recommendations to incentivise pension funds to invest in growing Irish businesses could significantly boost the available capital.
By enacting the report’s recommendations and addressing these issues head-on, Ireland could build a more robust and self-sustaining economic future.
Sarah-Jane Larkin is Director General of the Irish Venture Capital Association
*Disclaimer: The views expressed in this column published in the August/September 2024 issue of Accountancy Ireland are the author’s own. The views of contributors to Accountancy Ireland may differ from official Institute policies and do not reflect the views of Chartered Accountants Ireland, its Council, its committees, or the editor.
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