Enterprise Ireland hunts for hidden unicorns

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When SoftBank took a 51 per cent stake in Cubic Telecom in December, valuing the vehicle-technology provider at more than €1bn, Ireland’s biggest homegrown tech deal was validation for one of Cubic’s early investors, Enterprise Ireland.

The state agency that channels seed capital and other funding to companies seeking to emulate successful global champions — like building materials giants CRH and Kingspan, food group Kerry Group, packaging firm Smurfit Kappa and Ryanair — took an early punt on Cubic. The agency reckons it has spotted more “hidden” Irish unicorns.

“I’d say we have quite a few and we have a lot of quietly ambitious family-owned firms that are growing very strongly,” Leo Clancy, chief executive of Enterprise Ireland told the Financial Times.

Ireland has made attracting inward investment one of its most successful economic policies in recent decades: annual capital spending by foreign companies in Ireland increased 49 per cent in 2023 to €15.5bn, according to IDA Ireland, the state agency responsible for attracting foreign direct investment. The world’s top global tech and pharmaceutical companies have set up in the country and are major contributors to state coffers via their taxes.

But domestic businesses still account for two-thirds of Irish jobs. Enterprise Ireland’s mission is to help those companies grow, export and expand internationally.

Enterprise Ireland is by far Europe’s most active venture capital fund by deal count, according to PitchBook, a VC and private equity platform. It tallied 988 investments by Enterprise Ireland between 2018 and the first half of 2022.

That put the agency 42 per cent ahead of its closest rival in terms of volume of deals, French public sector investment bank Bpifrance.

“We made 161 investments in 2022 versus 125 in 2021,” Clancy said. “We set a target that we would grow that to 150 — and we’ve exceeded that.”

Companies backed by Enterprise Ireland achieved record exports in 2022 of more than €32bn, and in 2023, companies it supported employed a record 225,495 people. But much of the agency’s business is at the seed or pre-seed stage.

“There are other state VCs [like Bpifrance and Scottish Enterprise] out there but we’re investing more at earlier stages. We’re seeing companies invested in by institutions once we get the investment flow moving,” Clancy said.

“Investment has slowed in the past 18 months — you’ve seen that around the world — it’s harder to clear rounds. But the best companies are still attracting funding,” he said.

“We’re writing lots of small cheques to lots of companies but that’s very good because those companies wouldn’t be funded in any other way if we weren’t there.”

Only around a quarter of the 90 high potential start-up companies in which Enterprise Ireland made pre-seed investment last year managed to get matching funding from other VC companies, with the rest relying on families, friends and other private investors, he said.

Enterprise Ireland’s budget was some €450mn in 2022 and is expected to have been about €480mn in 2023. Seed rounds are typically in the region of €200,000 to €300,000, matched 100 per cent by private investment raised by the company. It invested €850,000 in Cubic in 2011 and 2013.

Pre-seed investment is much smaller — some €100,000 from Enterprise Ireland plus €10,000 from founders’ funds. “Almost no one [else] would fund this,” Clancy said. The agency made 70 such investments last year.

Since the early 1990s, Enterprise Ireland and its precursors have invested €700mn of funds, a sum which has leveraged €2.6bn of fundraising from companies in which it has invested, Clancy said. Investment is based on returns, not on particular sectors, and the agency has a portfolio of investments ranging from medtech to manufacturing.

“We want to think there’s no reason why we can’t have tech leaders out of Ireland,” he said.

He dislikes the term “unicorn” as a proxy of corporate value because some privately held $1bn firms have little economic impact. “I think we’ve over-focused on that. And it’s a metric that only becomes apparent through a funding event — so you won’t hear about companies that stay private.”

What Enterprise Ireland prefers to focus on, he says, is the ability to scale.

“You can see more companies that are achieving unicorn status — although that’s not my favourite metaphor for companies,” Clancy said. “But if you can see more companies achieve success globally and actually funding into the companies’ growth of their workforces, growth of their sales, I think it’ll encourage more and more entrepreneurs and that’s how you get a flywheel moving.”

In 2011, when Ireland was being rescued in an IMF and EU bailout, and battling to emerge from economic meltdown following the global financial crisis, a domestic property market bust and a banking crisis, Enda Kelly, the taoiseach at the time, declared his ambition to make Ireland “the best small country in the world in which to do business”.

“It was incredibly powerful. I think it’s still not a bad vision for Ireland,” said Clancy.

But he added another layer of ambition: “I think we can certainly be the most innovative small island in the world . . . I think we just haven’t blown our trumpet.”