This blog intends to consider for the justification of various funding investments made by founders, family, friends, business angels, Banks, Enterprise Ireland, and Venture Capital in tech start-ups in Ireland. It ascertains if the money is about to head for the doors. Is tech boom is over for Ireland?
Technology industry employs over 105,000 people in various companies. It is responsible for 40 % of national total exports. All of the top global technological companies have a significant Irish presence and the home-grown sector employs over 30,000 people with total sales of over €2 billion per annum .
Furthermore, Budget 2016 has a strong emphasis on the indigenous sector with incentives on innovation and announcement of knowledge development box (KDB) . While presenting the budget, Minister of Finance, acknowledged that Ireland has an open economy and various international concerns regarding the global economic outlook.
Figures released from Vision-net.ie on 3rd November 2015 show that 1,185 tech start-ups were formed in Ireland last year. Almost 32% specialise in software consultancy and supply while 21% specialise in “other information service activities”. However, it shows a disproportionate spread in the country with 7 out of 10 start-ups opening in only 3 counties in Dublin 58% , Cork 8% and Galway 5%.
Correspondingly, considering the new companies registered in 2014, the biggest increase came in the real-estate sector, followed by construction and finance. While real estate and construction had 89% change compared to 2013, IT start-ups have less than 15 percent change. It doesn’t fill with confidence considering this change amounts to the biggest growth in IT start-ups company registration over the past 5 years.
options reveal a strong support for start-ups in Ireland. Personal Savings is the number one financing option to start one. Another way a start-up gets capital (also known as ‘love money’) is through friends, family, and colleagues. In 2011, about 28,000 ‘Family, Friends and Colleagues’ provided at least €195 million to new businesses with mean investment amount to €26,000. Informal venture capital funds exceed formal venture capital funds with 5: 1 ratio. About 3,000 business angels invested approximately €80 million . The idea behind investing your own money and raising capital from friends and colleagues is that there is more bargaining power with financiers with a solid own capital investment.
Additionally, Banks are providing funds to facilitate start-ups with innovative ideas. Strategic Banking Corporation of Ireland loans is currently managed by Bank of Ireland and Allied Irish Bank, with other banks expected to join. All of the main Irish banks have their own dedicated new business funds such as Bank of Ireland is engaged with Kernel Capital and have the intention to invest € 17 million in high potential start-ups to support early stage businesses, while start-ups can also access AIB Seed Capital Fund.