The decision by the Department of Environment, Climate and Communications to cease funding the National Digital Research Centre from next year has been met with disappointment – to put it mildly – by what is termed the Irish start-up ecosystem.
Some 200 technology company founders and their fellow travellers have written an open letter opposing the decision to close the State-funded but privately operated tech incubator and warning that it comes at the worst possible moment; as the storm clouds gather over the sustainability of the Irish foreign direct investment model post the US election.
What appears to have happened is that the Department of Communications has tried and failed to get the Department of Enterprise to take over responsibility for funding the incubator to the tune of €17 million over five years.
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The Department of Communications has a good case. The reason why it is responsible for the NDRC has been somewhat lost in the mist of time but reflects the view that prevailed in the mid noughties that all things digital sat under the communications banner.
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The nub of the issue is whether or not the research centre still brings something to the Irish start-up party that a State agency can’t
The NDRC is now obviously a better fit with the Department of Enterprise. However they have demurred, citing the overlap with various programmes and schemes run by Enterprise Ireland which also comes under their purview. In their view, these programmes have rendered the NDRC obsolete.
These include the Pre-Seed Start Fund (PSSF), the High-Potential Start-Up Fund and the New Frontiers programme. There is also a network of 270 regional enterprise hubs which have been supported to the tune of €150 million since 2017 and more money is on the way for them from the EU via the Smart Regions Fund.
Enterprise Ireland also provides risk capital and funding for early-stage enterprises via the €90 million Irish Innovation Seed Fund Programme for high innovation start-ups and the Seed and Venture Capital Scheme which will be increased to €250 million over the next five years.
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When measured up against the scale of Enterprise Ireland’s operation, it is reasonable to question the logic of continuing with State support for the NDRC. It is run on a commercial basis by Dogpatch Labs and backed by a number of tech industry figures.
The nub of the issue is whether or not the research centre still brings something to the Irish start-up party that a State agency can’t.
The 200 or so NDRC alumni and supporters who wrote the open letter are in no doubt that it does. The various Enterprise Ireland programmes are “not designed to meet the specific demands of high-growth start-ups or address the challenges these businesses face”, they claim. The proposition “is disconnected from reality and dismissive of the unique value an entrepreneur-led accelerator provides to technology start-ups”.
In truth you would not expect them to say anything different. To a greater or lesser extent they are beneficiaries of the founder-led incubator model as is promulgated by the research centre and its peers. Of course, that does not mean they are wrong.
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Others hold that the days of the founder-as-rock-star approach to fostering innovative businesses is played out and the incubator-based model is now something of a self-perpetuating circus that detracts from the more important work of putting place a structure that will grow indigenous Irish businesses of scale.
This would appear to be the view of the Department of Enterprise but we don’t know because they haven’t said. If so, it puts an onus on the department to demonstrate how they will ensure the niche currently occupied by the NDRC is filled. It’s quite substantial.
According to the research centre, more than €180 million has been raised by early-stage tech companies participating in NDRC programmes since 2021 alone. Research centre portfolio companies have created 650 jobs over the same period, while more than 950 companies have participated in the accelerator’s initiatives, including over 175 regional founders.
In any event, it appears the battle is not over. Dara Calleary, the outgoing Fianna Fáil junior minister for enterprise, has called for the NDRC funding cut to be reversed and presumably it will be one of the things in the mix after the election, assuming Fianna Fáil are involved.
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The issue is certainly worth a second look and what would be helpful is for the Department of Communications to publish the report it commissioned from Indecon consultants last year on the NDRC which is presumably the evidential basis for saying that it is surplus to requirements.
If the National Digital Research Centre is to close its doors, it should not be simply because of a turf war between government departments as seems to be the case.
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