Irish venture capitalists have called for measures to stimulate the flow of private capital from institutional investors to small and medium sized enterprises (SMEs) in next month’s budget after funding “plummeted” in the second quarter.
Ireland has the potential to unlock up to €2 billion of institutional capital to boost growth prospects of Irish SMEs and start-ups, according to a pre-budget submission published by the Irish Venture Capital Association on Monday.
IVCA chairwoman Caroline Gaynor said that the submission coincides with the worst venture capital investment into Irish SMEs and start-ups for ten years as funding plummeted from €494m to €112.6m in the second quarter of this year.
She also said threats to the Irish economy caused by increasingly isolationist US economic policy “emphasises the need to recalibrate our own economic model”.
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“Foreign Direct Investment (FDI) will continue to be a pillar of the Irish economy, but its traditional impact is in decline as international competitors replicate our policies,” she said.
“It is important to note at a time of fiscal uncertainty due to global political headwinds that our proposals can be achieved without recourse to direct Government funding.”
What can we potentially look forward to in Budget 2026?
The submission recommends a number of government policies to stimulate private capital from Irish institutional investors, including pensions, insurers and banks, to co-invest in Irish VC and growth funds.
“This would reduce our over-dependence on international VC funding which accounted for three quarters of total venture capital investment last year,” said Ms Gaynor.
“The big barrier in growing more global winners in Ireland, recognised by government and industry alike, is in scaling finance.”
[ Venture capital funding surges to record in first quarterOpens in new window ]
She said international funding has steadily increased from 49 per cent of the total to 75 per cent over the last four years on an annualised basis. “Larger, later stage domestic funds would reduce this dependence on and indeed vulnerability to overseas investors,” she said.
IVCA director general Sarah-Jane Larkin pointed to new data which found that over 70 per cent of international funding in the first half of this year went to companies that already had a previous or current investment round involving an Irish VC.
“Ireland has a track record in picking winners and getting companies off the ground,” she said. “It just shows what we could do if VC funds here were bigger.
“We don’t have to reinvent the wheel to achieve this. We already have the playbook from other EU countries and the UK which have implemented successful polices to boost private capital sources of funding.”
She pointed for example to the Dutch government which has implemented several policies to encourage pension funds to invest in venture capital, aimed at enabling them to allocate an additional €100 billion to such investments over the next five years.
