When Tines, a Dublin-based software company, announced recently that it had raised $125 million (€114 million) in a series C funding found, bringing its total valuation to $1.125 billion (€1.03 billion), it became the latest Irish firm to join an elite club.
Tines is Ireland’s latest unicorn, a term used to describe a privately-owned company with a valuation in excess of $1 billion. Founded in 2018 by Eoin Hinchy and Thomas Kinsella, Tines’ workflow and AI orchestration platform enables businesses to operate more efficiently while mitigating risks. Big customers include Mars, Coinbase, CrowdStrike and Databricks.
There are now around 10 such ventures in Ireland, all of whom reached this lofty status within the last seven years. Customer service software firm Intercom, famously founded in a Dublin coffee shop in 2011, is generally credited as Ireland’s first unicorn, achieving its $1 billion valuation in 2018. WorkHuman, which provides employee incentive and reward schemes for corporates, achieved this distinction in 2020, while Fenergo which develops regulatory compliance and data management software for global financial institutions became a unicorn in 2021.
In the post-Covid period, a flurry of unicorns were created including LetsGetChecked, Flipdish, Wayflyer and Transfermate, the latter being the first Irish unicorn to be led by a woman, in chief executive Sinéad Fitzmaurice.
The success of these firms is a testament both to the entrepreneurial savvy of Irish founders and the supportive ecosystem for such ventures. But with concern rising about the over-dependence of the economy on foreign direct investment in a global economy that has become increasingly uncertain due to Trump administration policies, are we creating enough of them?
Moreover, are we capable of holding on to them as Irish owned and Irish-based ventures or do they inevitably have to sell out to overseas investors – often US-based institutions – to gain unicorn levels of scale. The concern here is that jobs and tax revenues from ventures that were typically supported in their early stages by the State, may benefit other economies.
Seed funding availability is generally good in Ireland but once companies achieve a certain scale and need to expand out of Ireland, they often have to rely on funds from outside of this country – primarily the US, notes Sarah Jane Larkin, director general of the Irish Venture Capital Association.
“The next office is in the US, the engineering is done in places like Palo Alto,” she says. “We have a real issue with having these companies embedded in Ireland, where they can expand globally from this country.
“The strategy is about getting the product to a certain point and then getting bought out by a large player. The capital requirements of such businesses don’t lend themselves to building a manufacturing base here and exporting from here.”
Larkin sees this as part of a wider picture of a structural problem within Ireland’s investment market.
“The big growth in the economy is very recent and we don’t have large intergenerational wealth, trust funds or family offices like the rest of Europe. That’s a good source of venture capital because it is patient capital. We also don’t have a State pension fund unlike in other countries where they invest in local enterprises. The savings of workers today could be used to create the jobs of tomorrow in the local economy. You see that for example in France, Germany and the UK.
“A lot of the pensions platforms in Ireland have a European HQ for decision-making [so] we have struggled with the pension funding. If you are a pension holder in Ireland there will probably be an allocation to venture capital, but it will be going to fund companies out of Ireland and that’s a really significant issue.”
Fergal McAleavey, EY Ireland corporate finance partner, agrees Ireland does a good job at supporting start-ups through Enterprise Ireland, the Ireland Strategic Investment Fund (ISIF), Local Enterprise Offices, university spin-outs, accelerator programmes and incubators with the large tech corporations headquartered in Ireland, he says, and it is natural that there are some exceptional performers who reach unicorn status.
“Ireland is a relatively small market, so it is inherently difficult to reach the scale of a unicorn, but when we look at the likes of recent unicorn Tines, or Stripe, Flipdish and TransferMate, I would say that Ireland punches well above its weight on a per capita basis.”
Additionally, it’s important to point out that Ireland’s own entrepreneurial community is tight-knit and constantly supports start-ups to grow and succeed. For example, more than three quarters of EY Ireland Entrepreneur Of The Year community alumni have conducted business with one another and several unicorns, including AMCS, Stripe and Wayflyer, are also alumni of the Entrepreneur Of The Year programme, he notes.
While at first glance, it appears that potential unicorns have no option but to sell out to foreign investors, this is not necessarily the case, he maintains.
“The Irish culture of innovation is recognised by Silicon Valley and international private equity houses, bringing a lot of foreign investment into growing Irish companies. However, these international investors are bidding against Irish growth and scaling finance funds who have encouraging levels of ‘dry powder’ to continue supporting Irish entrepreneurship and ambition.”
Tom Early, manager for new investments at Enterprise Ireland, says that there is general acceptance that there are gaps in the funding market, specifically in the €2-10 million area, or the post-seed rounds up to Series A. “That’s just one route or mechanism for funding but not all companies are suited for the [venture capital] funding model that is often viewed as the gold standard. Sometimes companies can be very good but just slow growth in nature. They are never going to attract VC funding. If we are talking about prospective unicorns, they are naturally the ones that will attract that VC or institutional type funding.”
Early says that as a part of his work he has interviewed around a hundred high potential start-up ventures. The common denominator of companies that reach unicorn-level scale are ambition, capability and risk appetite on the part of the founders, he says. Funding is only part of the story.
“Founders have often said to me that access to finance is a barrier to scaling but in my experience, access to funding is more of a symptom rather than a root cause of the problem. There may not have been the capability within the team to scale it, they may have taken on the investors at too early a stage, or they may have lacked capability at board level to offer them the right strategic advice. Their product may not have been innovative enough or they may not have had a strong market proposition or market fit.”
Another issue Early has identified that may prevent founders getting to unicorn stage is that founders focus on their immediate funding needs. “They will say we need €500,000 to do this now. They will look at it piecemeal rather than mapping out their longer funding journey, how much they need to raise, when they need to raise it and as a result of that they may give up too much of their value far too early.”
One early stage Irish company that harbours ambition to reach unicorn status is Coso.ai. Its AI-powered solution creates social media content for subscribers, disrupting a market dominated until now by social media marketing agencies.
Founder James Flynn explains that the social media scheduling end of this market is worth around $2 billion a year globally, and estimates the content creation market could be worth 10 times more.
“There’s going to be a couple of companies in our space that achieve that unicorn status and there’s no reason to believe that can’t be us. As early movers in this space, there’s a couple of competitive advantages we believe we can build out from and we are working as quickly as we can to get as big as we can,” Flynn says, adding that either being acquired or having the scale to acquire someone else are both options.
The Enterprise Ireland-backed firm hopes to engage in a series of funding rounds over the coming years. “Every couple of years you need to go through these rounds until you get to a certain scale or profitability. At each of these stages, the majority of start-ups don’t get through the next stage of funding. We’re aware of that challenge but are optimistic.”
Flynn has met the leaders of a number of Irish unicorns in recent years. A couple of things have struck him about these figures. They each have shown vision of where they need to go, based on their focus on achieving the scale necessary to succeed in a global marketplace. They have balanced this, however, with a surprising humility.
“Maybe that’s an Irish thing, but you see very little ego amongst the people who have achieved this. They retain a founder’s mentality. They are still humble and they are asking questions. Sometimes when you are talking to them, even when you might be operating at a much earlier or lower point in the ecosystem, you feel as if they are trying to learn off you which is surprising – in a very nice way.”
