Enterprise Ireland’s High Performance Startup Unit (HPSU) scheme processes over 80 deals a year. This makes Enterprise Ireland (EI) the largest VC in Europe in terms of the volume of deals that passed through its program on an annual basis. EI’s purpose as an agency is to develop the indigenous industry in Ireland by supporting companies and help grow them into international markets.
Tom Cusack is the Manager, HPSU, Communications, Media, Entertainment Services and Software. He has recently returned to Ireland after being overseas for sixteen years. He explains, “The definition of a High Potential Start Up, is a company that has the ability to hire 10 or more people and has the ability to achieve revenue in excess of one million euros within three years. We are only focused on companies that have an international dimension.”
The HPSU investment is an equity investment. The typical investment is somewhere in the region of €200 —€250,000 for most companies.
There are four main areas that HPSU program covers:
- Telecoms, New Media and Entertainment
- Business Software, Financial and Enterprise Software
- Clean Tech and Life Science
- Food and Consumer Retail
They receive roughly 2,000 enquiries on an annual basis. 2-300 hundred of those companies would be given some sort of support to get them to the feasibility stage. Ultimately, around 80 of those would be taken to the investment committee for an investment decision. These companies would have to have traction, strong visibility and customers in the international market to qualify as suitable candidates for the process.
The investment committee consists of senior members of EI with the addition of some external expertise. The investment decision would then involve commercial and technical due diligence.
“Traditionally, we would have funded companies at the feasibility stage and the investment ready stage. What we saw coming out of the internet Web 2.0 space was a gap between feasibility and investor ready.” Tom explains, “It was very hard hard for companies to get past the feasibility stage to the point where they could attract investors.
“On that basis we launched the Competitive Start Fund. It is a 50k investment. Which we would put in for a 10% ordinary stake in the company. It is really to help companies bridge that gap and give them a shot in the arm after the feasibility round to get to the investor ready stage where they can attract significant investment.”
The HPSU chose the internet and games space to launch the fund in December 2010. There were 125 applications of which 10 were funded. In a subsequent round in Feburary 2011 another 15 companies were awarded funding.
The HPSU typically invests on a matched funds basis. But for the Competitive Start Fund the candidate company has to put up €5,000 to match funding of €50,000 which would be paid in two tranches.
“Rather than waiting to the point where they had customers we needed to get in earlier and try and help a wider cohort of companies. What we are trying to do is spread our investments a little bit more.
“It is built on the Y Combinator model which is about fail fast, fail cheap. We are a development agency. We are in the risk business. There is a huge amount of diligence that goes into our investment decisions at a technical and commercial level.
“What we are really trying to achieve is to position Ireland as the number one place for a startup in Europe.”
To accomplish this aim EI is looking to fund entrepreneurs from overseas who will have their headquarters in Ireland.
Tom explains, “We are looking to increase the diversity of the skill base of our startups in Ireland. Our ambition is that by 2013 that 10% of our HPSUs would be overseas originated.
“The view is that if we can attract an overseas entrepreneur to set up here then we can create jobs and income. Plus, it adds a different dimension to the startup community here.”
A major attraction that would entice entrepreneurs to come here is the international network of Enterprise Ireland. Tom adds, “From day one they have access to over thirty international markets. They will have people out there knocking on doors, trying to support them, trying to find opportunity for them.”
Enterprise Ireland has 30 office worldwide each consisting of teams of sector specialists whose job is to take companies into their particular market; do introductions, find them market opportunities, find them partners, distribution and so on.
Whether the entrepreneurs or promoters are native born, come from the Diaspora or are of some other origin, the underlying goal is the same — Raise the export figures for the companies to in turn grow export led jobs here in Ireland.