Private market investment firm Elkstone is seeking to raise at least €150 million in a second venture fund, with the goal of “filling a gap in the market” for funding of early stage, high-potential start-ups.
Best known for its venture investments in start-ups such as Flipdish, LetsGetChecked, Manna and Soapbox Labs, Elkstone says its latest fund will target all of Ireland.
“We’d like Fund II to be a step up on Fund I. We are certainly targeting in the order of €150 million, but I would love it to be €200 million,” Elkstone founder Alan Merriman told The Irish Times. The company is seeking to fill a “gap in the market” for “young, early stage, high-potential companies struggling with funding”.
“That’s where we can make a big difference. Not only can we put our money to work at that early stage,” he said, “but through our international network we can draw in international VCs as those companies scale.”
He said there is a “funding gap that is well in excess of €1 billion, so there is clear capacity for the market to absorb a fund from Elkstone that is in the order of €150 million plus”.
Mr Merriman expects the Elkstone fund to invest in between 30 and 40 companies. “It is inevitable some companies will fail. That is the nature of venture but some companies will do incredibly well.”
The firm has reduced its threshold for interested investors to the legal minimum of €100,000, to be drawn over five to seven years. It wants its entry point to be “at a level where people can take advantage of EIIS (Employment Investment Incentive Scheme) relief”.
“The Government brought in the EIIS [to encourage the public] to invest in venture,” he said, noting that there was a “significant cohort of investors in Ireland who can afford to invest in venture at that type of level; we need to get their money to work for the good of the economy”.
“It is now well understood that public [stock] markets are unlikely to get the strong returns they’ve given over the last 10 or 15 years,” he said, urging the public to engage in further investment in private equity funds.
The firm believes its edge on the market is getting access to the “very best venture opportunities” across the island of Ireland.
“We are very focused on getting strong returns from this fund and, to do that, we want to have access to the very best Irish companies, regardless of whether they are in the Republic of Ireland or Northern Ireland,” Mr Merriman said.
Elkstone’s first venture fund closed at €100 million, including investment from the Ireland Strategic Investment Fund, having surpassed the €75 million planned at its announcement in 2022. Those funds have been spread across nearly 30 companies.