To meet Ireland’s bold start-up targets, urgent action on funding needed

Ireland must mobilise more private capital from sources including pension funds, say Martina Fitzgerald, CEO, Scale Ireland and Sarah-Jane Larkin, director general, IVCA.

“It is our long-term ambition that exporting Irish companies become the primary driver of the Irish economy.” That is part of Enterprise Ireland’s new 5-year strategy, launched earlier this year, which sets a bold and ambitious target, given our historical reliance on foreign direct investment.

Indeed, the new strategy goes further than the Government’s White paper on Enterprise, published in late 2022, which aims for Ireland to become an “innovation leader”.

Both targets are of course to be commended. But if we are to realistically achieve either of them, Scale Ireland and IVCA both strongly believe that serious action is needed to mobilise significant funding and private capital to help more indigenous companies start, scale and globalise their operations from here in Ireland. Otherwise more scaling companies will follow the money and move.

That point is made by numerous official reports, including the White Paper on Enterprise, which highlighted the challenges facing Irish scaling companies in accessing funding and the need for them to seek investment outside of Ireland and in many cases outside of the EU. This brings with it, it says, the increased risk of “exceptional ventures, technologies, knowledge and jobs relocating elsewhere”.

So, we all want to keep our founders and scaling companies here in Ireland.

In terms of specific challenges, the White Paper notes a critical €3-10m funding gap which will not surprise founders or investors.

More recently, the Department of Enterprise published a report by independent consultants estimating the scaling finance gap in Ireland to be approximately €1.1bn over the next three to five years. It says this is broadly in line with the views of several fund managers and could be “perhaps on the conservative side given the growing uncertainty in the supply of capital”.

If we seriously want to meet the targets in Enterprise Ireland’s new strategy to support 1,000 start-ups and 150 large Irish exporting companies, and keep Irish companies here, we must solve our funding shortage. Our organisations are united on this.

So, there is no better place to start than with the main problem identified in the latest report – “the lack of Irish private institutional capital”.

Investment landscape

The latest IVCA VenturePulse report indicates that venture capital funding in Ireland has fallen to the lowest level in ten years. In the second quarter of 2025, funding plummeted to €112.6m, down from €494m in the same quarter last year.

The dramatic quarterly drop is largely explained by an 81pc pull back by international investors, a reduction of over €305m. It highlights how exposed companies and investors are to global investment trends.

This comes at a time when Irish households hold a record amount in savings accounts, with figures showing more than €163bn on deposit at the end of January 2025.

In parallel, an analysis of international investment, however, shows Ireland consistently underperforms in later stage venture and growth equity investment compared to our OECD peers.

In addition, the 2024 ‘Review of State Support for Equity Investment in Ireland’ report by SQW consultants for the Department of Enterprise, showed that growth in VC investment in Ireland and Europe were broadly matched from the early 2010s to 2016. However, since then, the gap in total investment between Ireland and the European average has widened. Most worryingly, this gap is occurring across seed, early and later stages.

The report also found that deal size is an issue here even when compared to other small economies. To put this in context, in 2022 Ireland had the lowest average VC deal size compared to Finland, Denmark, Sweden and Scotland.

Looking at the big picture over the last decade to 2024, in terms of GDP, Ireland’s investment in venture capital at just 0.2pc of GDP lags behind 12 European neighbours including Estonia, Sweden, the UK, Finland, France and Denmark. This is according to Atomico’s State of European Tech 2024 report. Looking to the US, which invested 0.53pc of GDP in venture capital, if we increased our investment to 0.5pc, as much as €1.5bn in additional funding would be provided for Irish start-ups.

While acknowledging that Ireland has only become a thriving wealthy nation in the last 30 years, we must recognise that this has created a long-standing structural private funding gap in the Irish economy. This creates a ceiling on how far Irish companies can scale before they seek capital abroad.

So, we must expand the scope of pension fund investments to include private markets. This has the potential to better support Ireland’s domestic economy across multiple sectors, including venture capital and indigenous companies and infrastructure.

Many European countries are mobilising a small proportion of pension savings to fund innovation in Europe, rather than having European pension savers funding companies in the US. France, Germany, the Netherlands and Denmark have introduced policies to incentivise asset allocation to their domestic funds.

The UK has the most ambitious initiative with policymakers aiming to have 10pc of pension fund assets allocated to indigenous companies via private funds by 2030.

The view of Scale Ireland representing founders

As the largest representative organisation for Irish tech start-up and scaling companies, Scale Ireland welcomed the big investment, job creation and business growth announcements made by some of our members this year.  They include Fenergo, Aerogen, XOcean, Manna, Fire1, Mail Metrics and most recently, Proverum.

These companies represent a broad spectrum of Irish tech companies ranging from medtech, fintech, clean-tech, communications technology to drone delivery. We want to ensure these companies grow their operations globally from their bases in Ireland, ensuring they continue to generate increased exports, revenue, high-quality jobs and innovative solutions. It’s a win-win scenario for the companies, our economy and society.

To ensure that we represent them effectively, we conduct an annual State of Start-ups Survey to gauge the sentiment of founders and CEOs on their key challenges.

For the fourth consecutive year, the number one issue has been funding. The level has been similar too, with 80pc consistently finding it difficult or very difficult to raise capital.

These numbers are backed up by frank discussions with our members who are scaling their companies internationally. For a presentation late last year, we spoke individually to a number of founders and CEOs of scaling companies who had raised or were seeking to raise between €7-100m. We spoke to them on the basis of anonymity and they were very forthcoming.

Most found the funding environment very difficult – even those who would be viewed as success stories having raised more than €15m in the last 12 months. The vast majority said it was far more challenging than they had originally envisaged. Some pointed to the difficulty in attracting US investors and cited the slow pace of finalising investments. One company had no issue raising funding and their investors to date were international. But they were the exception.

This feedback aligns with numerous reports pointing to the scaling funding gaps in Ireland and in Europe.

If we look at the last decade, the Atomico report found that the funding gap between Europe and the US is bigger than people think. While a similar share of start-ups founded in 2015 in the US and in Europe have gone on to raise at least a $1m round (22pc versus 18pc), the gap widens by the time companies raise $5m. While the proportion of US companies able to raise rounds of $15m or more is twice that of Europe (8.3pc versus 4.1pc).

The funding challenges increase the risk of companies moving, as outlined by the Draghi report on Competitiveness in Europe. It noted that between 2008 and 2021 almost 30pc of Europe’s unicorns relocated outside the bloc and, in the vast majority of cases, they moved to the US. They followed the funding to scale up.

Scale Ireland, along with the Government, state agencies, the European Commission and the European Investment Fund want to keep these companies in Ireland and in Europe. That requires serious action.

The view of the IVCA representing investors

The IVCA represents venture capital and private equity firms in Ireland. Our members empower the next generation of Irish companies driving the economy of the future. In 2025, we proudly mark our 40th anniversary and since our founding, we have championed the development of Ireland’s venture capital and private equity industry, supporting thousands of high-potential companies, generating employment and attracting international capital. No less than 75pc of international capital into Irish SMEs follows an earlier investment by an IVCA member.

There is a further opportunity to facilitate significant funding and growth. The Central Bank reports the total assets of the Irish Pension Fund at €146bn (March 2025). Coupled with the significant money on deposit, Ireland must unlock even a small portion of these private funds to boost scaling companies.

Ireland should introduce an ‘opt-in’ requirement in pension documents for new entrants into pension schemes, allowing new members an option to allocate a small proportion (1-5pc) of their pension to a fund supporting Irish industry.

It is important to note that policies to mobilise more private capital from Irish sources including pension funds will not cost the exchequer, nor are they likely to generate lesser returns for savers. In fact, Invest Europe and other sources show that European VC performance in the last 15 years has outpaced US equivalents.

Our pension savings of today should be invested long term in the Irish economy, ensuring high-quality companies and jobs for future generations.

On a separate note, the Government’s Seed and Venture Capital Scheme, set up in the 1990s through Enterprise Ireland, positioned Ireland among the first European nations to use public capital to encourage private VC investment. This approach – co-investing alongside private investors in professionally managed funds – anticipated global best practices that became common later.

The recent €75m boost by the Government to this scheme is very welcome, but now further initiatives are needed to close our funding gaps.

In an increasingly isolationist global economic market, it is more important than ever that we are not dependent on international sentiment or capital, and have the capacity to fund our indigenous champions. We need to enable Irish companies to grow locally and compete globally.

Time to act

This issue is bigger than any one budget or department. Our organisations are both focused on finding long-term solutions. This will involve unlocking a small portion of our pension fund savings into indigenous companies, strengthening existing funds and setting up new ones such as the one outlined in Enterprise Ireland’s new strategy.

So, back to our scaling companies, if they are to reach their potential and those bold targets, this must be urgently addressed. While we support the findings of the detailed reports on this issue, we don’t need any further reports. We need to act.

By Martina Fitzgerald and Sarah-Jane Larkin

Martina Fitzgerald is CEO of Scale Ireland. She has two decades of senior communications experience working as a national journalist, including with RTÉ. She is a best-selling author and was a visiting fellow at Columbia University in New York last year.

Sarah-Jane Larkin has been director general of the IVCA since January 2018. Previously, she worked in commercial roles in the healthcare and medical device sectors and for a representative body in the life sciences sector.

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