Industry body IVCA says Government-backed vehicle could mobilise pension and private capital for indigenous businesses without significant Exchequer cost.
Ireland could unlock an initial €1 billion in funding for indigenous small and medium-sized enterprises through a new government-convened investment vehicle, according to the Irish Venture Capital and Private Equity Association (IVCA), which has outlined the proposal in its pre-Budget submission.
The industry body believes the initiative would help strengthen Ireland’s indigenous business sector, reduce reliance on overseas investment and create a long-term funding mechanism for scaling Irish companies.
“This can be implemented quickly as we have an off the shelf working example in the Danish Dansk Vaekstkapital model which has pumped more than €1.5 billion into domestic companies”
The proposal centres on establishing a fund-of-funds structure designed to pool investments and spread risk, making it more attractive for institutional investors, including pension funds, to allocate capital to Irish businesses. The IVCA also says the vehicle could provide an avenue for directing a modest portion of savings held in the proposed Personal Investment Account (PIA) into productive investment within the domestic economy.
Opportunity for Ireland
Richard Watson, chair of the IVCA, described the proposal as a significant opportunity for Ireland and pointed to Denmark as a model for success.
“And this can be implemented quickly as we have an off the shelf working example in the Danish Dansk Vaekstkapital model which has pumped more than €1.5 billion into domestic companies,” said Watson.
The IVCA argues that while foreign direct investment remains a vital component of Ireland’s economic success, growing international uncertainty underlines the need to strengthen the country’s homegrown enterprise base.
“Foreign Direct Investment will continue to be a core pillar of the Irish economy but the rapidly changing international environment and global political uncertainty make it increasingly urgent to strengthen indigenous enterprise,” Watson said.
He noted that Ireland has built a strong reputation for supporting start-ups through organisations such as Enterprise Ireland and the Ireland Strategic Investment Fund (ISIF), but said a gap remains when companies seek larger rounds of growth capital.
“Ireland has a good track record in getting start-ups off the ground thanks to government initiatives through EI (Enterprise Ireland) and ISIF (Ireland Strategic Investment Fund), but the gap in institutional scaling finance means that these companies usually have to go overseas to raise the capital necessary to grow into major employers.”
The call comes at a time when venture capital investment in Irish technology companies has weakened. According to the IVCA, investment during the first quarter of the year fell by almost 60% to just over €221 million, with international investors accounting for 85% of the capital raised.
Sarah-Jane Larkin, director general of the IVCA, said the figures illustrate both the potential of Irish companies and the vulnerability of relying too heavily on overseas investors.
“VC investment in the quarter fell by almost 60% to just over €221 million with 85% of the capital raised coming from international investors. That combination points to a market with strong companies and real investor interest, but one that remains heavily dependent on external capital conditions.”
The IVCA’s submission argues that increasing domestic institutional investment could reshape Ireland’s economic future in much the same way that landmark public policy initiatives did in previous decades.
The association states: “Public policy choices in the past such as the expansion of free education and the establishment of the IDA reshaped the country’s economic trajectory for generations. A framework to mobilise domestic institutional capital into Irish venture and growth investment could be similarly important.”
A central element of the proposal is that it would require limited direct public expenditure. Instead, the IVCA advocates using a portion of existing ISIF resources to attract significantly larger volumes of private-sector investment.
“At a time when all Government departments are facing spending pressures, crucially, this can be done without material Exchequer cost. The objective is not to create a new spending commitment, but to use a limited portion of existing ISIF capital strategically to convene, structure and catalyse much larger pools of private investment,” said Larkin.
She believes the approach would strengthen domestic ownership of innovation and support the growth of more Irish-headquartered businesses.
“This would help create the financial foundations for more indigenous companies to scale from Ireland, deepen domestic ownership of innovation, and build a stronger base of employers over time. This is therefore not only a response to a funding gap, but a time-sensitive opportunity to strengthen the long-term structure of the Irish economy.”
The IVCA also warns that Ireland risks falling behind other European economies that have already introduced mechanisms to channel pension and institutional capital into domestic innovation and growth companies. It points to initiatives in France, Denmark, the UK, Germany and the Netherlands, as well as wider European programmes, as examples of countries actively improving access to long-term growth capital.
The association argues that Ireland now faces a strategic choice. With international capital becoming more unpredictable and competition for investment intensifying, creating a domestic funding infrastructure could play a critical role in helping Irish SMEs scale, innovate and compete globally while retaining stronger roots in the Irish economy.
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