A government analysis of capital expenditure on startups and equity supports says that  HPSUs (high-potential startups) have experienced strong growth in all areas and have shown greater resilience compared to non-HPSU companies.

The Department of Business, Enterprise & Innovation report also highlights the challenges that need to be dealt with “to continually enhance the impact and effectiveness of funding throughout the system”.

A cost-benefit analysis of the supports provided indicates only that “financial aid for startups is likely to have at least paid its way in terms of wages, profits and taxes created”.

Business minister Heather Humphreys  (pictured) commented: “The report shows that there is a positive correlation between entrepreneurship and economic performance in terms of growth, firm survival, employment creation and exports and that Enterprise Ireland and Local Enterprise Offices support programmes are positively contributing to the development of the entrepreneurship throughout the economy.”

The report concludes that while progress has been made in developing Ireland’s entrepreneurial base, several challenges need to be addressed to enhance the impact and effectiveness of funding throughout the system. It lists the need to address data gaps to ensure that future evaluations can be undertaken robustly; understanding the gaps between drawdowns and approvals of supports; and an update of the suite of evaluations.

In Association with

The agencies involved are Enterprise Ireland and the network of 31 Local Enterprise Offices around the country, all of which now operate according to a ‘systems approach’ model in which together they act as market facilitator, coordinator, market creator and an investor — rather than simply providing grants. 

The report suggests that enterprise policy is now seen as a key deliverer of many amenities, services and even infrastructure, as against direct provision by the state through capital expenditure. 

“Enterprises can also contribute to enhanced quality of life and the attractiveness of towns and cities by providing many services in the regions. In addition, innovative enterprises can contribute to realising national policy priorities in areas such as smart infrastructures, healthy ageing, food security and a sustainable environment to deliver better outcomes for citizens," the report claims.

Market Failures

It also refers to market failures which “government funding in startup and equity in the area aims to address”. They include financial and cost gaps, information asymmetry, capability gaps, spill-over effects and risk aversion market failures. 

Several of the gaps are related to the fact that annual figures for approvals and drawdowns do not necessarily reflect accurately the activity among the target businesses, both because projects and payments are spread over more than one year and also the fact that in some approved cases the subject firm does not draw down the funding.

And because payments and approvals do not converge over time, the reports recommends that an analysis is made of the factors that drive the gap between payment and drawdown. “This would be useful in assessing whether there are reasons or factors that affect a company’s ability to meet targets set out for the project.”

The report also call fort a review of the suite of the evaluations applied to applications for funding “to ensure that evaluations, findings and policy objectives remain up to date”. 

In terms of a cost-benefit analysis, the reports says that the lack of fully comparable data over time means that the best it can conclude is that “financial aid for startups is likely to have at least paid its way in terms of wages, profits and taxes created”.

The venture capital sector in Ireland has grown significantly since the introduction of the Seed and Venture Capital but the report concludes that  state support in the area is still needed for sustained growth, particularly in early stage and seed investments and particularly at the development capital stage.

On another note, the report points out that between 2012 and 2016 there was an increase in the number of female-led HPSUs, so that by 2016 they represented 16% of the total developed in the period, and they have experienced increased survival rates over time.