Companies which have venture capital backing grow faster, create more jobs, and export and invest more in R&D than other SMEs, according to the latest study by DCU Business School, which regularly tracks the sector.

An outstanding feature of the study is the finding that high-tech companies account for 98% of funds raised, which is the highest weighting in Europe and on a par with Silicon Valley.

The DCU report says VC-backed companies increased employment by 19.7% in 2015 and by 14.4% per annum in the three year period 2013 to 2015, which compares to the overall increase in employment of 3.4% in 2015 and 2.8% per annum 2013-2015.

So it’s a productive sector, and it also accounts for 34% of all R&D spending by SMEs despite making up a much smaller proportion of the total number of smaller firms. In total, VC firms took on 20,000 more staff since 2003, and the researchers established that a multiplier effect suggests 60,000 further jobs resulted indirectly.

Dr Eric Clinton of DCU Business School said: “VC-backed firms are an important constituent in helping to build a knowledge economy. We found that high tech companies account for 98% of funds raised, which is the highest technology weighting in Europe and more equivalent to Silicon Valley. We found that VC backed companies grow faster, create more jobs, exports and invest more in R&D than other SMEs.”

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The report found that graduates represent 71% of employment in VC-backed firms, while the average annual growth rate in revenues since 2012 was 29%, with over 80% of this generated through exports. In the three year period to 2015 VC backed companies generated exports of €1.5 billion, at a rate of 25% growth per annum.

VC-backed high technology companies have increased R&D by 21% per annum in this three year period, while expenditure on sales and marketing increased by 23.6% annually over the same time period.

Regina Breheny, Director General of the Irish Venture Capital Association, commented: “The report also confirms that VC investment helps to commercialise government investment in third level research, Science Foundation Ireland centres for science, engineering and technology (CSETs) and strategic research clusters (SRCs). Approximately 75% of Irish university spin-outs go on to access venture capital and 66% of the SMEs collaborating within the CSETs and SRCs are venture backed.”

The report, which is the sixth in the series, (The Economic Impact of Venture Capital in Ireland 2013-2015) can be downloaded from the IVCA website.
Photo: Regina Breheny with Michael Murphy, chairman of the IVCA. (Pic: John Ohle)