31-07-2025
Irish firms wanting to scale up face €1.1bn funding gap over next five years
Irish enterprises who are looking to scale up their operations will experience a funding gap of about €1.1bn over the next three to five years given the small size of investment funds available, a new report has found.
According to the report, commissioned by the Department of Enterprise from the SQW Economic Research Consultants, the funding gap is particularly acute in areas where deals are valued between €5m to €10m range, as well funding for capital and research and development intensive sectors, and long-term investments, particularly in areas where product development can be lengthy.
It found the demand for equity finance among scaling firms has increased in Ireland over the last decade, and expects that trend will continue.
The report noted Irish firms had similar problems to the rest of Europe when it comes to accessing appropriate scaling funds, and it continues to be a top concern for start-ups.
The report said the scaling finance gap is primarily driven by supply side issues, in particular the small size of funds.
'This limits the quantum of later-stage capital available and ability to write the size of cheque required for scaling,' the report said.
'According to stakeholder consultees, the supply of equity finance for scaling is limited. There is a particular issue in relation to the size of the funds available, which are seen as too small to serve scaling companies, as well as investors being too risk averse,' the report said.
Fund managers also found fundraising a challenge given the lack of Irish private institutional capital investing in this asset class, 'in part due to their appetite but also due to regulatory barriers'.
On the company side, there is also an issue of unmet demand where firms have the tendency to ask for less funding than needed in practice to scale due in part to the "perceived lack of capital available and the anticipated challenges in securing finance'.
The report said there was a need for future Government intervention in this area to improve the supply of scaling finance.
It suggested there was a need for larger investment funds in the range of €200m to over €300m to execute scaling strategies, which should aim to both increase the quantum of scaling finance and the size of deals.
It also said there was a need for long-term patient capital given the types of sectors where demand is strong and the gap is most acute.
'The provision of State funding will need to crowd in and be matched by private investment. Unlocking private institutional finance is critical, especially from pension funds,' the report said.
Enterprise minister Peter Burke said one of the key challenges for enterprises across the country was 'accessing capital' and 'it can be the reason preventing them from realising their potential and growing into large, even multinational, businesses'.
Mr Burke said the findings of the report 'will inform the development of appropriate and targeted policy measures, which I intend to bring to Government later this year'.
The report gathered evidence through an e-survey of "potential scale-up firms" in Ireland, with 166 responses, as well as interviews with fund managers, stakeholders and Irish firms.
