Raising business funding in Ireland
For businesses of all sizes with ambitions in Ireland there are plenty of opportunities to raise funds to develop to the next level.
The management of Dublin-based business Lets Get Checked could surely not have predicted how the first half of the year would go for the company. When the Covid-19 pandemic hit in March, the personal health testing business reacted quickly and brought out a test help fight the disease.
Lets Get Checked also raised $71 million of venture capital funding in the second quarter – the largest funding round in the three-month period in Ireland.
The money will be used to expand the company’s home health and remote diagnostics operations in the US, a sector that is booming given that many people are avoiding traditional healthcare services due to the pandemic.
But that was not the only successful venture capital investment in an Irish company this year; despite the difficult business environment, investments have been at near-record levels in 2020. In the months from April to June, 30 Irish firms received venture capital investments worth a combined $317 million, according to data from KPMG’s Venture Pulse Q2’20 report, which reports on venture capital investments around the world.
April to June’s figure was more than double the amount invested in the first three months of 2020 ($151 million) and even higher in the second quarter figures from 2019 ($125.8 million).
These statistics were all the more impressive considering it occurred during the height of the Covid-19 pandemic, when the economy suffered a severe shock during nationwide lockdowns. Moreover, it was noticeable that many of the deals involved businesses in the healthcare and software sectors – two sectors that were incredibly active during the pandemic.
But it isn’t just at the larger end of the market where businesses are successfully raising significant funds to help them to go to the next level. Earlier this month, Ronspot, a start-up company that has developed a solution that enables employees to pre-book office facilities such as desks, secured more than €650,000 worth of investment from a syndicate of investors.
The syndicate included the Halo Business Angel Network (Hban), which is an initiative comprising several members including Enterprise Ireland and Invest Northern Ireland. Members could see the potential in the business as more companies look to develop a mix of remote and office-based working, even after the pandemic ends, while also managing their real estate costs.
Ronspot plans to use the funds to continue to develop its business plan and take on more employees for growth.
These examples show that at all levels in Ireland, funding is available for businesses that have demonstrable potential and sound business models.
A number of funding options are open for Irish businesses – either needing next stage growth or start ups – along with companies looking to move to Ireland. Nevertheless, not all types of funding are appropriate for all businesses. Careful consideration needs to be given before a business embarks on raising funds; what does the business owner want from the investment and what are they prepared to do in return? Here, expert advice from financial advisors can be crucial and steer a business towards the right type of finance for their needs.
What follows are some of the main types of finance available for Irish companies, although it is an overview rather than an exhaustive list.
For fast-growing businesses looking to raise significant funds – usually more than €500,000 – then venture capital can be the answer. This is where specialist investment firms inject funds into a business. They can also bring in experts, access a range of contacts the business wouldn’t ordinarily be able to get and add credibility in the eyes of other companies and investors in the market.
In return, the venture capitalist company will ask for a minority share in the company. Venture capitalists also usually seek a spot on the company’s board of directors to have some influence over the direction of the company. Investments are usually for a limited time – often about five years – after which the venture capitalist will attempt to sell their share of the business for a profit to another investor, a company buy-out or via a flotation on a stock exchange.
Another well-respected form of raising funds is through business angels. These are informal investors – usually high net-worth individuals who have been successful in business themselves in the past – who provide money to start-up or developing companies. They also often take an active role in the business, seeking to use their experience to help it grow so they can make their money back in time. Think Dragon’s Den from the TV.
Grants and state funding
Another funding route, especially for start-ups and small businesses, is to apply for grants. The obvious choice is Enterprise Ireland, the state agency that handles support and development of Irish businesses and the largest seed capital provider in the country. The agency provides a range of funding options and support to Irish businesses, with the aim of providing sustainable growth and steady employment.
For businesses with fewer than 10 employees, then the Local Enterprise Office is an option. This provides funding for microbusinesses, as well as advice on other funding options that can be accessed, business support and training in a variety of business disciplines such as sales and marketing and financial planning.
Meanwhile, digital start-up companies can access funding through the NDRC. In addition to funding, the NDRC works intensively with businesses on their growth strategies to be attractive to customers and investors in the future.
A traditional yet effective method of accessing growth funding is through a bank loan. The vast majority of business loans made by Irish banks are to small and medium-sized businesses. In this case, the bank provides a lump sum up front, and the business then repays this, plus interest, back with a set amount being paid each month for an agreed time. However, defaulting on repayments can lead to significant problems for a business.
Banks will want to see robust financial and business plans before making a loan. In times of recession, banks tend to pull back and loans can be more difficult to access.
One of the newer methods of raising capital is through crowdfunding – sometimes also known as peer-to-peer lending. This is where online platforms are used to raise funds. Hundreds of individuals or businesses can contribute funds – of any amount – to businesses that they believe have potential at attractive interest rates.
Sites such as Kickstarter are popular international crowdfunding platforms, but there are also Ireland-specific ones such as Linked Finance, which provide funds to small businesses in the country.
Currently, there are also a range of grants and financial support packages available to help businesses in Ireland affected by the pandemic. In July, the Irish government announced a €5.2 billion stimulus package designed to kick-start the economy. This included, among other things, a restart grant of up to €10,000 to help businesses reopen and re-employ staff. In addition, businesses with fewer than 10 employees and turnover of less than €2 million can apply for three-year COVID-19 Business Loans – anything from €5,000 to €25,000 – from Microfinance Ireland. These loans have no interest or repayments for the first six months.
But whatever sort of funding a business in Ireland wants to raise, then the management will need expert advice to ensure they get the best deal. Whether they are businesses based in Ireland or looking to establish a base in the country and raise funding to do so, expert advice from people who know the country and how to raise funds is paramount. Accountancy firms can analyse the business and advise on which funding options are the most appropriate and then help to structure any deal.