Mr. Karl Flannery:

There are close to 1,000 technology companies located in Ireland, ranging from start-ups and SMEs to the multinational corporations, and they are employing more than 90,000 people. The number of Irish-owned technology companies continues to grow and now stands at over 700, accounting for a total revenue of approximately €1.8 billion. According to a recent survey, nearly 75% of these companies plan to increase their workforce.

While the ICT sector as a whole has weathered the storm or even prospered relative to other sectors in the Irish economy, the indigenous digital technology and software sector has not achieved its full potential, with very few companies scaling beyond 100 employees and €10 million in turnover. Two main factors are at play here: talent and finance.

With regard to finance, Enterprise Ireland has played a key role in nurturing and developing start-ups and early-stage enterprises with a variety of grants and acting as a catalyst for a range of private equity seed and venture capital funds. Two new development capital funds are now in place for expansion-stage companies. However, the availability of finance, particularly debt finance, is proving challenging for growth-stage companies that have achieved sustainable revenues and profits. Factors at play include the fact that traditional forms of security for debt are not typically available from technology companies. Second, there is limited understanding of the technology sector among the banking sector, although I note AIB has this year produced a report specific to the technology sector, which we welcome. This is but the first stage. Third, we experienced demand for personal guarantees from the banks. The fourth factor is the long "No". Ongoing demand for information and long delays in processing the applications, followed by onerous terms and a reduced offer, can mean that the requested debt facility is frequently not pursued or taken up. The final factor is poor awareness among technology companies of the range of financing options and the particular options that are appropriate given the stage of development of the company and risk involved.

We can see from the Central Bank quarterly numbers that the level of credit outstanding to the technology sector has remained largely unchanged for the past two years despite the growth in the sector. Therefore, innovative and targeted products are needed for the growing number of companies which have achieved critical mass and have the potential to scale up. We need ways to provide security to the banks such as leveraging the research and development tax credits, extending State guarantees and other mechanisms.

Venture debt products appropriate to the Irish market conditions need to be developed where pure debt products are not appropriate to the level of risk involved. These products can provide a more acceptable risk-reward model to the financial institutions. The reward for Ireland, where we can address the shortcomings in the financing system for growth and expansion-stage companies, far exceeds the perceived costs or burden that may be placed on the State.