Wednesday, 27 November 2013
Ceisteanna - Questions - Priority Questions
Development Capital Scheme
4. To ask the Minister for Jobs, Enterprise and Innovation the way he will ensure the recently launched development capital scheme does not encounter a similarly disappointing level of take-up as the microenterprise loan fund and the seed and venture capital scheme; and if he will make a statement on the matter. [50617/13]
The establishment of the development capital scheme is an innovative initiative under the Action Plan for Jobs and has the objective of increasing the availability of risk capital and closing the ‘equity gap’ experienced by SMEs seeking risk capital in the region of €2 million to €12 million. That has been identified by Enterprise Ireland as an obstacle to Irish companies growing to scale, which is a central aim of enterprise policy.
A total of €75 million in funding has been made available through my Department for the development capital scheme with the aim of leveraging a minimum total of €150 million in additional funding from the private sector. Enterprise Ireland has arranged competitive calls for partners in three separate funds. The funding partners are selected based on sectoral expertise, track record and supporting networks which they bring to the funds. Under the scheme, commitments were made to the three funds that will provide equity, quasi equity or debt of between €2 million and €12 million to established investee companies. On 4 November 2013 I announced the establishment of the first of those funds of €125 million which will be managed by MML Growth Capital Partners Ireland. The leverage of private sector moneys at €100 million is very encouraging. A further two funds will be announced in the near term.
Each of the funds established under the development capital scheme is aimed at providing funding for the mid-sized, mostly export-oriented businesses with clear growth and development prospects. The MML fund is a general fund which has no particular sectoral focus. It will target investment opportunities in a wide variety of growth-orientated sectors including manufacturing, technology, engineering, food, life sciences, services and electronics. Enterprise Ireland invests in these funds on the same terms as the private sector. The investment managers are responsible for making investment decisions within a clearly defined investment strategy over the lifetime of the fund.
I look forward to seeing investment in Irish companies in the near term. I am confident the State’s investment in the development capital scheme will be fully utilised, given Enterprise Ireland’s engagement with the seed and venture capital sector which goes back almost two decades and has been very successful in assisting the growth of high potential start-ups, HPSUs, attracting leveraged funds, bringing top level managers to Ireland and attracting interesting first-time international money to the Irish SME market.
The difficulty I have with the scheme is that the rationale and rhetoric sounds great but when will it hit the street? When will companies that need the finance get it from the development capital scheme? All of the initiatives the Minister has taken are announced in a blaze of glory but the practicalities on the street are minimal. In the first year of its existence the microenterprise loan fund has lent just €1.62 million. The target the Minister has set is that it will create 7,500 jobs by 2022. We have just dealt with the seed and venture capital fund. The credit guarantee scheme is way under target, as is the SME credit fund. ISME’s survey indicated that up to the end of September 57% of respondents had been turned down. We will later discuss source funding as a potential alternative option. There is still huge difficulty for SMEs to get money to ride the wave of growth that exists. If the Minister wants to continue with the figures we saw yesterday this has to be his No. 1 priority in terms of resolving the issue.
To reassure the Deputy, the MML fund is fully subscribed. The fund has a total of €125 million. Two managers have been appointed in this country who are now in a position to enter into agreements with companies who have ambitious growth plans. The need for such investment has been identified by Enterprise Ireland. Companies that are not in the gazelle league favoured by venture capitalists, that are solid companies with growth markets, have found it difficult to get funding. The fund will fulfil the need they have. The fund has hit the street and is available to be drawn down. These are the very sectors in which we are seeing significant performance. The food sector is doing exceptionally well. Technology is doing very well. Life sciences are doing well. This is a good opportunity as the fund has real management expertise as well as money. That is the benefit of the fund.
To outline Enterprise Ireland’s track record, last year the seed and venture capital scheme funded 140 new companies at a cost of €80 million. There is a track record of the funds delivering for companies.
I do not doubt Enterprise Ireland’s track record. It is superb. Microfinance Ireland, MFI, attended the Joint Committee on Jobs, Enterprise and Innovation a few weeks ago. Every Member should look at the presentation it gave and the information it has for companies. It has a difficulty in terms of getting its message out. I suggested to the Minister previously that it would use the Revenue database as it has the best database for business in the country for whatever reason. The database must be used to get information. What happens in the case of companies that are not in one of the growth areas?
That is the difficulty. There are many solid companies trading in the domestic market that do not fit into the areas for which the measures are being announced and they cannot get finance. They are the respondents to the ISME survey who still, in September 2013, five years into the crisis, cannot get credit for viable businesses. As well as focusing on the sexy, gazelle type companies, we need to focus our efforts on the day to day companies that employ people and keep their local economies going. They need help too.
Enterprise Ireland has a mandate that is focused on export oriented companies. The skill we bring in for these companies, for example, is in people who have the capacity to enter new markets. The scheme is aimed predominantly at export oriented companies. We have large numbers of companies with great growth capacity and these are well spread throughout the regions, in the areas of food, engineering, manufacturing and so on. These are the backbone of our industrial base and this is a gap that needs to be filled. I believe the view of manufacturing, which has been dismissive in recent years, has been misplaced. There are opportunities now as Ireland is more competitive. This is a fund that will help bridge a gap which has been well identified by research. I am optimistic this scheme will hit its target and we will closely monitor it. I accept the points made and there will be initiatives to improve information flow. I have met with both the banks and there will be a communications initiative around the various financial options for SMEs.