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News : Innovation Last Updated: Dec 17, 2010 - 6:08 AM


Innovation Fund Ireland: National Pensions Reserve Fund announces $50m investment in US venture capital firm Polaris
By Michael Hennigan, Founder and Editor of Finfacts
Dec 16, 2010 - 4:55 AM

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L/R Paul Carty chair National Pensions Reserve Fund, Taoiseach Brian Cowen, Terry McGuire co-founder Polaris Venture Partners and Enterprise Minister Batt O'Keeffe, Dublin, Dec 15, 2010.

The Irish National Pensions Reserve Fund (NPRF) today announced a $50m investment in US venture capital firm Polaris Venture Partners. The investment is being made through Innovation Fund Ireland, a Government initiative to attract leading international venture capital fund managers to Ireland.

Polaris Venture Capital is, for the first time, to open a specialised investment office outside the United States, establishing a ‘Dogpatch lab’ in Dublin.

Taoiseach Brian Cowen said the announcement is regarded as a shot in the arm for middle ranking Irish companies anxious to expand and enter the big league.

Underscoring the importance of the development at the launch of the initiative, he described it as a “significant coup for Ireland.”

Polaris Venture Partners is described as “a partnership of experienced investors, operating executives and entrepreneurs”. With a range of offices across the United States, the company’s mission is to
“identify, invest in and partner with seed, early stage and middle-market businesses with exceptional promise and help them grow into market-leading companies”.

The so called Dogpatch labs - - named after the area in San Francisco where one was first set up - - are described as “dynamic open plan areas housing 30 to 50 entrepreneurs, working on new technology and life science related businesses at early stages of development”.

The initiative will be funded with an investment of $50m provided to Polaris by the National Pension Reserve Fund through the Innovation Fund Ireland.

The Innovation Fund Ireland was launched by the Taoiseach Brian Cowen in New York last July. With the potential to reach €500m, the fund is intended to grow middle ranking Irish businesses into market leading enterprises. The NPRF plans to invest a total of €125m in the Fund.

In October, the NPRF announced its first investments of $30m under Innovation Fund Ireland.  DFJ Esprit have now opened an international office in Dublin, with a Dublin based partner. In addition, the Taoiseach said DFJ - - which is based in Silicon Valley - - will work with the IDA to help bring fast-growing venture backed companies to Ireland.

Cowen added: "I believe that the new Digital Media world is a sector where the European Union should try to carve out a lead for itself.

In doing so, I think we need to look again at how the Union deals with issues such as intellectual property and particularly the use of copyright material.

The Digital Media sector requires copyright laws that are flexible and suitable for the modern internet environment. I do not believe that the current European copyright legislation is the best way of dealing with the new on-line world, with its myriad of opportunities."

Terry McGuire, managing partner Polaris, said: “Dogpatch Labs has been highly successful in establishing hubs of entrepreneurial activity in the US We are excited to be taking that model to Ireland, which has already attracted the likes of Google, Facebook and LinkedIn, and are hopeful that, in partnership with Innovation Fund Ireland, Dogpatch Dublin will emerge as a key hub for entrepreneurs across Europe.”

Speaking today, Paul Carty, chairman of the NPRF said:
“This investment, which forms part of our commitment to Innovation Fund Ireland, is a strong commercial opportunity for the NPRF and the establishment of a Dogpatch Labs in Dublin creates an important new catalyst for entrepreneurship in Ireland.”

IBEC says new investment "confirms global confidence in Ireland’s innovation ambitions"

IBEC, the business group welcomed the decision of Polaris to establish a new operation in Ireland.

Commenting on the announcement, IBEC innovation executive Aidan Sweeney said: “This announcement clearly shows that Innovation Fund Ireland can attract leading international venture capital firms to establish a significant presence in Ireland. The fund is playing a key role in attracting investment to the country, which can then be used to help innovative Irish companies build the necessary scale to grow exports and create jobs.

“Coming soon after Hewlett-Packard’s decision earlier this week to further invest in high-tech activities in Ireland, the arrival of Polaris demonstrates global confidence in Ireland’s ambition to become a leading player in research, development and innovation.”

Finfacts Comment: We don't like the role of having the pitcher of cold water or the salt cellar at the ready for a reality check.

Nevertheless, as we have highlighted several times, there is an unquestioning consensus of approval from all the beneficiaries of the Government's lavish spending on what it calls the 'smart economy' and IBEC is of course a cheerleader for its members as it was of the banks during the boom.

IBEC's claim of global confidence in Ireland's innovation ambitions, is a little over the top given that it is Ireland who is investing the money. It's interesting that there has been no information on what Polaris' commitment will be or whether it is a 'loss leader' in supermarket parlance.

Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, last September launched a bid to draw 'top' investors to Ireland under the €500m fund to support enterprise and create jobs.

O’Keeffe said he expected a strong response from the international investor community and investors had until November 26th to signal their interest in establishing a presence in Ireland and 32 expressions of interest were received.

The Taoiseach said on Wednesday that "VC (venture capital) is important for the generation of employment in all sectors."

VC companies only fund a small number of startups and last month, we reported that the US industry lost money in the past decade.

Approximately one-third of portfolio companies fail, so those that do succeed must do so in a big way.

VCs require an exit route and the one for Irish tech companies is to be acquired by a US firm.

This year, US firms acquired 2 young Irish university spinouts  -- good news for the promoters and investors but maybe not for the Irish taxpayer.

With the exception of Silicon Valley and Israel, there is NO evidence that university research can create an engine of growth.

The UK's principal high-tech cluster is located in the area around Cambridge University; it is known as 'Silicon Fen' and has been developed since the early 1980's; it has about 30,000 employed and most firms have less than 10 employees.

The Innovation Fund Ireland is modelled on the Yozma Program (Initiative in Hebrew), a state fund of funds launched in 1993 to promote venture capital funding with investments from US firms.

In the early 1990's, Israel had highly trained graduates in both its defence forces and the defence industries. At that time, in the aftermath of the collapse of the Soviet Union, and influx of close to one million people, Israel's overall population increased by 20%. Nearly 40%  of these immigrants held academic degrees, many of whom were scientists, engineers and specialised technicians.

A thriving independent local VC industry, which began as growth of the US high-tech sector was accelerating, has been established comprising close to 80 VC funds with the total capital under management in excess of $10bn.

Sixty-five Israeli companies with a total market capitalisation of over $50bn are listed on the US Nasdaq Stock Market. These companies represent 90% of the total number of Israeli companies listed on a US exchange.

Ireland did have an indigenous high-tech sector in the 1990s and its demise is a case of 'don't mention the war.'

This year, Cognotec went bust and Trintech was sold to a US private equity firm; in 2008, Iona Technologies which had been the most successful university spinout of the 1990s, was sold to a US software company of more recent vintage. An Israeli company acquired Parthus some years before.

The Taoiseach again spoke on Wednesday of creating a European Silicon Valley; many clones have developed over the past decades with mixed results and Soviet leader Nikita Khrushchev launched a clone in Russia in the 1950s.

The missing feature in all the official Irish blather about the 'smart economy' is the market; without that it will remain a socialist legacy of Brian Cowen's.

SEE: Finfacts articles;

Irish Innovation: Ireland banking on the faith-based smart economy strategy

Ex-Intel CEO says Ireland's 3% of GDP research target not adequate; Wise or crazy advice?

Innovation Ireland: O’Keeffe urges latest research policy advisory group to focus on new 'high-quality jobs' - - The group headed by Intel Ireland’s former general manager, Jim O’Hara, is the fourth advisory group or taskforce to have been established since December 2008 to advise on the floundering 'smart economy' strategy.

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