Sales of Irish tech firms create 300 millionaires in 15 years and no scaleups
By Michael Hennigan, editor of Finfacts
May 4, 2015 - 10:40 AM

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More than 300 shareholders and executives at Irish tech firms have become millionaires over the past 15 years through selling their businesses, according to a new report on mergers and acquisitions in the IT sector. However, there have been no significant scaleups (“Competitive advantage doesn’t go to the nations that focus on creating companies, it goes to nations that focus on scaling companies”) despite the commercialisation of research being the flagship enterprise policy.

The Irish Times reports today that research by Pegasus Capital, a corporate advisory firm, shows that some 215 Irish technology companies have been sold since 2000 for a combined €7.9bn and, 44% of all the deals, by value, have been completed in the past five years.

It is not clear if all the firms in the sample originated as Irish indigenous startups or if any are redomiciled firms that moved to Ireland from elsewhere for tax purposes.

The report highlights good news for founders and early backers of tech firms but a conundrum for public policy where the taxpayer gets little return on investment while overall commercialisation of research and patenting remains poor.

Earlier this year we reported that indigenous tech firms employ about 10,000 and data from the Irish Software Association in 2014 show that of 806 firms, 316 had 1-10 employees; 400 had 11-50 employees; 67 had 51-200 and 20 had 201-500; 2 had 501-1000 and 1 had 1001-5000. About 230 firms have annual revenues of at least €1m.

In January Enterprise Ireland said in its end of year statement: "In 2014 we transferred a total of 29 clients employing over 700 people to IDA Ireland as a result of mergers and acquisitions that resulted in the Irish entity becoming majority foreign owned. These leading Irish technology players are expected to continue to grow substantially in the future and help embed MNCs even deeper in Ireland. It is a testament to the quality of their products and services that they have attracted the interest of the world’s best companies."

Last year we reported that big tech firms are no longer engines of innovation and they increasing rely on the inventions of startups. However, in the US, the rate of creation of new tech startups is also falling.

Less than 4% of UK startups have 10 or more employees 10 years after their creation according to a report on scaling-up companies that was commissioned by the British government. However, the fastest growing 6% of businesses between 2002 and 2008 created half the new UK jobs in that period, according to data from Nesta, an innovation think-tank.

Prof Daniel Isenberg, a US based-academic and former entrepreneur has said:

Scaling up is vastly harder than starting up. What is much more certain is that, as anyone who has tried, as I have, can tell you, starting up a venture is just the first baby step on a long hard trudge to scaleup. But without the ability to scale way beyond start, all the blood, sweat and tears (and money) will be flushed right down the drain."

While there has been no significant scaleup of an Irish tech or life sciences firm since 2000, leading home-grown firms, Elan and IONA Technologies, were absorbed by US firms.

Startups vs Scaleups: 4% of UK startups have 10+ employees 10 years later

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UK and Irish business R&D heavily reliant on foreign-owned firms

Ireland: Innovation with or without R&D/ scientific breakthroughs

Irish patent filings at European Patent Office fell in 2014

Irish R&D Tax Credit: No evidence of rising business innovation; Facts don't matter

Dublin's Silicon Docks: Separating hype and reality

Dublin Web Summit 2014: Separating hype and reality Paddy Cosgrave, co-founder of the Web Summit commented in a tweet: "Phenomenal level of research + info in this post about Irish tech policy & startups in general"

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