Taoiseach, Brian Cowen (l) and Minister for Foreign Affairs Micheal Martin at a press conference on June 16, 2010, at Government Buildings.

Analysis Update, Tuesday, July 13: Cowen's Innovation Fund Ireland, jobs, Irish start-ups and failed entrepreneurs

Taoiseach Brian Cowen is to launch a €500 million “Innovation Fund Ireland” at a breakfast meeting with US business executives at the New York Stock Exchange, Monday morning.

The Government is to invest €250 million over the next five years in the fund to boost Irish businesses and €250 million will be provided by venture capital funds. Brian Cowen was speaking before traveling to the United States for three days, to promote the fund to investors and appear on US television networks at a time when the US has its own debate on how to generate new jobs.

According to issued extracts of the speech, the Taoiseach will say at the New York Stock Exchange that the fund is “a crucial pillar of our economic renewal” and that he would make Ireland “a honey pot for the best European entrepreneurs." He will say Ireland is a “global innovation hub” and “the best place in Europe,” to do business.

Cowen will say the plan is to make Ireland the best place for transforming research and knowledge into products and services, for starting and growing an innovative company, for relocating or expanding a small to medium-size business, and for research-intensive multinationals to co-operate with each other.

“The Ireland of the future will be a smart, high-value, export-led economy,” that will create “the products and services of tomorrow for a world market,” the Taoiseach will say.

The new Irish fund is modelled on the Israeli Yozma  fund which effectively created the Israeli venture capital market in 1993. Originating from a government program aimed at prompting venture investments in Israel, over a period of three years, the group established ten drop-down funds, each capitalised with more than $20 million. In parallel Yozma started making direct investments in start up companies. This marked the beginning of a professionally managed venture capital market in Israel. Today, Yozma's drop down funds constitute the backbone of the Israeli venture market.

A thriving independent local VC industry has been established comprising close to 80 VC funds with the total capital under management in excess of $10 billion.

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

The Yozma fund began as the US high-tech boom was gathering pace and the country had a significant R&D base in the defence industry.

The director of Israeli high-tech incubator programs told a committee of the Parliament (Knesset) last January that two thirds of the seedling high-tech companies nurtured by Israel's technology incubators program had closed down; only 61% managed to raise investment, and the firms were defaulting on state loans granted to them.

According to figures on the period between 1993 and 2009, 444 of 1,209 companies established through the program (37%) are still in operation, 55% continued to operate for less than three years, and just 26% have managed to survive for at least ten years.

Finfacts will provide analysis on the new fund on Tuesday.

For example, there is a common misconception about US entrepreneurs and venture capital - - the main funders of US start-ups are bank and credit card companies.

RTÉ Television interview with Taoiseach Brian Cowen, July, 11, 2010.