14 Jun 2023

Spinout factories: why Ireland’s universities punch above their weight

Ireland has so far created seven unicorn companies with valuations of more than $1bn, including names like Flipdish, LetsGetChecked, Wayflyer, Intercom, Fenergo, TransferMate and WorkHuman.

Wayflyer was one of the most recent to join the unicorn herd last year, and it did so just three years after being founded. The e-commerce financing and analytics platform, which has so far raised more than $236m, is the first unicorn to have spun out of an Irish university — University College Dublin — and it is the sign that the unique system that Ireland has developed for fostering university innovation is starting to bear fruit.

Seven unicorns from a country of just 5m people is a good hit rate. Of those countries in Europe with a similar population size, Finland also has 7 and Norway has 10, according to Dealroom. Slovakia doesn’t have any yet.

Ireland isn’t just punching above its weight in unicorns. It also manages to create a lot of startups from a very modest public spending budget — the country has a research budget of about €1bn, not much more than the research income of just a single university like Oxford in neighbouring Great Britain.

“New enterprises formed per €100m research income is around 5.5 in Ireland, whereas it is 2.2 in the UK and 1.7 in the US,” explains Barry Fennell, a senior commercialisation specialist at Enterprise Ireland, the government organisation responsible for the development and growth of Irish enterprises in international markets.

How does it make a little go such a long way?

One factor is strong collaboration between universities. Ireland is too small for each university to build its own tech cluster in a silo so they have tended to develop complementary strengths and work together, in line with the Gaelic Irish saying: ‘ní neart go cur le chéile’ — there is no strength without unity.

Venture capital firm Atlantic Bridge has emerged as a key pillar, engaging with university tech transfer offices at a very early stage and helping connect startups with international investors. Also helping are a unique national IP protocol and government funding scheme that shepherds startups through their critical pre-seed stages.

Atlantic Bridge: engaging two years before a spinout is formed

Atlantic Bridge, an investment firm with offices on both sides of the pond that specialises in bringing Irish startups to the US, joined forces with Trinity College Dublin and University College Dublin in 2016 to create a €60m University Bridge Fund that would invest in spinouts from all Irish universities and research institutes. The university venture fund was a first for the country. University College Cork and University of Galway joined the list of limited partners for the €80m University Bridge Fund II in 2021.

The University Bridge Funds’ portfolio has secured more than €450m in equity and grant funding so far, leveraging over six times the investment received from Atlantic Bridge.

The nationwide approach has given Atlantic Bridge the pipeline to make more than 40 investments to date split between healthcare, software and deep tech.

Conor O’Sullivan

Notably, University Bridge Fund’s work starts even before a company exists — a unique model in the country.

“We spend a lot of time on the ground with university tech transfer teams, Enterprise Ireland commercialisation specialists and meeting researchers and academics, often 18 to 24 months before they actually spin out,” investment director Conor O’Sullivan says.

“We’re a deep tech investment firm, so a lot of the things that we see, we’ll have the expertise for in terms of the people within the team and advisors. And we try and help them from a technical point of view, but also build out teams very early on.”

Fiona Neary, innovation operations manager at University of Galway, says: “This has been a huge, very important step for our venture scientists because it gives them first-hand insights into the needs of the investor.”

Once a spinout is ready for investment, Atlantic Bridge has a large network of co-investors it can bring in — it has invested alongside more than 50 other funds to date, many of them based overseas, like US-based healthcare provider Mayo Clinic’s corporate venture capital unit Mayo Clinic Ventures or Imec.xpand, the Belgium-based venture fund affiliated with research institute Imec.

Corporate venture capital interest tends to come at later stage, O’Sullivan explains, though Mayo Clinic Ventures did invest in University of Galway spinout Tympany’s seed round. “We have a very large number of corporates that we develop relationships with through helping companies scale and develop sales and partnership opportunities. We try and bring them onto corporates’ radars as early as we possibly can,” O’Sullivan says.