Enterprise Ireland and the IDA need to evolve in order to foster a “new breed of startups,” according to Dublin-based aircraft-leasing giant Avolon.

In its report on how to improve Ireland’s startup and innovation culture, Avolon also said that Enterprise Ireland should aim to eliminate all direct company funding and provide financial backing solely through private venture capital firms by investing in their funds.

According to its latest annual report, for 2017, Enterprise Ireland invested €89.1m in equity and venture capital that year.

It invested €36.9m in direct equity across 388 investments in 319 companies.

The Enterprise Ireland direct equity portfolio held equity investments in 1,526 companies at the end of 2017. Its equity investments generated income of €26.8m for Enterprise Ireland in 2017.

The agency, which is headed by CEO Julie Sinnamon, also invested €52.2m in private equity funds in 2017, and one new fund amounting to €15m was established under the Seed & Venture Capital Scheme.

Enterprise Ireland received proceeds or distributions totalling €54m from its capital funds investments in 2017.

“This agency injects significant capital into our ecosystem but shoulders too much of that burden and as a result is often is limited where scale is needed,” the report from Avolon – entitled ‘Project I’ – claimed.

Enterprise Ireland said: “Enterprise Ireland received a copy of the Project I document today and will take the necessary time to review it in full.”

It added: “Enterprise Ireland is committed to the continued development of the startup ecosystem in Ireland. EI works and supports the brightest and best manufacturing and internationally traded services startups in Ireland that have the ambition to take their businesses global.”

The agency said it works closely with a number of other agencies and government departments to support startups.

But the Project I report insisted that Enterprise Ireland and IDA need to evolve to meet the requirements of a world-class startup ecosystem.

“The mandates of the IDA and other government agencies must be revisited to include specific support for this new breed of startups,” said the Avolon report.

“This in turn will require a change in their current performance metrics, enhancing the focus on job creation with a stronger emphasis on economic value-add for the startup sector.”

Avolon CEO and co-founder Domhnal Slattery said the purpose of the company’s report was to “strategically critique and encourage” change.

“While our paper highlights where we feel changes are needed within our ecosystem and ecoculture, it underlines the need for collective action,” he said.

The report also claimed that Enterprise Ireland (EI) should re-evaluate how it invests the State’s money.

“EI should upgrade its selection and funding disbursement processes to improve the quality of successful startup applicants and introduce improved systems for monitoring deliverables,” it said.

It also calls for a number of changes including the introduction of a new share option scheme specifically designed for startups, an increase in the lifetime limit on entrepreneurial relief, and “fundamental changes” to the tax regime.

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