Finance house Elkstone has announced a new €75 venture fund to invest in early-stage technology companies in the Republic. The fund is the first to be announced by the multifamily office, which also operates across wealth management and property.
The firm has achieved notable success recently with three companies that it has backed financially – online healthcare companies LetsGetChecked and Thirty Madison, and digital food-ordering platform Flipdish – achieving "unicorn" status after hitting $1billion-plus valuations.
The plan is to expand on Elkstone’s success with its venture club, which has also backed highly regarded companies such as Manna, Soapbox Labs and Altada.
The new fund, which is to officially launch next month, has secured a cornerstone investor that has committed €20 million. A further €35 million has been committed by Elkstone's existing client base, while management, including chairman Alan Merriman, are committing €3 million to the fund.
Mr Merriman said the fund intends to invest in up to 35 companies over an initial four-year period, with deal sizes in the range of €500,000 to €2 million.
The plan is to invest approximately 55 per cent in initial investments spread between seed and Pre-A opportunities, with the remainder of the financing to be used for follow-on investments.
The fund is targeting a return that is 5 per cent per annum above the MSCI world index. Investors will also be able to benefit from EIIS tax relief of up to 40 per cent.
Elkstone has backed more than 45 companies to date via its venture club with investments totalling around €50 million, which includes €18 million in follow-up funding. Other start-ups it has invested in include Evercam, HealthBeacon and Robotify.
Founded in 2011, Elkstone has gained a reputation of being prepared to back early-stage companies that Irish institutional investors and venture capital firms have kept away from. It backed LetsGetChecked and Flipdish at seed stage, and was also one of the first investors in Manna, considered by many to be a risky bet given its focus on drone deliveries.
Legislation
Elkstone came close to launching a €50 million venture fund prior to the coronavirus pandemic but this was delayed after the Revenue Commissioners questioned how it was structured, leading to a change in legislation.
Speaking to The Irish Times, Mr Merriman, who co-founded Elkstone after leaving EBS Building Society, where he served as finance director, said he was confident, following discussions with the Department of Finance, of receiving approval for the new fund from the Central Bank of Ireland.
“We want to have a meaningful fund, which is why we’re targeting €75 million. We also want it to be focused on early-stage because that is where the gap is primarily in the Irish market in terms of real risk investing,” Mr Merriman said.
“If we get more big liquidity events then there is also more likelihood that employees in those companies will go out and create new ventures themselves, which we haven’t really had here and which successful tech scenes need to succeed,” he added.
Mr Merriman said that on the back of Elkstone’s success with Flipdish and LetsGetChecked, some of the best-known VCs in the world – including Sequioa, Accel, Atomico and Balderton – are all looking at the firm to be their “eyes and ears” locally.
“I hope that if we can continue to support scaling Irish companies at an early stage with the fund, those bigger international players will be there to pick up the reins as follow-on Series A, B and C stage,” he said.
The new fund's advisory team includes Orla O'Gorman, former head of listing at Euronext; Stripe's head of payments engineering Sean Mullaney; Huckletree co-founder Andrew Lynch; and Claire Fitzpatrick, former global strategy and operations lead at ConsenSys.
