With government backing, Ireland's Elkstone closes first VC fund at $108M for early-stage startups

Yet another early-stage VC fund has closed in Europe this week, as Elkstone finalized a EUR100 million ($108 million) pot aimed at Irish startups. It comes a day after Lifeline Ventures closed a EUR150 million ($163 million) fund for fledgling startups in Finland, while several others have landed across the continent in the past few months.

Elkstone, a wealth management firm that for the past decade has invested privately at the seed stage in future unicorns such as Flipdish and LetsGetChecked, has launched its inaugural venture capital fund with the backing of the state's Ireland Strategic Investment Fund (ISIF) and Enterprise Ireland (EI).

The new fund claims around 250 limited partners (LPs) in total, including a host of undisclosed business people from Ireland.

A year in the making

Elkstone first announced plans for its VC fund in January last year, initially targeting EUR75 million. Within three months, though, it revealed it was raising the ceiling to EUR100 million, with a view toward backing seed and pre-Series A startups with investments in the range of EUR1 million to EUR2 million.

Although the fund has only officially closed now, Elkstone says that it has already deployed around 10% of the cash across six startups, including Bluedrop Medical and Inclusio, with several more deals closing "imminently."

One of the big driving forces behind the new fund was a recent legislative tweak the Irish government made to the Employment Investment Incentive Scheme (EIIS), an initiative that enables Irish startups to secure investment that are more tax efficient for the investor. The changes, which Elkstone had pushed for, mean that investors now benefit from tax relief of up to 40 percent. Up until that point, Elkstone says a fund of this size would not have been possible due to the risk/reward ratio.

"Our fund investor base, comprising both entrepreneurs and private capital alongside EI and ISIF, is a key edge in helping us bring meaningful value add to Irish founders as they look to fulfil their businesses potential and scale internationally," Elkstone chief executive Alan Merriman said in a statement. "Whilst the macro backdrop is undoubtedly challenging, it is a good time to be investing and we are very positive on the outlook for disruption and innovation."

It's true that VC funding has mostly declined across all stages over the past couple of years, but data indicates that earlier-stage funding has been more resilient, particularly at the seed stage. In addition to Finland's Life Ventures' new fund announced yesterday, since February we've seen a number of early-stage VC funds arrive on the European scene. For example, the U.K.'s Amadeus Capital Partners partnered with Austria's Apex Ventures for a EUR80 million ($87 million) fund aimed at deep tech startups, while in France Emblem and Ovni Capital each announced new EUR50 million ($54 million) funds. In London, meanwhile, Playfair Capital closed a $70 million pre-seed fund.

As for Ireland specifically, Elkstone's new fund represents one of the largest -- if not the largest -- to emerge from The Emerald Isle. For comparison, Dublin's Frontline Ventures launched a EUR70 million seed fund for European B2B startups back in 2021.

Having ISIF on board as an LP is a huge boon for Elkstone, and it comes at a time when Ireland is clearly doubling down on its investment ethos -- just last week it revealed plans to establish a sovereign wealth fund year.

"This fund expands our reach in early-stage venture capital and gives Irish businesses a valuable new option for attracting the capital they need to grow," ISIF director Nick Ashmore added.