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The Minister for Communications, Climate Action and Environment, Denis Naughten secured Government approval to continue Exchequer funding of the National Digital Research Centre (NDRC) programme and for his Department to run a competition to appoint a concessionaire.

The NDRC was established in 2006 under a concession agreement with the Minister and it operates to develop promising research ideas in the digital area into new commercial ventures ready for launch in the private sector. The Department last year engaged Indecon International Economic Consultants to undertake an independent review of the policy underpinning the NDRC programme.

The consultants found that the investment in the NDRC programme has been effective with estimated net economic benefits of €73.5m. The report highlights that NDRC-supported companies have created over 680 high value jobs in Ireland and have secured follow-on investment of €152m. Indecon concluded that the policy objective underpinning the NDRC programme is still valid and recommended that the State should continue its support for start-ups in the digital sector.

Announcing the decision, the Minister stated

“Digital technologies are having a transformative effect in practically every facet of society and one of our goals in Government is to create a business environment in which new digital enterprises can thrive. The findings of the Indecon report are that the National Digital Research Centre (NDRC) is an important and successful policy in supporting early stage Irish digital enterprises and the report recommends that the State should continue its support for the programme.

On foot of the Government Decision, my Department will run a competitive procurement process to select a concessionaire to run the NDRC programme and deliver early stage enterprise supports in the digital sector.”

Background

The NDRC was established in 2006 under a Concession Agreement with the Department, following a competitive process. It operates to develop promising research ideas in the digital area into new commercial ventures ready for launch in the private sector.

A consortium of third level institutions was selected in late 2006 to manage and operate the National Digital Research Centre through a concession agreement following a competitive procurement process. The initial Concession Agreement between the Department and the National Digital Research Centre Limited (NDRC), a company established by the consortium, ran from 2006 to 2013 and involved funding from the Department of €25 million. An option under the concession agreement to renew the contract for a further 5 years was exercised in 2013 with funding of €17.5 million (€3.5 million per annum) up to the end of June 2018.

The review examined (i) the operations, performance to date against objectives and wider economic impacts of the NDRC endeavour, and (ii) its future relevance and the extent to which there is a rationale, if any, for continued State support beyond the expiry of the current Concession Agreement, having regard to the ecosystem within which the NDRC operates.

The review was overseen by a Steering Group comprising of officials from the Department (National Digital Strategy Division, Financial Adviser and Senior Economist), the Department of Business, Enterprise and Innovation and Enterprise Ireland.

NDRC is primarily focused on the very early stage, pre-seed, part of enterprise supports. It also offers some seed and venture support. It also has many of the characteristics of a start-up accelerator programme but also some distinguishing features including:

• a. its focus on the digital sector;
• b. its provision of pre-seed and seed funding (often at a higher level than other accelerators);

Indecon states that the NDRC is a high-performance initiative consistent with international best practices.

In terms of the wider economic impact of NDRC, Indecon concludes that the investment in NDRC has been effective with an estimated net present value of the contribution of companies who participated in NDRC activities of the order of €906 million. Indecon’s estimates suggest economic benefit of €73.5 million when account is taken of the opportunity costs of resources and additionality/deadweight - a net benefit to cost ratio of 1.3:1 given a total cost to the State of €55.25 million. This calculation excludes spill over benefits from any research undertaken by the supported businesses.

Other metrics of performance include 680 jobs and follow-on investment of €152m secured by NDRC-supported ventures.