National Digital Research Centre responds to my post on ROI

The NDRC have been admirably responsive to the issues I’ve raised in my post.

Amy Neale of the NDRC has been good enough to come back to me with a graciously worded response to my self-admitted numeracy-challenged efforts to make sense of the Return on Investment for the public money invested by the Centre.

Dear Simon,

I am responding by email where there is no constraint on character count to ensure we are able to cover appropriately the points you have raised. You’re right; the ‘1.2x return on investment’ deserves a bit of explanation, and so we will prepare a more detailed statement to publish on our website. I’ll also provide some detail here which I hope makes clear our ‘return on investment’ figure.

NDRC’s 1.2x return refers to the amount of commercial, return-seeking investment in the outputs of NDRC projects compared with the NDRC input investment in those collaborative translational research projects. Of the projects that have reached completion by August this year, committed commercial follow-on investment was 1.2x the amount that NDRC invested into those projects (this figure includes attrition costs – costs incurred by those projects we have stopped early where we have identified that they will not accrue a return on investment).

The 2.6x return that you quote is a return on commercial, return-seeking angel investment for commercial investments made, which is a different type of investing to that which NDRC is making.

Angels tend to make less risky investments by choosing later stage technologies, or companies that have been operating for a period of time. NDRC is focusing at the hazardous earlier stage for new technologies and products, with a focus on bridging an internationally recognised gap that exists between investment into research and marketable products. We are focused on building this as a capability for Ireland, in order to translate publicly funded research investment into direct economic impact.

We are committed to using the term ‘investment’ to describe financial support we make into projects because we expect projects to be focused on making a return from the outset, unlike other pure research funders.

While the overall goal of NDRC is to create market capital, follow-on investment from third party commercial sources is the immediate return sought by NDRC investments. It is this follow-on investment that the State/Economy gets in the short terms in return for the investments NDRC is making with the taxpayer funds. This follow-on investment goes towards building sustainable businesses and creating sustainable jobs.

We are only 3 years from our initial investments into projects. It will take quite a few years to realise an income returning exit which explains why there is no income return recognised in our accounts. As a young organisation follow on investment into technologies and ventures is an important indicator for us, and goes further than simply stating number of companies forms/ number of technologies patented.

As a final point of clarification, we work with third level institutions across Ireland, not just Dublin.

I do hope this clarifies some of the questions you raised in your twitter feed, and also addresses the difference between the angel investment research you quoted in your blog piece and NDRC’s investment focus.

With best wishes
Amy Neale

I’d like to thank Dr. Neale for taking the time to respond to the issues I raised. I will probably have to think on her email for a little bit before I can fully digest it. Let me know what you think in the comments.