Stripe layoffs pose awkward questions for state fund ISIF and its dual investment and jobs mandate

It should be a wake-up call to policy makers about the impossibility of trying to micro-manage economic winners, rather than setting conditions that help all kinds of business thrive.

In March 2021 the Irish Strategic Investment Fund (ISIF) invested €42m in the Collisons’ fast-growing digital payments firm in a funding round that valued the company at an incredible €80bn.

The promise of 1,000 jobs certainly did fulfil ISIF’s so-called “double bottom line” mandate, which requires its investment of taxpayer money to generate both a financial return and increase employment in the domestic economy.

Founded by Limerick brothers John and Patrick Collison, Stripe had taken off like a rocket. Hailed as the largest private tech company in the world, it was tipped to follow a growth trajectory like Google or post-iPhone Apple, and to eventually list on the Nasdaq for €100bn or more.

You don’t have to be too cynical to wonder whether the State agency’s head was turned by the glamour Silicon Valley success.

Not for nothing was Tánaiste Leo Varadkar quick to hail the “fantastic news” of the “partnership” and its promise of “really good, well-paid, professional jobs”.

It may be that policy makers couldn’t get past the nagging issue that the Collisons’ great success was taking place in California, where the brothers had chosen to locate the company, instead of at home.

Taking a real stake in Stripe with the promise of prestigious jobs was a nice consolation prize, or looked like one.

Still, Irish taxpayer money came with one big commitment, though: Stripe pledged to add at least 1,000 new jobs to its Irish operation over the next five years.

Now the company is going in reverse amid a shifting economy and a big decline in its valuation. And although Stripe has taken a noticeably decent approach to the affected staff, it sure isn’t hiring new employees here as planned. That happens in the real world.

But the whole episode raises uncomfortable questions about ISIF’s decision to back any one company with so much taxpayer money, especially if, like Stripe, there were plenty of private sector investors ready to back the company.

Stripe’s retrenchment at the very least makes things awkward for ISIF. An IPO looks far off now and it won’t be €100bn, and jobs numbers are going into reverse.

That may well turn around, but growth may prove slower and tougher in an era of expensive money.

The Collisons are smart business people and good employers, and short-term embarrassment for Isif isn’t the real issue here.

The big issue is that the so-called “double bottom line” investing it is charged with doesn’t really make sense.

That mandate was conceived in the dark days of the financial crisis when the economy desperately needed stimulus and the idea of a State anchor investor was important for indigenous firms seeking foreign financing from sceptical fund managers.

Yet capital returns and increased employment can often be at odds, as Stripe is discovering.

Job creation is vitally important for Government. At the company level, more jobs are not necessarily better. A company that overhires can destroy value.

Companies rightly aspire to grow but no private business can ever credibly commit to job creation as policy. The imperatives for state agencies and the minister responsible for steering them are very different.

Could the €42m that went into helping secure Stripe’s aspirational jobs growth have been better stewarded for taxpayers?

Spreading smaller investments across a number of ventures in a range of sectors, as Enterprise Ireland does, would certainly be less risky, even if it’s a tougher slog.

Building homes the private sector isn’t producing wouldn’t be an outlandish alternative, some of Stripe’s still hundreds of employees here might even benefit.

Stripe isn’t the issue. The question is whether it really makes sense for a state agency like Isif to get so involved in backing any one company when in business all plans are always highly contingent on factors impossible to predict over the longer term.

Building a better race track that means more horses get all the way around the course is a far better use of taxpayer money than trying to pick winners, even if it never quite gets the same PR plaudits.​