A lot hinges on Innovation Fund Ireland, the €500m initiative set up to attract foreign venture capital to our shores with the lure of matching investments from Enterprise Ireland and the National Pension Reserve Fund.

This month the government committed to a five-year job creation programme which it expects will boost employment by 300,000. This won't be done without the IFI bringing in experienced investment managers to help foster an innovation-driven enterprise sector and to generate high-quality employment.

But some venture capital experts are already questioning the state's model, which is based on Israel's successful Yozma funds: state-backed, early stage funds which subsidised private investment to commit to an economy starved of outside money.

In 1993 the Israeli government created the Israeli venture capital market out of thin air through the formation of its first fund. Israel now has more start-ups per head than any other country and more companies listed on the Nasdaq than China and India combined. So it appears that when it comes to promoting enterprise, Israel succeeded.

While there is a consensus among venture capital experts that the motivation behind the IFI is worthy, some are cautioning that we cannot simply try to emulate the Israeli model. It needs to be adapted for Ireland.

Yozma effectively created the technology sector in Israel. Michael Donnelly, chief executive of VC fund Growcorp and an expert on Israeli innovation, said Ireland is past that point in its development.

"It doesn't necessarily make the Yozma model irrelevant, but we need to look at the post-Yozma model for Ireland. The Yozma model is built around letting public money be available to venture capital funds," he said.

IFI, by contrast, provides co-investment opportunities for foreign VC rather than subsidising them. Both the NPRF and Enterprise Ireland, which are each committing €125m to the fund, have purely commercial mandates. This means they operate as equity partners, not underwriters. Also, unlike Yozma, these state backers aren't creating an entire VC infrastructure from scratch. Instead IFI wants to import sophistication and scale to an Irish VC environment which is struggling to get to the next stage of development.

"Government agencies are not structured to do that," said Donnelly. "It's up to the private sector too. We need a pipeline of companies that already exist and are ready to scale up. The companies sold in Ireland in the last five years were sold because they couldn't raise the scale-up capital they needed."

Achieving scale has been a persistent problem for Irish start-ups. Even if Yozma's original mandate was to seed, fertilise and cultivate original growth in VC support for indigenous industry, Israeli high-tech companies do tend to grow bigger than Irish firms before exits such as buy-outs or stock market listings. This is seen as key to sustainability.

"It's not just about high-potential ventures," said Rory O'Shea, lecturer in new venture finance, innovation and entrepreneurship at the UCD Quinn School of Business. "Ireland is failing to generate high-performance ventures. We need to think about the later stage. We need to learn from the Israeli model and to develop sustainable innovation."

So what exactly is achievable within the IFI structure?

"In the last few decades new ventures were primarily responsible for all net jobs creation, for example in the US," said Federica Pazzaglia, senior lecturer at UCD's Quinn School of Business. "One could argue that initiatives directed to stimulate the VC industry in Ireland can be seen, at least in some measure, as part of the government policy to react to the aftermath of the crisis and the rise in unemployment within the country."

But O'Shea thinks a restructuring of how funds are distributed is needed. "Ireland is failing to produce university spin-offs in large numbers because seed funding is needed," he said.

"The Innovation Task Force report recommended an overhaul of the Enterprise Ireland decision model. Feasibility schemes need to be put in place as well as later-stage match funding schemes by Enterprise Ireland. We need to catapult embryonic start-ups, not match funding schemes on a pro capita basis."

He said the system is flawed because "our funding is predicated on the funding capability of the innovator rather than the potential of the idea". The current system means start-ups must provide half the capital before they will receive support.

He also said the Israeli policy doesn't match Irish goals because job creation was subordinate to attracting capital. "Ireland needs sustainable innovation and jobs, not just venture capitalist millionaires."

He warned that a copy of the Israeli way of doing things might just see the best jobs created here following the capital inflows back to their sources overseas. The problem in Israel is that "a lot of the high-potential start-ups have sold out to American companies. All the skills went to America".