Protect and Grow our Indigenous Technology Sector

The Alliance for an Innovation Driven Recovery is a newly formed coalition of organisations with a shared interest in the growth of the indigenous tech sector in Ireland.

Since March 2020, our world and our country have been altered immeasurably. As we look ahead to what the recovery might look like, high-growth tech startups will represent a significant share of those companies that can create and retain high-value jobs across Ireland.

We are committed to working collaboratively with the newly formed coalition government, to support decision-makers in charting a path to economic recovery.

Key Actions

Ireland has become a centre of innovation, enterprise and entrepreneurship. However, today’s entrepreneurs are being forgotten during the Covid-19 crisis. We all want a swift end to this health crisis, but we also desperately need to protect the future of our economy during these challenging times.

High-growth companies are making a huge contribution to the economy, but are often yet to make a profit because they are investing in their people, technology and bringing advanced products and services to market.

Neighbouring countries such as France and the UK have moved decisively to craft supports to help their startup ecosystems through the crisis.

In Ireland we need to follow suit. 

We are seeking to work with the Government to improve the policy environment for high-growth companies by:

a) Committing to a process of structured engagement with the sector

b) Prioritising targeted changes to Employee Investment Incentive Scheme (EIIS) to support access to private capital

The Irish Government must act now to protect Ireland’s entrepreneurial future so we do not lose a generation of high-growth startups.

Priority Actions 2020

Key Policy Priority: EIIS

EIIS is a tax relief which aims to encourage individuals to provide equity based finance to trading companies.

Right now, access to cash is the biggest challenge for businesses of all types. For this reason, temporary enhancements to EIIS will be vital to giving Ireland’s innovative enterprises every opportunity to access private capital.

The government needs to incentivise investment in high-growth SMEs to support an innovation-driven recovery through the retention and creation of high-skill jobs.

These changes should be targeted at increasing the certainty about which companies are eligible for EIIS, ensuring that other investment vehicles can qualify for EIIS tax relief and providing enhanced relief to micro companies.

EIIS Submission

Data about EIIS, BES investment in high-growth tech companies

This analysis is based on data from Revenue on investment raised between 2007-2018, under four key schemes: Business Expansion Scheme (BES); Employment Investment Incentive Scheme (EIIS); Seed Capital Scheme (SCS); Start Up Relief for Entrepreneurs (SURE).

Our focus is on the level and type of investment incentivised under these schemes into “High-Growth Tech Startups and Scaleups” which are innovation-driven businesses that are high-risk and require significant upfront investment before breaking-even, thus are very dependent on equity-based finance. These companies present huge potential in terms of employment, exports and innovation. They are distinct from lower-risk asset-backed or service businesses.

The key finding is that the majority of the investment has been focused on lower-risk businesses (71% / €579M) as distinct from higher-risk, high-growth start ups and scale ups (29% / €238M), with the percentage of investment going to startups and scaleups consistently about 30% of the total each year.

These findings confirm the observation in the 2018 Indecon report commissioned by the Minister for Finance

“The evidence on firms assisted shows that some of the companies are in lower risk sectors. There is merit in considering whether the focus of the scheme can be amended in order to target companies most in need of finance and thereby reduce economic deadweight and Exchequer costs”. [p.9]

See the full report here.

Data from H1 2020: Reduced capital available for early-stage tech companies

Recent data from TechIreland for the first half of 2020 (H1 2020) shows that while there has been an increase in the total amount invested, there has been a significant reduction in the number of early-stage deals.   

The total amount invested was an impressive €545 million in the first six months  - but the vast bulk of the investment went into mature businesses that are scaling their exports and employment. That is great to see, and a vindication of the nurturing that those businesses received at an early stage.  

However, there has been a significant drop in the number of early-stage businesses – those tech startups that rely on business angels to get to their first Seed Round.  The number of investments less than €500k was down 40% and the number of investments between €500k and €1million was down 60% over the same period in 2019.  Data from IVCA and KPMG Venture Pulse show a similar trend. 

See the full report here.

Learn More or Join the Alliance

The Alliance for an Innovation Driven Recovery is a newly formed coalition of organisations with a shared interest in the growth of the indigenous tech sector in Ireland.

We welcome other organisations who share this interest to join the Alliance, to help structure and streamline engagement on key policy items with the Government.

If you’re interested in joining, or learning more, please contact one of the following members of the Alliance:

Scale Ireland: liz@scaleireland.org

IVCA: sjlarkin@ivca.ie 

HBAN: john@hban.org

Euronext: Orla O’Gorman

TechIreland: john@techireland.org

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