In mid-March 2020, as the world began to go into lock down over the Coronavirus pandemic, the priority of our work at Scale Ireland had to change quickly.
As the global economic impact hit - and social distancing measures required a major shift in how businesses of all kinds operate - we have had to refocus our resources to assess what the impact of this would be for startups and how they could be supported to survive. All the while working to get that message across to the right people in Government.
Like any advocacy organisation, a lot of work goes on behind the scenes.
So we’ve put together this blog to share what we’ve been doing as part of our efforts to strengthen the voice of the startup community right across the country.
1. Identify & Share what resources & supports are already out there
This document includes useful information for startups on the following :
- what the Government had already started doing to support businesses,
- some guidance for startups to avail of supports, and
- practical resources for companies having to transition to a new way of working
The document also highlighted Scale Ireland’s efforts to gather ideas on what the Government could do to help.
This resource was also featured in Sifted.eu (online publication from Financial Times) who included it in their roundup of different national startup policies and responses taken across the EU.
2. We gathered data from key people across the startup community
We worked with our Steering Group to identify what was happening on the ground. The diversity in our Steering Group gave us a quick sense of what was happening across the startup ecosystem, including the investment environment (VCs, corporate lawyers), feedback on potential tax measures (tax advisors), EU measures (European Innovation Council member) as well as from startup founders themselves.
We also worked with our global partners across the Allied for Startups network.
Being able to quickly learn from and where possible emulate good practices followed by governments and startups associations across the EU has been a valuable feature of these exchanges
Our exchanges with France Digitale enabled us to identify the steps the French Government was taking to specifically support startups and scale-ups. Accordingly, we communicated that learning with government agencies here in Ireland.
Further, on 3 April, alongside 20 other organisations and led by Allied for Startups we signed an Open Letter. This letter was sent to the heads of the three EU institutions, the European Commission, the Council and the Parliament, as well as to the ECB President.
The letter called in particular on the EU Commission President von Der Leyen to:
- give startups a central role in solutions to COVID-19
- provide economic support to startups in short run
- make startups central to plans for future growth
3. Survey: we surveyed 250 people across the ecosystem
To ensure our policy proposals were genuinely representative of the real needs of a good cross-section of the startup community, in partnership with TechIreland we carried out a survey (http://bit.ly/Covid19StartupSurvey)
Within 3 working days over 250 representatives of Ireland’s startup community had completed the survey, providing valuable insight into the real challenges facing startups from the pre-seed to series B stages. The summary of findings can be viewed here.
The survey is now closed, however we continue to capture feedback from the startup community, so if you have feedback or ideas please continue to share them with us via the survey above.
The survey highlights the current challenges facing innovation-driven startups in Ireland today, in particular:
Zero or low revenue at the early stages of growth: Many early-stage startups have zero or minimal revenue and are investing in innovation with the view to generating revenue and significant scale in the longer term. In this business model P&L revenue and cash flow are not directly tied, thus revenue provides minimal contribution to operating costs. This impacts their ability to access debt, and if eligibility criteria for government supports are conditional on being able to demonstrate reduced revenues they may inadvertently be excluded.
Reduced availability of Investment: Startups are typically dependent on external investment to fund their operations. Many startups are in the process of fundraising and are finding that all types of investors are slowing down investment processes; with VCs focusing in particular on companies that are already in their portfolio, while angel investors are reluctant to invest due to worries about personal liquidity.
Retaining teams of skilled employees: The main asset a startup has is its human capital: typically salaries account for around 70% of startups’ cost base. Many have limited scope to cut costs without reducing employee numbers or salaries. Because of the dependence on teams of knowledge workers, reducing headcount in the short-term can have very significant long-term strategic implications.
4. Clarifications: the Wage Subsidy Scheme and Startups
The speed at which some new measures aimed at helping businesses were introduced meant that there was some work to be done in clarifying whether startups would be eligible and how they could avail of them in practice.
This was particularly the case for the Covid-19 Wage Subsidy Scheme - this is a scheme which has been rolled out for businesses facing major economic disruption but that wish to keep staff in employment.
Below are Scale Ireland’s and others’ Wage Subsidy Scheme resources:
- Scale Ireland’s explainer is linked here.
- Multiple clarifications have come since we created this document, some of which were answered in Revenue’s updated guidance on the scheme.
- This video interview with Niall McEvoy from the HPSU team at Enterprise Ireland (organised by the HPSU Founders Forum) provides a good overview of all the support for innovation-driven startups, as distinct from SMEs as a whole. For updates on the Wage Subsidy Scheme watch from 7mins 28seconds.
5. Policy Submissions: to Government departments, political leaders, agencies
On March 31st we submitted the COVID-19 Policy Proposal document to the Government. The document includes proposals informed by international best practice, learnings from our Survey, and input from expert bodies and people across the ecosystem.
It highlights the key challenges facing innovation-driven startups, in particular:
✪ COVID-19 Bridging Financing Fund: supplying emergency financing to viable startups through dedicated Government-backed investment fund.
✪ Clarify Eligibility for Supports: ensure the COVID-19 Wage Subsidy Scheme and other business supports apply to pre-revenue startups or startups that are otherwise dependent on investment capital.
✪ Tax holiday / deferment: deferment or suspension of employer related taxes would have the greatest impact to support cash flow; followed by acceleration of VAT repayments and deferral of VAT payments.
✪ R&D Tax Credit repayment: priority should be allocated to SMEs, this would help the most R&D active companies to survive the crisis.
The proposal was shared with all the key departments (Departments of an Taoiseach, Finance and Business, Enterprise & Innovation), the main agency that supports startups in Ireland (Enterprise Ireland), and the current and opposition political leaders.
(If the proposal above is too meaty, check out the shorter Executive Summary.)
Since we submitted this just over a week ago, happily Government has made changes that have been welcomed by the startup community (like the accelerated R&D Tax Credits refunds which we tweeted about today).
We’ll be sharing progress on policy for startups in the coming week, so please follow our channels to learn more.
6: Grassroots Political Engagement
Before Covid-19 hit, the political world in Ireland was focusing closely on the General Election, and the formation of the new Government. As part of this work we carried out an Open Letter campaign back in January, which attracted over 300 signatories.
We are continuing to engage with politicians and other key decision-makers about getting these policies implemented as quickly as possible.
Before and during Covid-19 we’re increasingly seeing startup founders contacting their political representatives, highlighting the value startups like theirs bring to both urban and rural Ireland, and calling for startups to be put on the political agenda.
You can support this work by reaching out to your own TD's using our pre-prepared template linked here.
7. Bridge Financing: Proposing how a COVID-19 Fund could work for Ireland’s startups
As mentioned above, there has been some positive progress in Ireland on supports for startups, and clarifications re eligibility gradually coming through.
In terms of next steps we’re advocating for more to be done to help viable startups survive the crisis.
In particular we’re currently working with a number of bodies like the IVCA and HBAN, as well as organisations like Goodbody and Deloitte to help inform a proposal for how a COVID Bridge Financing Fund could work in an Irish context. If you’d like to collaborate with Scale Ireland on making this happen please let us know.
So that’s a snapshot of the work we’ve been doing to advocate for startups during Covid-19.
If you’d like to learn more about our work, or would like to support our small team, please drop us a line by using the comment form here.