Saturday, 9 May 2015

Ireland behind UK for Startup supports hears event

Ireland has been overtaken by the UK for startup supports since 2011 it was said today at a conference held at the Wayra startup accelerator in Dublin today.

Despite Ireland and Silicon Docks being heralded as one of the major tech hubs in Europe in recent years with a litany of major multinational tech companies locating offices themselves in the area, a less flexible taxation system has done damage to the early stage Irish startup ecosystem since 2011.

100 early stage startups in attendance heard how they could avail of UK seed funding schemes in preference to Irish schemes with Paul Jenkinson, Managing Partner at Jenson Seed fund giving a presentation on how to hack the UK system and the advantages of the UK system in comparison to the Irish one. Three other indigenous Irish startups spoke of how they had availed of UK seed initiatives rather than their Irish equivalents at the event also.

Ian Lucey an investor with 40 investments in Irish startups organized the event said; “I wanted the startup community to know of different supports available to them and how they can get them. There has been untold damage done to the Irish ecosystem by the introduction of the revamped Employment and Investment Incentive Scheme in 2011.”

“It has became more miserable and less attractive and has caused the amount claimed by to drop by two-thirds. If Silicon Docks can only support the big multinationals that’s fair enough, but if lean, agile Irish startups have to move to Silicon Roundabout in the UK to survive they might as well know the facts. The changes made to the Irish system since 2011 are scandalous – they’re killing startups and startup funding.”

The Lucey Fund organized today’s event following information released under Freedom of Information Act 2014 The information revealed that:

1) The R&D tax credit is too complex and time for consuming for small startups to apply for. 981 small companies (defined as those with less than 50 jobs) claimed €62.1million in R&D tax credits since 2011, while large companies (defined as those with 250 or more employees) who are less dependent on these tax credits received more than twice this amount at €142.2million.

2) Seed capital has become less attractive to entrepreneurs due to harsh terms.
The amount claimed in the Seed Capital Scheme (SCS) has dropped by a third from 2million to 1.3million in 3 years.

3) Since the introduction of the Employment and Investment Incentive Scheme (EII) in place of the Business Expansion Scheme (BES), the amount claimed by startups has dropped by two-thirds from €41m in 2011 to €16m in 2013. The FOI request also revealed that bodies such as the Dublin Chamber of Commerce, The Consultative Committee of Accountancy Bodies and Irish Tax Institute have all expressed concerns about EII.

At the same time as these counterproductive changes were made in Ireland, in 2011 the UK government changed their equivalent of EII, called (SEIS) the Seed Enterprise Investment Scheme. The change led to a jump that almost tripled the investment overnight.

Interestingly, it also inversed the trend of existing enterprises receiving investment under the scheme, to now being weighted towards new startup companies.

Crucially, the difference between the British and Irish scheme is the amount of time it takes startups to receive their rebate back after spending it on R&D. UK companies get their rebate back within three weeks. Irish companies get a rebate back in three installments over three years.