Business Irish

Sunday 17 November 2019

Top venture capital investor criticises Ireland's treatment of entrepreneurs as 'outrageous'

Brian Caulfield, head of Irish Venture Capital Association
Brian Caulfield, head of Irish Venture Capital Association

Sarah McCabe

Leading venture capitalist Brian Caulfield, the president of the Irish Venture Capital Association, has criticised the Government's approach to entrepreneurs.

The need to change the tax treatment of, and supports for, entrepreneurs is the single most important message he wants to get across for the Irish Venture Capital Association (IVCA), he told the Sunday Independent.

He said: "Ireland is a good place to be a company - but it is a terrible place to be an entrepreneur.

"Not only does the tax system disincentive entrepreneurs, it actively penalises them. Everything is stacked up against them - from the lack of social welfare supports for entrepreneurs who fall on hard times, to the extra 3pc Universal Social Charge supplement they have to pay, to the fact that they get no PAYE tax credits. And then, of course, there's the 33pc capital gains tax that they have to pay when they come to sell their company.

"It is outrageous. We really, really need to create an environment that fosters entrepreneurs."

The IVCA represents the local venture capital community in Ireland.

Venture capital funds take equity stakes in business in exchange for giving finance, rather than giving loans. It is an important source of funding for start-ups.

According to the IVCA's VenturePulse survey, around 1,000 Irish businesses have raised in excess of €2.1bn from venture capital funds since the onset of the credit crunch in 2008.

Trinity College computer engineer graduate Caulfield took over as president of the association earlier this year, replacing ACT's John Flynn.

Caulfield is an entrepreneur as well as a venture capitalist. He currently works for venture capital network Draper Esprit, its only Irish-based investor. Draper Esprit has invested in several Irish companies, including CurrencyFair, Datahug and Movidius.

Caulfield previously founded software companies Exceptis Technologies, which was acquired by Trintech Group and Similarity Systems that was acquired by Informatica.

Prior to joining Draper Esprit, he was a partner at Trinity Venture Capital.

Caulfield joins a cacophony of business leaders calling on the Government to improvement the tax treatment of and supports for entrepreneurs.

From Gaelectric co-founder Brendan McGrath to Monex founder Frank Murphy and Enterprise Ireland chairman Terence O'Rourke, a host of big-business names have slammed the status quo.

The Department of Jobs has written to the Department of Finance, seeking a raft of changes to facilitate entrepreneurs. These include a cut in capital gains tax and a new share option scheme for small and medium enterprises.

Minister for Finance Michael Noonan has signalled that some changes will be made in the next Budget but the specifics remain unclear.

Fundraising for venture capital funds in Ireland and Europe is very challenging, Caulfield added.

Rules that limit investment by pension funds contribute to this problem, he said.

"There is a lack of joined-up thinking. On the one hand, Enterprise Ireland is actively seeking to support VCs.

"But on the other hand, the Government makes it very difficult to invest in venture capital funds."

The pension industry manages the largest pool of private money in Ireland.

In the United States, pension funds are a major source of money for venture capital. But in Ireland, pension funds have been reluctant to invest in VCs.

The Irish Venture Capital Association blames this reluctance on rules which limit equity investments by pension funds, particularly for defined contribution schemes, a reduced appetite for risk in large semi-state or public sector defined benefit schemes and negative sentiment surrounding the pension levy.

"The industry would like to see Government facilitate and encourage Irish pension schemes to invest in VCs," said Caulfield.

"The other thing is that there is a funding crunch coming. Venture capital funds at seed stage and at the series A stage are running out of capital.

"Potentially, companies are really going to struggle. Government needs to be really conscious of that."

Sunday Indo Business

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