Sunday 22 September 2019

Sorry, but Ireland is not the best place to start a business

Another angle

Niamh Bushnell is Dublin’s Commissioner For Startups.
Niamh Bushnell is Dublin’s Commissioner For Startups.
Dylan Collins

Dylan Collins

'Talk about me/you better hashtag problem" -Stormzy 'Know Me From'. The Internet sector has always done a tremendous job of marketing. In terms of building excitement, we are second only to a Kanye West appearance at Glastonbury.

The corollary of this phenomenon is that perhaps people aren't willing to ask enough questions.

A couple of weeks ago Ian Lucey (@IanLucey) published an extremely interesting comparison of the Irish and UK investment incentive landscapes with the total amount invested under each across the last three years (for American readers who don't understand the significance, in Europe these government incentives are heavy drivers of angel investment).

By 'interesting', I mean 'damning'.

In Ireland, the total amount invested under BES/EIIS is down 70pc since 2011. Over the same period in the UK, investments under their incentive scheme (EIS/SEIS) is up 55pc. In an ecosystem as under-developed as Europe, governments are probably one of the few inputs which can materially improve the landscape for startups. That being said, I've mixed views on criticising government incentives for investing in startups. On one hand, it's not any government's responsibility to build your company. On the other, if a government is going to position itself as a startup utopia, it's fair game for scrutiny. We talk about making Ireland the best place to start a company. Let's be very clear here: it currently isn't and it's getting worse. There's a difference between telling people they should start companies in Ireland (they should, it's a great country) and telling founders that Ireland is the optimal place in the world for them to start a company (it isn't).

Ireland has demonstrated that for many later stage companies it is an excellent location. This is a remarkable achievement and testament to the IDA, EI and Web Summit. As a founder you need to be where is best for your company but for most early-stage startups this means something quite different.

Ireland hustles hard for its startups. We have several seed funds and some later stage funds (not enough, we need more). Enterprise Ireland is doing everything it can to generate new startups short of printing company incorporation documents from ATMs. But if Ian's data is correct, we're not heading for a Series A crunch in Ireland (a phenomenon being seen elsewhere), perversely we're heading for an angel crunch.

It sounds crazy to think that while Silicon Valley VCs are being disrupted by super-angel funds and UK Angel List syndicates are now becoming significant players across Europe, Ireland would somehow be heading in the opposite direction. Yet that's pretty much what's being indicated here.

Walking around Dublin or Cork (where I was the other week) this doesn't feel like an issue. The visibility of angel investors is probably higher than it's ever been and initiatives like Dublin Globe and Niamh Bushnell's appointment make what I'm saying feel a little crazy. But the maths seems pretty irrefutable and I think in 12 to 18 months we could be looking at a different angel investor landscape as the replacement curve declines.

The best founders will find money, wherever it is. But failing to keep up with the private-market-led US or the tax-incentive-led UK simply means that Ireland is effectively outsourcing its angel investment expertise in the long-term. With many of those angel investment buckets being geographically constrained, the gravitational physics for startups over the next few years seems clear.

With either investor or founder hat on, I don't want to care about government incentive schemes. Honestly, I want them to be irrelevant to everything I do. However with a current policy that seems deliberately designed to create an inferior angel investment to the most obvious location for our startups (the UK), I care very much. Interestingly I bumped into someone who was behind the scenes on setting up the UK's EIS investment scheme almost 20years ago. At the time, there was a lot of opposition to it internally so it took a few determined politicians to see it through.

Read Ian Lucey's post (it's on Medium) and ask some questions.

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