Money and talent hold back Ireland’s most promising start-ups

Regional tech start-ups represent the greatest opportunity for indigenous economic growth but are being held back, a new Scale Ireland report reveals.

Access to finance and the retention and recruitment of staff are the biggest challenges facing Ireland’s indigenous start-ups.

These are the findings of Scale Ireland’s first State of Start-up Survey, which gauged the sentiment of entrepreneurs in the sector on issues that included the economy, employment, taxation, State supports and incentives, skills, gender and sustainability.

“At a time when the sector is experiencing significant growth, it should not be held back. The ambition and momentum of start-ups must now be matched by increased state support”

Based on the responses of more than 230 start-up founders and CEOs the vast majority had not applied for key State schemes including the Employment Incentive Investment Scheme, R&D Tax Credits or the KEEP share option scheme.

Most of the founders confirmed their companies did not have a sustainability or climate action plan.

The survey formed the backdrop for Scale Ireland’s first Regional Startup Summit taking place today (28 January 2022) in Cork city.

Across Ireland there are 2,000 indigenous tech start-up and scale-up companies that between them employ 47,000 people.

“This survey highlights the challenges facing indigenous tech start-ups,” said Martina Fitzgerald, CEO of Scale Ireland. “At a time when the sector is experiencing significant growth, it should not be held back. The ambition and momentum of start-ups must now be matched by increased state support. With this support, indigenous start-ups will create more employment and grow globally.”

A challenging picture

Almost half (47%) of businesses said that securing funding was their biggest challenge.

Just more than a quarter (25.2%) said that recruitment and retention of staff was the biggest challenge facing start-ups.

The cost of doing business (8.7%), tax and regulation burdens (8.7%) and lack of expert advice and support (5.7%) were also cited as challenges.

When it comes to attracting private capital, 579% described it as difficult while 21.3% said they found it extremely difficult.

Only 18.3% found the process straightforward while a mere 2.6% would agree that it was very straightforward to attract private equity.

A resounding 74.3% said they had not accessed the Employment Investment Incentive Scheme (EIIS), indicating just how broken and impractical EIIS had been. A decision was made in Budget 2022 to address the EIIS system and make it more attractive to investors as well as extend it for three more years.

Frighteningly some 58.3% of start-ups said they lost staff in the past year and a resounding 45.7% said they found it more difficult to recruit and retain staff in the last year.

“We now have further evidence of the challenges facing founders to retain staff,” said Scale Ireland chair Brian Caulfield. “It is becoming more difficult, with four out of ten founders that contributed to our survey, losing staff over the last twelve months.

“This is a pressing issue, that needs to be urgently addressed. It is also critical that we examine why many founders are not availing of state incentive schemes. We have to ensure they are user-friendly’.

When it came to sustainability and climate action an overwhelming 70.4% said they did not have a plan and 45.1% said it was not a priority for them. Almost a third said they would need more time and resources to commit to a climate plan.

Some 66.1% of start-ups surveyed said they availed of the R&D tax credit. Almost half (48.7%) said the found the application process too complicated.

46.2% said they would prefer to monetise the R&D tax credit in year one, not over the course of three years.

Who dares sells

When it came to skills, surprisingly marketing and sales (47.8%) followed by finance and operations (34.3%) were where they lacked resources while technology expertise came in third (30.4%).

“This survey has provided very important insights for stakeholders across all sectors to better understand the key challenges facing the start-up community in Ireland,” explained the general manager of Microsoft Ireland Anne Sheehan.

“We need to nurture the ecosystems and form partnerships to create the best financial and policy supports, skills programmes and technology solutions to support Irish start-ups to secure and grow their businesses. This will ultimately ensure we develop the environment for the next generation of start-ups to succeed in the Irish economy.”

Read full report:

State of Start-ups Survey

Main image at top: Scale Ireland chair Brian Caulfield with CEO Martina Fitzgerald at the Scale Ireland Summit last year

John Kennedy
Award-winning editor John Kennedy is one of Ireland's most experienced business and technology journalists.