Investment into early-stage Irish tech businesses fell in 47pc in Q2. Scale Ireland hopes changes revealed in Budget 2022 may reverse the decline.
The decision in Budget 2022 to address the Employment Investment Incentive Scheme (EIIS) by making it more attractive to investors has been something of a clarion call by indigenous Irish tech companies for more than a decade.
EIIS will be extended for three years and will be amended to make it more attractive to investors, Finance Minister Paschal Donohoe, TD, announced yesterday.
“We hope the €90m Innovation Equity Fund will be operating as promised in early 2022, as many early-stage start-ups cannot scale without sufficient investment”
Entrepreneurial lobby group Scale Ireland had proposed changes to the Employment Investment Incentive Scheme to address a significant decline in private investment in early-stage start-ups.
The latest figures show investment deals valued between 1m to €5m in early-stage start-ups had decreased in value by 47pc in the second quarter of 2021, while there was a drop of 42pc in the number of such deals.
Boosting local tech investment
Scale Ireland welcomed measures that could enhance the attractiveness of EIIS, including:
- Broadening the range of investment vehicles, which qualify for tax relief under the Employment Investment Incentive Scheme;
- Establishment of a €90m Innovation Equity Fund, which will target domestic, high-innovation enterprises;
- Removal of the rule that 30pc of an investment in an EIIS company must be spent before relief can be claimed;
- Allowing greater capacity for investors to redeem their capital without penalty within EIIS
The Budget also included provisions for remote workers around broadband and energy rebate as well as the extension of a corporation tax relief for certain start-up companies until 2026.
A long-standing critic of the failure to overhaul EIIS in previous years has been Scale Ireland chair Brian Caulfield, a seasoned tech entrepreneur responsible for a number of successful exits and a skilled investor in his own right.
“We welcome the measures introduced to incentivise private investment in early-stage start-ups, which are struggling to attract funding, despite the overall positive funding environment,” Caulfield said.
“We also hope the €90m Innovation Equity Fund will be operating as promised in early 2022, as many early-stage start-ups cannot scale without sufficient investment, and this follows a four-year decline in early-stage funding.”
Scale Ireland is on a mission is to make Ireland a leading location for innovation and entrepreneurship.
There are currently more than 2,000 indigenous tech start-up and scale-up companies employing more than 47,000 people around the country. For each additional job in the average high-tech firm, five additional jobs are created outside that firm in the local community.
But there is much more to be done, says CEO of Scale Ireland Martina Fitzgerald.
“We welcome the positive measures in the Budget specifically targeting private investment in early-stage start-ups, as it is vital that the government gives greater support to the indigenous tech sector. In terms of the upcoming Finance Bill, we hope the Government will be able to implement many of the changes in the 2019 Finance Bill – for small and micro companies – which are still outstanding.
“These include increasing the R&D Tax Credit from 25pc to 30pc, which would have a significant impact,” Fitzgerald urged.
Interview with Scale Ireland CEO Martina Fitzgerald: