The Government’s failure to deliver a budget of any real substance for startups will see an increasing number of fledgling businesses struggle, with more “dying” and fewer coming from abroad to set up base here.
The claim was made by Dublin Startup commissioner Niamh Bushnell, who said she was disappointed that a range of measures to support startups were not included in the budget.
While accepting that her office and other stakeholders were never going to get all or even most of what they had hoped to see in the budget, she was surprised to see none included in what she said is a plan that leaves serious failings in the entrepreneurial landscape unsolved.
“To me, it was a budget that signposted a recognition of entrepreneurs but did very little for them,” said Ms Bushnell. “It’s a massive missed opportunity and the unfortunate thing is these things just take so long to come around again.
“It takes another year potentially for anything to happen and then potentially another year after that for things to be enacted. Two years, [even] one year or six months in the life of a startup is a very, very long time.
“I don’t think any of us were naive enough to think we could go and ask and get what we wanted on day one. It’s not the way the system works, it can’t work like that.
“But what confuses me is that the Department Of Finance came out and put out a call for submissions for how can we improve the tax system for entrepreneurs … and we know from talking to them that they received over 40 submissions.
“We know that many of the things in the submissions were the same, maybe in a different order of priority but essentially, we all came back with a shortlist of asks and none of them came to fruition so what was the point of that exercise if nothing could be done to lighten the burden.”
One of the key issues that was not dealt with in the budget was the inability of startups here to compete for talent against bigger companies by offering share options.
One way of levelling the playing field somewhat is to offer prospective employees equity in the company as an additional sweetener but share options here trigger immediate tax liabilities meaning such options are hardly ever used.
“It’s just a very big disincentive and deterrent to consider share options as an attractive addition to a benefits package let’s say,” said Ms Bushnell. “They’re so much part of the parlance and the culture of startups.
“Getting equity in a startup is a massive part of part of the negotiation that you would have day one coming in at an early stage.
“For that to be something our companies can’t offer really takes us out of the competitive landscape and takes us out of the culture of startups as well.”
The lack of a seed investment scheme was also disappointing as it limits the crucial early-stage funding companies can avail of.
“It’s just very, very challenging to get seed money here because we don’t have that fertile angel climate and that will continue to be the case until we incentivise ordinary people [to invest],” said Ms Bushnell.
“We’re missing out on that whole opportunity and infrastructure for entrepreneurs here and we really can’t be a genuinely strong and fertile startup hub without it so those are the challenges.”
Ms Bushnell said the Government signposted a recognition of entrepreneurs with the introduction of a €550 annual tax credit but said another improvement to the capital gains tax which saw a 20% rate introduced for entrepreneurs still leaves us “way behind in terms of competitiveness”.
“All of these things that seem to be small pieces of the puzzle are actually crucial in a startup just like a way that a good relationship with a co-founder is crucial,” she said. “All of these other pieces can make or break these companies.”
However, she said that Dublin’s thriving startup scene still had a huge amount to offer entrepreneurs and that would continue to be the case.
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