Technology start-ups stifled by lack of funding

TECHNOLOGY start-ups are being starved of vital funding and government action is required to counter the deficit warned the Irish Software Association last night.

In a pre-budget submission, ISA said the next wave of Irish companies is being stifled by a lack of proper funding and has called for urgent action. To deal with the problem, the ISA has called on the Government to raise the ceiling on amounts which are available to companies under the Business Expansion Scheme and Seed Capital Scheme to 2 million. ISA chairman Paul O’Dea said “the present limits have become unrealistically low and out of touch with the capital requirements of today’s start-

up companies.” Because of the high risk nature of start-ups in the current business climate, “venture capital funding is proving almost impossible to secure for early start-ups in the sector.” Even in the changed circumstances and a much tighter fiscal climate, Mr O’Dea said that supporting the sector still made sound economic sense. Ultimately it would result in net gains to the Exchequer through the creation of high added value and additional revenues in the years ahead.

The sector employs 30,000 or 10% of total industrial employment while it generated sales of 10bn of which 8.5bn came from exports.

The ISA, which is part of IBEC, said outdated limits and restrictions are excluding many experienced business people from the seed capital scheme.

The global down-turn has resulted in some job losses at a senior level in the software sector and an ideal opportunity has presented itself to provide significant funding for those individuals to exploit their experience in the sector by the creation of new companies, said Mr O’Dea.

ISA has also recommended additional tax initiatives to encourage more Research & Development in Ireland in view of our poor track record in this regard.

Expenditure on R&D in Ireland lags far behind leaders such as Sweden, Finland and the US. Local and foreign-owned companies do not conduct significant R&D in Ireland. And the 100,000 jobs in the ICT sector in Ireland would be more secure if greater levels of R&D were carried out here.

The ISA has already welcomed the Government’s earlier announcement of the Broadband Programme which will see a 160 million investment in delivering town fibre optic networks in key locations regionally.

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