State investor warns of funding shortages hitting tech startups

Digital startup investor NDRC, which is funded by the State, has warned that Irish companies are struggling to get early-stage investment and that the response from Government is “inadequate”.

In a submission to the Department of Finance, NDRC also said there had been a number of worrying developments as funding available for early-seed investment shrinks.

It said the decision by life sciences accelerator RebelBio to move from Cork to London was a concern.

“In light of the obvious difficulties posed by Brexit for the UK economy, to see an accelerator like that gravitate towards London for tax/investment reasons is a particularly worrying investment.”

NDRC said figures from the Irish Venture Capital Association suggested a reduction in early-stage funding.

“While the macro numbers are healthy, they are dominated by a small number of high-profile deals.

“Early-stage investment would appear to be struggling.”

NDRC, which has invested in over 250 companies since it was founded in 2007, made the submission to a consultation into the Employment & Investment Incentive (EII) and Start up Refunds for Entrepreneurs (Sure) schemes.

It said that similar British schemes generated significantly more investment for new ventures, even when the size of both markets was taken into account.

“The sheer scale of these investments being generated by the Irish schemes is simply insufficient and is nowhere near the kind of policy response to the problem that policy makers would wish.”

It added that ventures supported by NDRC were unable to access bank finance.

Although some changes were made to the EII scheme in October’s Budget, a spokesman for NDRC said its position remained the same.

“A more favourable tax regime for entrepreneurs would go some way to increasing the availability of funding to startups and scaling companies.”

The Halo Business Angel Network (HBAN), whose member have invested €90m of direct seed capital in 400 companies, said there were two broad issues with the EII scheme – operational inefficiencies and a lack of competitiveness when compared to the UK schemes.

In its submission, it said there is a “vacuum of funds” available at the moment.

In its current form the EII scheme was “severely inhibiting Ireland’s international innovation capacity development and competitiveness”.

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