Funds must be freed for starting up enterprises

 

VENTURE CAPITAL:IRELAND NEEDS to increase the amount of capital it has available for young business ideas if it is to start and grow enterprises on an “unprecedented scale”, according to the draft report.

A key goal for the State in the period to 2020 must be a “transformation in scale and nature of the Irish venture capital environment” through the attraction of top tier venture financing to Ireland so as to successfully grow innovative companies.

The State should nurture a national portfolio of “business angel funds” so as to direct capital into innovative companies.

Until this occurs, the report recommends temporary State intervention by way of a new Seed Capital scheme. The report also suggests a set of tax incentives that would incentivise start-up and angel funding activity.

Business angels are successful business people who invest their surplus money in new ventures that they also give guidance to.

“Ireland’s business angel community for smart economy companies has remained relatively weak and does not seem to have operated to a significant degree as a mechanism to recycle the personal expertise and resources of previously successful innovators,” the report states.

However, with the collapse of the property sector, those with surplus funds are likely to be looking for new areas to invest in.

The report recommends a capital gains tax rate of 12.5 per cent for profits from “angel” capital investment, where it is reinvested in a new qualifying business. A qualifying business would be an innovative start-up company with export potential.

The report also recommends introduction of an “entrepreneurial tax credit” whereby the entrepreneur would get a period of tax relief on his or her salary if they established a company that led to certain levels of job creation.

Ireland’s vibrant multinational community is one of its “most significant attributes and opportunities in driving innovation”, according to the report. It recommends measures which it believes will attract new foreign direct investment (FDI) and embed existing FDI.

Ireland needs to brand itself as an international “innovation hub” by attracting the European headquarters of private US companies, according to the report.

It argues that Ireland could provide support to foreign private companies that have top tier venture capital support and already have established models in their home markets.

The support would be aimed at helping such companies set up here so as to enter the European market, prior to their being taken over, or pursuing a public offering.

Public procurement could be used to drive and stimulate the development of innovative businesses with export potential, according to the report. It could foster co-operation between companies operating in Ireland.

“We believe that the risk of innovation can be reconciled with the necessary caution required in public procurement.”

The report recommends that a number of carefully selected flagship projects should be set in train requiring the development of innovative new products and services, many of which would occur through cross-sectoral collaboration between companies.

A specially created task force could select areas where public procurement could be used in this way. “We propose that a team from the key agencies should be formed to ensure that we take full advantage of new opportunities in convergence by driving the necessary investment, regulatory and education actions.”

The report recommends the provision of “excellent shared infrastructure” that would boost the activities of interested companies. As well as such obvious infrastructure as transport and logistics networks, broadband, and “wet” laboratories for life science companies, the report says that from time to time “it may emerge that an intelligent and far-sighted intervention by the State can provide a substantial, competitive and, ideally, unique advantage to companies operating in Ireland”.

“Such interventions may change and disrupt an entire global industry because those companies using the new infrastructure gain considerable advantage over their international competitors. This in turn can attract yet further foreign direct investment, as companies come to Ireland to use this highly innovative infrastructure.”