Fit for purpose funding

The establishment of new enterprises is key to keeping Ireland ahead of the curve on new technologies and to ensuring Ireland remains an innovator leading the way in the green transition. This is key to long-term sustainable growth and employment. An Ireland where innovation-led founder enterprises are easily established and quickly scaled can only be achieved with a simplified funding environment.

Founder enterprises are at the heart of Ireland’s knowledge and innovation led economy and require a supportive and incentivised tax environment to thrive. Ireland has a longstanding reputation for a pro-enterprise environment, attracting inward investment. Founders should also be encouraged to take risks with a framework that embraces new business creation, innovation, bureaucracy-reduction and the movement of talent and ideas within our thriving business ecosystem. This approach will keep talented and high-skilled would-be founders in Ireland to establish, scale and create employment.

Taxation poses both opportunities and challenges for Irish founders. While Ireland's favourable corporate tax rate attracts businesses, complex tax regulations and administrative burdens burden startups, especially those with limited resources. Simplifying tax processes, reducing compliance requirements, and offering tax incentives for research and development (R&D) activities can alleviate the tax burden on founders and foster innovation. Furthermore, promoting a tax environment conducive to entrepreneurship and risk-taking can stimulate economic growth and job creation. Addressing issues related to intellectual property (IP) taxation and implementing measures to prevent tax avoidance and evasion can further enhance the tax landscape for Irish founders.

Founders tell us that the funding environment can be complex and thereby a deterrent to early-stage growth and is often sensitive to international developments. Now is the moment for a re-energised approach to tax reform for founder organisations established in Ireland. This is essential for Ireland to keep its reputation as one of the best small countries in the world to do business as well as to foster and retain our own world-class cohort of founders. The reality for too many founders is that a complex and bureaucratic funding environment impedes rather than supports their capacity to scale their business ventures. This can be particularly problematic in the early stages of an organisation where capital is crucial to unlocking innovation and growth.

Our founders tell us that the key to meeting this ambition is a ‘fit-for-purpose' approach to Ireland’s funding landscape. This includes: the EIIS (Employment Investment Incentive Scheme) scheme, KEEP (Key Employee Engagement Programme) share options, R&D tax credit, CGT entrepreneurs’ relief and equity asks from State or quasi-state agencies in exchange for support.

Getting the tax-mix right is key to enabling founders to compete internationally and combatting challenges like attracting top talent to their businesses.

Our recommendations:

• Streamline the process for accessing funding and capital in Ireland. Help founders to take the first steps to growing their businesses. Access to funding is a top challenge faced by founders. For founders, capital is key to embarking on and scaling business ventures. Access to debt funding and grant funding should be simplified.
• Get the tax mix right to incentivise founders to establish new ventures. A core pillar of any framework for founders should be taxation. A package of measures to reform taxation in support of entrepreneurial pursuits is key to incentivising would-be founders to start off and to stay in the field. Review tax incentives for founders, encouraging them to establish their businesses and stay and scale in Ireland, including via early-stage tax breaks.
• Incentivise investment in founders. More than half of our founders told us that the funding environment had not improved since 2022. A significant and growing cohort are missing out on business opportunities.
• Promote entrepreneurship pathways with greater promotion of funding opportunities. While our founders tell us that Ireland has good funding opportunities, many are not aware of them or consider them too complex. With our thriving innovation-led founder ecosystem and robust FDI sector attracting and developing both domestic and overseas talent, more needs to be done to ensure potential future founders are incentivised to establish businesses here. A reduction in the complexity of these pathways will also enable greater uptake.
• Improve access to finance – Improve access for small business and small business startups to bank and non-bank finance, via the Strategic Banking Corporation of Ireland and Micro Finance Ireland schemes.
• Adapt funding supports to the needs and realities faced by founders. Ensure funding supports, such as Enterprise Ireland’s HPSU funding, extend beyond a time-limited period. The length of the journey of a founder can be inconsistent and regulatory as well as cost barriers may slow down that journey further. Funding supports lacking in flexibility do not incentivise founders to keep their business; businesses which could be strategic for Ireland if scaled given these are often innovative, employing high-skilled labour and contributing to the economy.
• Streamline tax repayments for founders. Streamline the experience of founders – who take on huge tasks with high potential for our economy – by removing barriers to tax repayment. For example, with the R&D tax credit, ensure repayment of tax comes in the shortest possible timeline.
• Enable founders to compete for top talent. At the early-stages of their business, founders are not always in a position to compete on salary with established organisations. This is particularly important in Ireland where founder organisations compete with larger organisations in tech, medtech, engineering and pharma which are often in a position to outmatch smaller organisations on salary. It should be easier for founder organisations to attract talent by additionally offering shares in their businesses. Address issues with the Key Employee Engagement Programme (KEEP) scheme to ensure founders can use this as an attractive option. Reduce the complexity and reform restrictions on the scheme.
• Improve the Employee Investment Incentive (EII) by allowing losses on EII investment for CGT purposes and providing founders with access to greater equity investment.