ICT Start-up funding and support-Cui bono?
By: Virginia Linehan
While our scope centres on funding for ICT start-ups in Ireland it is important to place our research into a broader context and consider its relevance. So why does funding and support matter? Simply put, start-ups create job and economic growth. Research from the Central Bank of Ireland reveals that start-up companies in the first five years of existence account for two thirds of all new jobs created in Ireland (Enterprise Ireland, 2014). However, as stated in my previous blog, given the lack of data available, it is impossible to ascertain the number of new jobs created by ICT start-ups alone.
Ireland was poorly ranked 16th out of 25 in Europe in the recent Global Entrepreneurship Monitor down from 9th place in 2013 (Newenham, 2015). Moreover, Ireland has less than half of the entrepreneurship rate of the United States. These statistics highlight the evident need for improvement. Published in March this year, The Programme for Government Annual Report 2015 listed its New Entrepreneurship Policy as a priority. The new policy plan aims to create 93,000 additional jobs in start-up companies by 2019 (Department of the Taoiseach, 2015). Increasing the number of start-ups, scaling growth and survival rate are the key targets of the plan. More specifically, it is projected that Ireland can double the jobs impact of start-ups in the economy if the following objectives are reached (Department of Jobs, Enterprise, and Innovation, 2015):
- Increase the number of start-ups by 25% (3,000 more start-ups per annum)
- Increase the survival rate in the first five years by 25% (1,800 more survivors per annum)
- Improve the capacity of start-ups to grow by scale by 25%
Under the plan the government has committed to doubling the volume of funding to start-ups in Ireland from business angel investment from its current level of €70m per annum. In addition the plan includes mentoring services for start-ups, co-working and accelerating spaces for start-ups across the country, a marketing plan to promote Ireland as the location of choice in attracting international start-ups, entrepreneurship programs in schools at all levels as well as apprenticeships programs and efforts to support the promotion of entrepreneurship amongst under-represented groups including migrants, women, younger and older people.
Further evidence of the importance of start-ups becomes apparent when the global impact of current tech giants such as Google, Amazon and Facebook are considered; these powerhouse originated as start-ups. It is envisaged that ten year from now the technology giants that will drive the global economy will be companies that are currently unheard of or not yet in existence (Compass.co, 2015). These companies will most likely be founded in Silicon Valley or perhaps from Amsterdam, Tel Aviv, or Bangalore or the many other cities who are competing for the investment, founders and talent that makes for a thriving start-up ecosystem. What have these cities got in common? They are ranked amongst the top 20 in the Global Start-Up Ecosystem Ranking. It is encouraging to note that Dublin scored highly as a top runner-up and contender for a top 20 spot in the ranking (Kane, 2010). Governments all over the world are paying attention to start-ups and as a result are striving to create a vibrant start-up ecosystem not just because of the trillions of dollars of GDP it represents but also because of the volume of jobs that are generated as a consequence. According to the US based Kauffman Foundation Research report start-ups create most new net jobs in the United States (Kane, 2010). For this reason, it is believed that the ecosystems with the greatest amount of thriving start-ups which fosters technology entrepreneurship will be the primary growth engine and therefore government policy makers who focus on nurturing start-up ecosystems will enjoy the most thriving economies (Compass.co, 2015).
The Irish government recognises the importance of start-ups through its New Entrepreneurship Policy and by creating Vision 2020 the objective of which is to make Ireland a global start-up hub for jobs and innovation by 2020. In addition, the government’s commitment to start-ups and entrepreneurship is evident through the appointment of a Dublin Commissioner for start-ups. According to the Dublin Commissioner for Start-ups, Niamh Bushnell every city in the world can become a great start-up city but Dublin has the potential to be a unique “City of 3 Forces” where the global leading multinationals and exciting start-ups conversing in a strong ecosystem making Dublin a magnet for innovation and investment. However, the commissioner concludes that there is a long way to go to realise this vision.
Compass.co, 2015. The Global Startup Ecosystem Ranking 2015. [Online]
Available at: http://startup-ecosystem.compass.co/ser2015/
[Accessed 14 November 2015].
Department of Jobs, Enterprise, and Innovation, 2015. National Policy Statement on Entrepreneurship in Ireland. [Online]
Available at: https://www.localenterprise.ie/Documents-and-Publications/Entrepreneurship-in-Ireland-2014.pdf
[Accessed 28 November 2015].
Department of the Taoiseach, 2015. Programme for Government Annual Report 2015.. [Online]
Available at: http://www.taoiseach.gov.ie/eng/Publications/Publications_2015/Programme_for_Government_Annual_Report_2015.pdf
[Accessed 14 November 2015].
Enterprise Ireland, 2014. New entrepreneurship plan aims for 93,000 extra jobs by promoting Irish start-ups. [Online]
Available at: http://newsletter.enterprise-ireland.com/1qkh01q7hf3?a=1&p=48061622&t=22180395
[Accessed 14 November 2015].
Kane, T., 2010. The Importance of Startups. [Online]
Available at: http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2010/07/firm_formation_importance_of_startups.pdf
[Accessed 24 November 2015].
Newenham, P., 2015. Ireland slips down entrepreneurial activity rankings. [Online]
Available at: http://www.irishtimes.com/business/economy/ireland-slips-down-entrepreneurial-activity-rankings-1.2337609
[Accessed 15 November 2015].