Access to finance is the biggest challenge facing indigenous tech start-ups and scaling companies, according to a Scale Ireland study of Irish tech founders.
A new survey of almost 250 Irish tech start-up founders confirms that funding is the biggest challenge they have faced in the past year.
The Scale Ireland 2023 State of Start-ups Survey, released ahead of the organisation’s Regional Summit in the Galway tomorrow (25 February), gauged the sentiment of entrepreneurs on key issues including the economy, employment, taxation, state supports and incentives, skills, gender, and climate.
“Direct Government funding, while welcome, requires a significant investment in process and the funding need is immediate”
The survey found that 51.6% of CEOs and founders considered funding to be their biggest challenge, up from 47% a year earlier.
Recruitment and staff retention has fallen to 17% as the biggest challenge, down from 25% in 2021.
According to 12% of founders the cost of doing business is their greatest challenge, up from 8.7% in 2021.
Other issues concerning founders include tax and regulatory burdens as well as the lack of available expert advice and support.
“The survey clearly demonstrates yet again that many founders are finding state supports and incentives complicated, and difficult to navigate which needs to be addressed,” said Scale Ireland CEO Martina Fitzgerald.
“We are calling for the setting up of a taskforce to address this recurring issue, which is denying many companies of the opportunity to avail of supports that were put in place to help them’.
You can keep your KEEP scheme
There are currently more than 2,200 indigenous tech start-up and scale-up companies, employing more than 55,000 people in Ireland. For each additional job created by a start-up, five additional jobs are created in the wider economy. There are 188 start-ups in Cork, 151 in Galway and 87 Limerick, with clusters of start-up and scale-up companies in counties Clare, Kerry, Kildare, Louth and Waterford.
Some 80% of respondents felt it was difficult or very difficult to attract capital which is just slightly higher than last year.
According to the study 35% of start-ups have found it more difficult to recruit staff in 2022, down from 45.7% in 2021. And while 40% of start-ups have lost staff in the last year, 22% of start-ups have let staff go.
Uptake of state supports remains unattractive with 83% of respondents not availing of the KEEP share options scheme (up from 77.8% in 2021), and 66% not availing of the R&D Tax credit (similar to 2021). While 73% of those who availed or looked at availing of the Employment Investment Incentive Scheme (EIIS) found the process difficult or not easy. 49% of respondents found the R&D Tax Credit scheme complicated.
Almost two thirds (62.5%) believe Enterprise Ireland’s new PreSeed funding will improve the environment for start-ups.
12% identified the cost of doing business as the biggest issue facing start-ups. 65.7% said inflation or cost of living issues had impacted their business.
A whopping 66.9% of founders/CEOs questioned did not have a sustainability plan, slightly down on last year (70.4%).
“The findings reinforce the challenging investment landscape facing start-up and scaling companies and the need to attract more private investment into the sector,” said Scale Ireland chair Brian Caulfield.
“Direct Government funding, while welcome, requires a significant investment in process and the funding need is immediate.”
Picture at top: Nick Ashmore, director of the Ireland Strategic Investment Fund; Anne Sheehan, general manager of Microsoft Ireland; Martina Fitzgerald, CEO of Scale Ireland; and Brian Caulfield, Scale Ireland chair
