Elkstone partner Niall McEvoy tells SiliconRepublic.com why the state needs to increase supports for early-stage founders to make Ireland an island of start-ups.
Ireland’s unique position as an attractive destination for multinationals is woven into the fabric of its entrepreneurial ecosystem.
Thousands have left cushy jobs at global tech companies based here to start their own business, bringing with them experience and insights that are crucial for starting and scaling successful start-ups.
These domestic start-ups, in turn, contribute to the Irish economy by creating hundreds of thousands of jobs and raking in billions in revenue.
“For an economy to prosper, you need successful entrepreneurs,” says Niall McEvoy, partner at Elkstone, one of Ireland’s leading VC firms focusing on early-stage tech start-ups.
“We do very well on FDI [foreign direct investment] here, but I think long-term we’d all accept that indigenous Irish industry, and the success and impact of Irish-owned, Irish-founded business is of very significant importance.”
Incentivising entrepreneurship
McEvoy is nothing short of a veteran in Ireland’s tech scene, having founded his own sports technology platform in the 2000s and then led Enterprise Ireland’s high-potential start-ups (HPSU) team in the ICT sector for seven years until he joined Elkstone two years ago.
Around the same time as his appointment, Elkstone launched a €100m venture fund for high-potential Irish start-ups in the seed and pre-Series A stages. The fund is backed by the Ireland Strategic Investment Fund (ISIF) and Enterprise Ireland.
Elkstone has been an early investor in Irish success stories such as Manna Drone Delivery, Flipdish and LetsGetChecked. More recently, it has backed up-and-coming Irish start-ups such as Zerve, Wellola, Jamango, Numra, and our most recent Start-up of the Week – Cytidel.
And while there is no doubt that the early-stage start-up ecosystem in Ireland is a site of robust activity – often showing resilience amid downward macroeconomic trends – McEvoy believes that we’re not doing enough to live up to our potential as an island of entrepreneurship.
According to him, the government needs to do more to incentivise entrepreneurship in Ireland, particularly in terms of making it easier for tech talent working in multinationals to start their own businesses.
“This ecosystem didn’t exist 25 years ago. It was very formative,” McEvoy tells me at the Elkstone offices in Dublin’s Baggot Street.
“Sure there was Microsoft and Apple and a few others, but the digital technology and more mainstream software companies that you see all around our office here – they didn’t exist. In terms of the incentivisation to get some of those people out of those businesses and into building start-ups – for me, there’s still a gap there.”
More reliefs at the start, not finish line
It is no secret that multinational form a considerable part of the Irish economy. Client companies of IDA Ireland, the state agency responsible for bringing foreign investment into the country, employ more than 300,000 people in Ireland.
“If you look at any successful large Irish scaled up company, whether they exited or whether they’re still going – such as the Stripes and Intercoms – there’s a common theme among all those companies: they tend to spawn the next generation of entrepreneurs raise, people who grew up in that environment of early-stage, saw the scale up, saw it become a real mature company with many hundreds of employees.”
Right now, McEvoy argues, there’s an overreliance on entrepreneurial reliefs on the exit side – even though very few start-ups actually get to the exit stage.
“All the risk is on the journey, but the reward seems to be only for those that actually get to sell their business in due course. If you leave a well-paid job to do your start-up, you’re not getting paid anywhere near what you were getting paid at your previous job – and you may not be getting paid for a while at all. Even from a taxation perspective, you lose your tax credits and are actually net worse off than before in terms of the risks.”
To help people make that jump from “safe gainful employment” to a high-risk, high-reward entrepreneurial journey, McEvoy says, the government needs to do more to incentivise founders through more tax reliefs and state supports when they’re starting off.
“Success builds generational success – and this is why it’s so important that we’re backing the best indigenous Irish founders to scale their businesses here locally through domestic and international VC funding,” he continues.
“Given the absolute high-risk profile of early-stage entrepreneurship, and the risk taken by these people – these are the future economic builders of the country – I think we need to find a better way to incentivise them to take that risk.
“And I don’t think it’s a simple solution, it’s probably a multifaceted solution. But pushing the benefit that benefit out to win the outcome happens down the road, doesn’t account for the risk that all the failed entities, or the less successful entities, have taken.”
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