Sarah-Jane Larkin, director general, Irish Venture Capital Association. Photo: Fennell Photography.
IVCA budget submission cautions over reliance on FDI
– Recommends measures to boost innovative, domestic SME sector
– Irish investors “besotted” by investment in property to detriment of productive sectors of the economy
Dublin; Monday, 19th August, 2024: Ireland’s success in attracting FDI (Foreign Direct Investment) has masked the fact that it has one of the weakest innovation records compared to other small, advanced economies1. This is stated in the Irish Venture Capital Association’s pre-budget submission.
At the same time, the report warns against over reliance on revenues from FDI at a time of an “evolving international tax landscape”.
“We need an increased focus on developing a dynamic SME sector. But indigenous, innovative enterprises and entrepreneurs with global ambition face considerable challenges in accessing risk finance to scale their businesses,” commented Sarah-Jane Larkin, director general, Irish Venture Capital Association.
The IVCA outlines how other European countries, including Denmark, France and the UK, have already generated scaling finance for start-ups and SMEs through access to pension and sovereign wealth funds.
The report recommends a mandatory ‘opt in’ to invest in Irish companies or funds by participants in the new auto enrolment pension scheme. Since the introduction of a similar scheme in France in 2008, the amount of capital allocated to French funds grew to €6bn from €200m between 2002 and 2016, according to the submission.
The UK aims to unlock over £50bn (€60bn) of new capital by the end of the decade, following the agreement that nine defined contribution (DC) pension providers will allocate a minimum of 5% of funds to unlisted equities by 2030. In Denmark, its sovereign wealth fund has established a ‘fund of funds’ vehicle for pension providers to invest in venture capital and private equity.
Sarah-Jane Larkin said that similar schemes could “unleash a wave of investment, allowing innovation to drive our indigenous economy and our most promising companies to scale from Ireland”.
She said that the association was optimistic that these concrete examples will be considered by the implementation committee recently established by Peter Burke TD, Minister for Enterprise, Trade & Employment, to develop recommendations to assist high potential start-ups access scaling finance.
The IVCA has also called for changes in the EIIS (Employment Investment Incentive Scheme) which is a tax relief vehicle which offers individual investors tax relief of up to 40% as an incentive to encourage investment in small and medium sized companies in Ireland.
The association says that updates to the scheme made in the Finance Act 2023 have created uncertainty for investors and diminished the capital available and the appeal of the EIIS for start-ups.
“Our members who operate designated investment funds are reporting a 30% – 50% decrease in the Euro value of investor applications to EIIS funds since these changes were made,” commented Sarah-Jane Larkin.
“We need to monitor and analyse the impact of recent changes and ensure more certainty on the qualifying tax relief. Irish investors have been besotted by investment in property assets to the detriment to the more productive sectors of our economy.”
Copies of the pre-budget submission are available at (www.ivca.ie).
Source: 1 https://enterprise.gov.ie/en/publications/publication-files/review-of-industrial-and-enterprise-policy-in-small-advanced-economies-and-implications-for-irish-enterprise-policy.pdf
Press queries to:
Sarah-Jane Larkin, director general, IVCA, Email: sjlarkin@ivca.ie
Mob: 087 320 9209 or
Ronnie Simpson, Simpson Consulting, Email: ronnie@simpsonconsulting.ie
Mob: 086 855 9410
About the Irish Venture Capital Association (www.ivca.ie)
The Irish Venture Capital Association is the representative organisation for venture capital and private equity firms in Ireland.
An independent DCU report released in January 2020 found that Irish venture capital and private equity firms have invested €5bn in Irish SMEs since 2003 and, through syndication, have attracted in a further €3bn in funding from international firms.
This supported the state’s investment through its agencies’ Enterprise Ireland and the Irish Strategic Investment Fund and geared up investment through the Seed & Venture Capital Programme by almost 16 times.
Ronnie Simpson BBS, FPRII; Member, National Union of Journalists
Ronnie Simpson Consulting
Web: www.simpsonconsulting.ie
LinkedIn: https://www.linkedin.com/in/ronniesimpson
(Formerly of Simpson Financial & Technology PR).
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