Scale Ireland calls for better start-up supports in Covid-19 crisis

5 May 2020

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Scale Ireland said that supports put in place for innovation-driven start-ups in Ireland have been insufficient so far and could result in job losses.

Industry group Scale Ireland has said that without swift Government action to support start-ups during the Covid-19 pandemic, around 80pc of innovative Irish start-ups could run out of cash within six months.

This figure comes from a survey, conducted by Scale Ireland, of more than 350 high-growth companies across Ireland. One-fifth of the start-ups surveyed said they risk becoming bankrupt within the next four weeks if urgent action is not taken.

Scale Ireland said that the current crisis poses an urgent threat to Ireland’s labour market, with the risk of losing up to 30,000 high-skill jobs across the country if start-ups and scale-ups are not supported.

Liz McCarthy, CEO of Scale Ireland, said: “It is unfortunate that the Irish companies with the greatest potential to boost employment and contribute to a more sustainable, regionally balanced model of economic growth post-crisis are the ones being overlooked by the existing emergency provisions.

“We don’t think for a moment that Ireland’s most innovative companies are being deliberately excluded. However, it is no coincidence that for years, Irish economic policy has failed to recognise the value of fostering indigenous innovation-driven companies.”

Start-up supports

McCarthy said that the Irish Government should follow the lead of nearby neighbours, such as Germany, by putting liquidity supports in place tailored towards helping start-ups that are focusing on innovation.

The UK government recently introduced a £1.25bn support package to help start-ups weather the Covid-19 crisis, while the French government introduced a €4bn support package.

Scale Ireland pointed out that the nation’s innovation-driven enterprise base has been steadily growing in recent years, with tech companies such as Intercom, Fenergo, AMCS, Teamwork, Ocuco, Pointy, Nuritas and Voysis becoming “household names” that have successfully scaled globally.

“This sustained effort to foster innovation has been paying off, with Irish companies ranking sixth in a global listing of the most innovative solutions in tackling the Covid-19 crisis. Without swift and targeted Government action, all this progress risks being lost,” Scale Ireland added.

Existing supports not suitable

Since the crisis reached Irish shores, the Government has introduced a range of measures to help businesses, including the Covid-19 Wage Subsidy Scheme and the €180m Sustaining Enterprise Fund. There have also been vouchers and liquidity supports introduced over the last few weeks.

“While Scale Ireland welcomes these, feedback from our members underscores how these schemes have not been appropriately designed for innovation-driven companies,” the advocacy group wrote.

Scale Ireland said that the rules around eligibility are “overly-complex” and the pace of response is “very slow”, with members reporting issues in terms of the time it takes to process applications for relevant schemes.

“The pace at which support agencies like Enterprise Ireland respond must reflect the very critical and time-sensitive manner that this crisis is impacting these companies,” the group wrote. It added that there has been a lack of coordination between Government agencies, banks and other groups involved.

‘A call to action’

Scale Ireland said that only 55 companies it surveyed have managed to apply for the Sustaining Enterprise fund, and only one has been approved so far.

“This in no way reflects that actual number of companies in need of access to liquidity supports, but rather goes some way in highlighting the significant deficiencies with how the support environment has been structured,” it said.

The group added that “innovation will be central to securing Ireland’s future recovery” but the absence of a targeted package of liquidity supports could lead to 30,000 job losses in a range of sectors, “while a further 60,000 future jobs expected to be created by 2025 will fail to materialise”.

The group urged the Government to take “swift and targeted” action to update its schemes to reflect the realities of how start-ups operate. In particular, it wants to make existing debt solutions available to indigenous innovation-driven companies, put in place a system of grants targeted at R&D initiatives, and introduce a targeted bridging fund leveraging private investment.

Kelly Earley was a journalist with Silicon Republic