Download Opening Statement from Sean O`Sullivan

Opening statement for the Oireachtas Jobs Committee
Sean O’Sullivan, Chair of Entrepreneurship Forum
25 February 2014
Chairman, Members of the Committee, thank you for inviting us here.
Firstly, I'd like to thank this Committee and its members for their previous support of
the Tech Visa policy, which the Government rolled out in April 2013, and has continued
to improve since then. We've seen the impact of that measure in continued growth and
vitality in the high tech sector. Numbers from the Department of Jobs indicates that this
policy has already created hundreds of new jobs in Ireland, and indirectly perhaps a
thousand or more jobs in its opening months. I am certain tens of thousands of jobs will
be created in Ireland if these policies are continued and expanded, and I applaud the
Government for its quick action on that front.
Early last summer I was asked by Minister Bruton to chair a Forum for the purposes of
making recommendations on improving our country's entrepreneurial situation, which I
was told would be a step in the development of Ireland's first overall policy document on
Entrepreneurship. I drew together a group of entrepreneurs, academics and government
representatives, and we consulted with hundreds of stakeholders from every part of Irish
society and the business community.
I'd like to introduce a few of the members who made up that panel, who are here with
me today. Wendy Gray, of the Department of Jobs, Enterprise and Innovation SME
Policy Unit; Daniel Ramamoorthy, Founder and CEO Treehouse; and Professor Tom
Cooney, of DIT. There are a number of other members, you can see there names in the
report, who were unable to attend today due to travel commitments.
This Forum was made up of volunteers who were pressed into service through their own
sense of duty and honor. As Chairman, I thank all of them for their countless hours
spent in session and out.
We produced a report, this document Entrepreneurship in Ireland: Strengthening the
Startup Community [show the document]. The purpose of the Forum’s report is to
support Government’s development of a National Entrepreneurship Policy Statement.
When we originally convened, the statistics on Entrepreneurship in Ireland were pretty
bleak. This committee undoubtedly knows of the fine work that is done worldwide in
producing Global Entrepreneurship Monitor (GEM) reports, which Ireland has
participated in for many years. The GEM report for 2012 revealed some startling
statistics: Ireland was 22nd of the 22 EU countries measured in terms of the adult
population (8%) that would aspire to be entrepreneurs, and 17th of 22 in terms of the
number of people that were early stage entrepreneurs (2.3%).
Despite the strong and welcome presence of multinational companies in Ireland, we
know that the majority of jobs in Ireland are created by indigenous businesses in their
first 5 years of operation. If we are to attack the problem of the unemployed in Ireland,
we must thus attack the issue of a community of people who apparently are neither
interested in nor in the process of creating jobs. We must, in fact, work on the supply of
entrepreneurs and startups if we hope to create a supply for jobs for the economy.
The GEM Report for 2013 came out last month and it indicated that the climate in
Ireland has improved since last year. However, at best we are in the middle of the pack,
and we have a higher goal and a higher need. As the Taoiseach has continuously
stressed, we want Ireland to be the best small country in the world for business.
Now, Government cannot lead the startup community – a market economy is made up
of thousands of interchangeable parts that must look to each other and the world rather
than to the Government... but Government can help create an environment in which
startups thrive.
The 4Cs– Community, Culture, Competency, and Capacity
The report is entitled “The Startup Community”, because in order to create an
environment where lots of people are thriving in creation of business, we must improve
our learning and the sharing. We must replicate the successful start-up communities
found in dynamic job-creating hubs that exist in many places, including America which,
at 12%, has nearly twice the rate of early-stage entrepreneurship that Ireland has.
There are 69 recommendations in the report that make recommendations on improving
Community – for example, through physical co-working centers; Culture – for example,
by facilitating employee stock ownership programs; Competency – for example, by
requiring STEM students to take a course on commercialization before graduation; and
Capacity – for example, by improving sources of finance.
Many of the recommendations actually help three or four elements at the same time,
such as Office Hours, a program whereby experienced entrepreneurs and experts
volunteer a few hours of free advice service monthly – interlinking the community,
demonstrating “give-before-you-get” culture, improving the competency of our people,
and providing links to the capacity for finance or staffing. Dozens of entrepreneurs are
already online at officehours.ie, providing hundreds of hours of free mentoring every
month.
We would like to bring to the attention of this Committee a few of the specific
recommendations that we feel are the most pressing, and that require an active
intervention by government.
Today we want to focus on 2 very simple elements of strengthening Ireland’s startup
community:
First, people. We need to get more people to be entrepreneurs in Ireland, and to have
access to talent to build strong teams and grow companies.
- The rate of new company formation too low
- The level of fear in starting new business is too high
Second, we need to get the financial mechanisms and incentives in place to help
companies start and multiply.
- CGT is one of the highest in Europe and the OECD
- Employee stock ownership programs are too cumbersome
We do want to highlight specific, concrete recommendations that will demonstrate the
on-the-ground, day-to-day experience of an entrepreneur trying to make it in Ireland.
The government can help remove barriers in these areas.
First, people. The focus on people includes tackling unemployment by getting more
people to become entrepreneurs in Ireland – targeting the unemployed, women, youth,
and third level graduates, and developing peer mentoring networks
We need to get more people off the dole and encourage them to be entrepreneurs.
 Reduce the time required to be on the Live Register before being eligible for the
Back to Work Enterprise allowance. (Rec6)
◦ Turn unemployment into economic activity and job creation
If we want more people to start businesses, we should reduce the favoritism shown to
employees rather than business founders, and we should enable more women to engage
as entrepreneurs rather than as employees.
 Maternity leave scheme should be amended to enable a woman to transfer a
portion of her maternity leave and benefits to the father of the child (Rec10 and
11) qualifying weeks for PSRI payments should be the same for female
entrepreneurs as for female employees. Advance notice should also be the same.
Job Bridge is an effective program for giving greater competence to our workforce,
especially our young and inexperienced workforce. JobBridge gives a leg up onto the
employment ladder for the unemployed.
 We should look to expand it by a factor of 10. Up to 50,000 of our people on the
dole should be on JobBridge instead (Rec43).
 Can we create an internship program for our youth, based on the JobBridge
Program, that can be funded by corporations rather than government? (Rec44)
We should commercialize the work of our research institutions, and we should give
competence and cultural awareness to our technical talent, which creates the most
scaleable and highest economic value enterprises.
 STEM students should be required to take a commercialization course before
graduation. (Rec40)
 Personal story of Sean and creation of MapInfo
Much of the work that needs to be done in Ireland does not need to be led by
Government, and the Government should be aware that it should not be looked to for
solving all problems.
 The startup community itself needs to deploy more activities for startup events,
across a broader range of geographies. Not everything should be just Dublin and
Cork. We need startup culture and community to spread to Galway and
Limerick.
 Peer mentoring networks need to grow (Rec20, Rec21). Office Hours is only a
small piece of this. Programs like techpreneur in Dublin or EO Ireland are great
models for peer mentoring, and should be led by the private sector on a
volunteer basis.
Those 5 areas address the focus on people that we want to bring to this Committee's
attention.
A second area we'd like to draw to your attention is finance.
Money follows structural advantages. For example, Ireland has a capital gains tax
exemption in respect of property held for seven years (FA 2012 s 84), whereby capital
can flow into physical assets now, without being subject to any capital gains tax.
Therefore, money will flow into these assets (despite all the learnings we've had in the past that
housing estates don't produce jobs, and that capital increases in cost of living doesn't help our
competitiveness or people's prosperity).
If we want money to flow into job creation, than we must encourage the creation of a capital
gains tax program so it is an advantage for money to be placed in startup businesses. Such a program
doesn't exist in Ireland today.
Ireland has one of the very highest rates of capital gains in the EU and twice the average
rate of capital gains tax in the OECD.
This is an abysmal deterrent.
We need to address the capital gains tax issue in both the short and long term. This will
require legislative chances in tax and finance.
- Ultimately, the Government must find a way to lower capital gains tax (Rec 68).
- However, in the short term, failing a change in the overall capital gains tax rate, our
specific recommendation is to allow rollover (reinvestment) relief on Capital Gains
into Irish Companies, either through EIIS, or through investment into a company.
Second, we need to improve Employee Stock Ownership Programmes (ESOP) – we
want to create incentives for employees who are loyal to a startup company. Amending
the ESOP program would address both People and Finance issue: promoting strong
teams, and creating a financial environment, which is conducive to startup growth.
Specifically, this includes:
- Enabling employee stock ownership without creating taxable events until the time of
sale of the stock (Rec41), and enabling companies to repurchase share options for
the benefit of their employees (from departing employees etc) without requiring
positive retained earnings (Rec42)
Third, changes must be made to a number of other financial mechanisms, including
improvements to the Employment and Investment Incentive Scheme (Rec52), and the
Seed Capital Scheme, which should be rebranded as Startup refunds for Entrepreneurs
(SURE). Details of these improvements are detailed in full in the report and we are
happy to discuss.
Keeping with the report’s emphasis on both People and on Finance, we strongly
recommend creating incentives for peer-to-peer lending (Rec58). These programmes
build both Community and Capacity, enabling tax-free interest income from loans to
startup businesses who are less than 6 years old.
These recommendations on improving financial mechanisms through Capital Gains tax
reforms, improving the EIIS and SURE programmes, and peer-to-peer lending will help
build a dynamic environment in which startup businesses can grow.
Conclusion:
Within the broader context of improving the community, culture, competency, and
capacity of Irish startups, today we focused on recommendations to get more people to
become entrepreneurs and startup team members, and to improve the financial
structures to facilitate businesses’ growth. These are critical elements that will help create
thousands of jobs and get our country to be a thriving economy.
As I said before, Government cannot lead the startup community, but Government can
help create an environment in which startups thrive. Some of these recommendations
will be long term changes, others can be made with a few bold legislative changes in the
short term. We need to build on Ireland’s positive momentum in the international GEM
ratings, while recognising that there is a long way still to go.
Most importantly, we need to act now. We welcome the initiative by Government to
undertake the Entrepreneruship Forum, and look forward to seeing progress by
Government and the Startup Community to implement the recommendations noted in
the report. Together, we can become the best small country in the world for business.
We appreciate your time and welcome any questions you may have.