Funding is biggest challenge facing start-ups, survey finds

Funding is the biggest challenge facing tech start-ups and growing companies in Ireland, followed by recruiting staff, a new survey has found.

The Scale Ireland 2023 State of Start-ups survey found more than half of chief executives and founders cited access to funding as top of the list of challenges, with 80 per cent saying it was difficult to attract capital. But more than 62 per cent were confident Enterprise Ireland’s new pre-seed funding, which is designed to support early-stage companies and help them reach key milestones to qualify for seed funding, would help start-ups.

The survey questioned almost 250 start-up founders and chief executives, to assess the views of the sector on a range of issues from employment and taxation to gender and the climate.

Other challenges facing companies include the recruitment and retention of staff, which was an issue for 17 per cent of companies. More than a third said they had difficulty recruiting staff in the past year, although this was lower than in 2021, when almost 46 per cent said they had trouble getting the staff they needed. Retaining staff was also an issue for start-ups with 40 per cent saying they had lost staff in the past year. More than a fifth have had to let staff go.

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The cost of doing business was cited by 12 per cent of respondents as a major challenge, with almost two thirds saying inflation or cost of living issues had impacted their business.

The burden of tax and regulation is also weighing on start-ups, while others were feeling the pressure from a lack of expert advice and support.

“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 chair of Scale Ireland Brian Caulfield. “Direct government funding, while welcome, requires a significant investment in process and the funding need is immediate.”

Although State supports are there for start-ups, they seem unattractive to companies, with 83 per cent of those who responded to the survey saying they hadn’t availed of the KEEP share options scheme, and two-thirds failing to avail of the R&D Tax credit. The Employment Investment Incentive Scheme and Research and Development Tax Credit Scheme were also criticised as difficult or complicated by some respondents.

“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 chief executive of Scale Ireland, 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.”