Dáil Éireann Debate, Wednesday - 27 November 2013
6. Deputy Dara Calleary asked the Minister for Jobs, Enterprise and Innovation the actions his Department have taken to harness the potential of crowdfunding for Irish enterprise; and if he will make a statement on the matter. [50551/13]
Amharc ar fhreagraWhat are the Minister of State's views on crowdfunding?
Crowdfunding, in respect of enterprise and other activities, is becoming an ever more popular alternative mechanism for businesses and promoters across the globe to access finance in a difficult financial market. In its various forms, crowdfunding allows individuals, businesses and promoters to solicit capital from funders, using social networks and crowdfunding platforms to finance projects. It appears to be affording real opportunities in the area of alternative finance for small and medium-sized enterprises, SMEs. Use of the mechanism appears to have seen substantial growth globally in the recent past, and it is seen by many sponsors as a means of democratising access to funds and supply of capital while moving the model away from venture capitalists and angel investors.
The Minister, Deputy Bruton, has met a crowdfunding company, Linked Finance, to explore the potential for this new source of funding in an Irish context. In addition, as part of a process of exploring new approaches for improving access to finance, departmental officials have engaged at EU level and the small business advisory group has considered crowdfunding and alternative access to finance models.
Crowdfunding is in its infancy and financial returns on capital will dictate its overall success. Data are not readily available domestically, at EU level or internationally with which to analyse its impact to date, although moves are afoot at EU level to consider methods to address this data deficiency. The issues of consumer protection and regulation also exercise many countries operating in this space. Decisions are only beginning to be taken in respect of these key elements of this novel way of funding enterprises. The Government, through the State bodies group chaired by the Department of Finance, is keeping the issue under review as to how best to utilise crowdfunding benefits to promote business development.
Additional information not given on the floor of the House
In terms of supporting access to various forms of financing, substantial funding has been provided by the Government and my Department is actively engaged in various initiatives. For example, my Department provides funding for the HALO business angel partnership, HBAP, through Enterprise Ireland and InterTradeIreland. This partnership provides investment for start-ups and has recently broken a €55 million total investment milestone in 128 deals since the organisation was founded six years ago. In total, €23 million has been invested by angel investors brought to the table by the national HBAP organisation over the past six years. The balance of €32.5 million was committed by seed funds, Enterprise Ireland and other private investors. HALO also works to develop business angel syndicates. Up to 60% of all angel funding in Ireland is coming through individuals, with syndicate groups making up a healthy 40%.
My Department has also funded the seed and venture capital scheme 2013-2017 through Enterprise Ireland, which will make commitments totalling €175 million to business during the operation of the scheme. This commitment is expected to leverage a further €525 million in private sector funding. Considerable effort has been put into addressing the seed and early stage funding gap indirectly through commitments to venture capital funds and directly through Enterprise Ireland's investment in the early stage competitive start fund and high potential start-up companies in 2012. Further Government supports include the seed capital scheme, SCS, and the employment and investment incentive scheme, EIIS, which are tax relief incentives for businesses provided by the Revenue Commissioners.
Linked Finance has brokered €1 million in lending after just six months. The UK Government has pledged to give £20 million to the UK's Funding Circle. It is willing to take a punt and has put necessary regulation in place for this sector. Crowdfunding is a solution for new start-up companies in areas where traditional lending methods have failed or will not take a risk. We discussed this last night with the Minister. The problem is we will be waiting for the EU to respond to this matter while companies looking for this kind of funding will give up and move to the UK where the funding is available. It must be remembered that funding is available in the northern part of this island. Will the Minister take a punt on crowdfunding and put regulations in place to ensure investment is protected rather than wait for an EU response in 2016 when the ship will have sailed?
I take the Deputy’s point. Linked Finance has made presentations to the State bodies group. We are aware of the possibilities of this potential source of funding. We are also aware of the UK initiative through Funding Circle and its £20 million pot. As it is a lending and investment model, we need to examine the tax implications, returns on investment and regulation. We have the seed and venture capital scheme, the HALO business angel partnership. These are other sources of funding which the State provides through its agencies. We are tracking this issue and will be proactive on the matter.
I have raised this matter before. This funding model has been proved to work in America and the UK. One issue that was raised with me by people interested in this funding system was the possibility of a tax relief for those lending as a way of the Government supporting it at an early phase to help get it off the ground.
I note the Deputy’s point. Linked Finance has made a presentation to the State bodies group. It is a live issue as a way of providing new forms of financing for enterprises and start-up companies. It is necessary to examine the regulatory and taxation regime as well as the permutations for the people taking the punt, as Deputy Calleary said, to ensure it is robust and they will not be caught out by this. An exemption on profits is also being examined.
