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Research conclusions:
1. Ireland, which was still shaking off negative economic and financial news three or four years ago, has now become the most suitable country for starting a business in Europe. 80% of entrepreneurs are optimistic about the future development of their companies. Ireland is becoming a new type of entrepreneurial country and investment paradise.
2. Forbes magazine once rated Ireland as the world's most business-friendly country. There are three crucial points behind Ireland's entrepreneurial boom: the Irish government implements a low-tax policy, and this policy maintains long-term consistency and certainty; high-quality talents and the reshaping of the entrepreneurial ecosystem.
3. However, for Irish entrepreneurs, getting round A or B venture capital financing is still a challenge, and there is still a long way to go to scale up the business. Many excellent companies choose to exit early and be acquired, and very few companies can go to IPO. It is too early to talk about whether the next Google can be born in Ireland.
Ireland has become a popular investment haven for domestic and foreign companies
This month, the Financial Times reported that Huawei completed its first acquisition in Ireland, buying the electronic communications network management business of Amartus to enter the Irish telecommunications market. As early as early 2013, Huawei established a research and development center in Ireland.
In fact, technology giants including ZTE, Tencent, Lenovo, etc. have already established offices in Ireland. Preferential tax policies, similar legal systems, high-quality labor force and other factors make Ireland an ideal overseas investment destination for Chinese investors.
Of course, Ireland is also favored by investors from other countries. According to the latest "2015 Ireland-US Economic Relations Report" released by the American Chamber of Commerce in Ireland, Ireland has not only become the number one destination for US foreign direct investment, but also the most profitable overseas investment destination for US companies. So, how did Ireland, once one of the poorest countries in Europe, "turn over" step by step?
In 2008, affected by the global financial crisis, the government adopted a series of policies, such as spending taxpayers' money for emergency financial assistance to ensure that the banking industry had sufficient funds to provide loans; implementing severe austerity policies and strictly controlling public fiscal expenditures; and at the same time, the government also increased investment in innovation. The Irish economy miraculously recovered under the background of long-term government consistency.
The Irish economy has been growing steadily for two consecutive years. In 2014, the rating agency Standard & Poor's released an assessment of the Irish economy, saying that given the continued improvement in the job market, Ireland's domestic unemployment rate may drop below 10% in the next two years.
In the first quarter of this year, Irish banks received 34,000 commercial bank loan applications, 18% higher than the same period last year, and the approval rate remained the same as last year; at the same time, PwC reported that Irish corporate CEOs are full of confidence, 80% of corporate executives remain optimistic about the development of their companies, and most want to increase the number of employees and further expand the market.
What’s driving Ireland’s entrepreneurial boom?
Two years ago, Forbes magazine named Ireland the world's best country for doing business; last year, Oracle Capital Group released the "World's Best Countries for Starting a Business in 2014" ranking, with Ireland ranking seventh in the world and first in Europe. Many people have begun to regard this small country with a population of only 4.6 million as the "Silicon Valley of Europe." So, what is driving the booming entrepreneurial boom in Ireland?
1) The Irish government implements a low tax rate policy, and this policy remains consistent and certain in the long term.
Ireland's corporate income tax rate has long remained at 12.5%, while in the United States, this rate is over 30%; in addition, the Irish government has been implementing a tax system called "Double Ireland", which allows multinational corporations to transfer profits from their main markets to countries with very low tax rates through Ireland.
This tax loophole attracts companies from all over the world to evade taxes, which has also triggered strong opposition from the United States and the European Union. The Irish government announced at the end of last year that it would abolish this tax system, but it would not be implemented immediately. Countries that have adopted the "double-tier Irish" tax system can wait until after 2020 to implement the new rules.
More importantly, even when international opinion was critical of Ireland's tax rate policy or the economy was in recession, the Irish government still implemented favorable policies for enterprises, always giving green lights instead of red lights. This long-term stable policy has greatly improved investors' confidence, because investors want to know that their future is certain after entering this market, without having to worry about what will happen if something happens.
2) Establish a special “bureau” to support entrepreneurship for all
The Irish government believes that the rise of a large number of start-ups can increase employment opportunities, drive exports, and thus promote the development of the overall economy. Therefore, the government established the Irish Enterprise Bureau to support companies with high growth potential. This team of more than 700 people has currently established branches in more than 30 countries.
Enterprise Ireland holds youth entrepreneurship competitions in colleges and universities, manages a fund to invest in outstanding start-ups at home and abroad, and this year has also increased the investment in Series A and Series B funds to help Irish companies achieve scale.
3) Education and multinational corporations produce high-quality talents
As early as the 1960s and 1970s, the Irish government began to implement free compulsory education; in the 1990s, the quality of the Irish workforce had been greatly improved. Technology giants such as Microsoft, Google, Facebook, Twitter, and PayPal all have their headquarters in Dublin, which to some extent helps to cultivate high-end skilled talents.
In the small country of Ireland, half of the population is under the age of 30. Irish entrepreneurs are generally young, flexible, open, inclusive, and have a global vision, because they understand that the local market is small and will become insignificant if they do not enter the global market.
Of course, the above three points are the key to the rise of innovation and entrepreneurship in Ireland, but don’t ignore a series of other factors. For example, Ireland is the only country in Europe where English is the mother tongue. American companies use Ireland to expand into the European market. At the same time, the booming incubators, accelerators, and R&D centers are all sources of development of Ireland’s entrepreneurial ecosystem.
Could the next Google be born in Ireland?
Three years ago, Richard Bruton, the Irish Minister for Jobs, Enterprise and Innovation, advocated attracting the next Google or Microsoft to Ireland; this year, he even more ambitiously proposed that Irish companies should also have the vision of becoming the next Google or Microsoft. So, is the Irish venture capital ecosystem sufficient to cultivate the next Google?
1) Bottlenecks that make it difficult to achieve scale
At present, the entrepreneurial boom is spreading around the world. Many people may simply equate entrepreneurship with entrepreneurial spirit, but it is important to remember that entrepreneurship is a complete process and experience. Ireland is called an entrepreneurial country because it is easy to start a company here, but how to make it continue to grow is worth thinking about. In Ireland, the seed financing environment is constantly improving, but it is still difficult for companies to win round A or round B financing. It has become a bottleneck that is difficult to break through for companies to achieve scale. Many excellent companies choose to exit early and be acquired. Very few companies can go to IPO. In addition, it is worth noting that despite the presence of well-known companies such as Apple, Google, Facebook, Airbnb, and Dropbox in Ireland, it is difficult to see the shadow of international venture capital institutions or private equity funds. Relatively international venture capital institutions such as Sequoia Capital, Microsoft Ventures, and Google Ventures have not entered Ireland.
2) Capital gains tax is too high, which discourages talented people from applying
Ireland's corporate income tax rate is much lower than that of other countries, which is enviable. However, its capital gains tax rate of 33% discourages a large number of talented people. It should be noted that this tax rate is only 10% in the United States.
As a result of this policy, some companies choose to register in Northern Ireland (which is part of the UK) and operate in the south, because the capital gains tax in the UK is also much lower than in Ireland. In addition, for employees with an annual income of more than 70,000 euros, their unified social contributions are also higher.
3) Too much focus on high-tech companies
In 2006, the Irish government set a goal to make Ireland a "world-class knowledge economy" by 2013, but this wish failed; this year the government proposed the latest goal to make Ireland the country with the greatest influence in scientific research in the world by 2020.
The Irish government hopes to create more jobs through university research, and hopes that Trinity College Dublin will become "Ireland's Stanford or MIT." But as Peter Thiel, the founder of PayPal and a well-known Silicon Valley venture capitalist, said, you will never become Silicon Valley by imitating Silicon Valley.
In addition, it is understandable that policymakers focus on innovation, but it is problematic to only focus on high-tech companies, believing that they can promote employment, while ignoring other companies with high growth potential. The effect of promoting high-tech entrepreneurship on driving overall economic and employment growth is not clear.
It can be seen that given Ireland’s current venture capital ecosystem, it seems too early to talk about the next Google.
As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity. |
