‘New blood’ needed to support Irish start-ups, says director of investment umbrella group

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John Phelan has an idea for how to spend Ireland’s pent-up pandemic savings.

he all-island director of the Halo Business Angel Network (HBAN), an umbrella group for early stage investors, says he is always looking for “new blood” to support Irish start-ups, and hopes it can come from ordinary savers.

“There’s certainly an opportunity there,” he told the Irish Independent. “If you look at the deposit rates in banks here because of the pandemic, there is something like an extra €23bn just sitting there on deposit which nobody knows what to do with.

“Nobody is willing to put it into early stage companies because it’s still high-risk. Where will that money go? Probably property because that’s where they keep bloody putting it.”

The pandemic wasn’t a terrible year for HBAN, with more than 60 deals worth around €14m in cash terms. While that was down on 2019’s €16.8m, Mr Phelan hopes to recover that lost ground this year.

“We don’t have an exact amount yet. It is not an explosion, by any means, but it’s certainly not a reduction. What I’d prefer to see is an explosion.”

Changes to investment tax reliefs announced in the Budget – and which he has long been pushing for – should remove some of the most frustrating obstacles to investors in early stage companies.

Mr Phelan has been a long-time critic of the Employment and Investment Incentive Scheme (EIIS), which he says compares unfavourably to generous reliefs available in the UK.

“I don’t think it works. We’re still having problems with it. We still have no guarantees, if companies get invested in, that after four years they will still qualify because Revenue might turn around and change their minds. The guidelines are not as clear as they need to be.”

HBAN is also trying to get younger and smaller investors on board, particularly the cohort of multinational employees in Ireland who might have “done quite well out of share option schemes” over the last decade.

The average investment size for angel investors in Ireland is around €40,000, but 50pc of investments are for €25,000 or less, which is in line with the US and Europe and “makes it all far more accessible”, Mr Phelan says.

“It’s not that you have to be a multi-millionaire to do all of this kind of stuff. We are making plans to bring in younger, more passive, more diverse investors, by bringing down that bar even further again.”

The success of Irish-owned payments platform Stripe – which is now the world’s second most valuable private billion-dollar company, joining TikTok owner Bytedance and Tesla founder Elon Musk’s SpaceX on the rich list – has inspired renewed interest in the Irish start-up world. But, Mr Phelan warns, don’t bank on backing a billion-dollar firm, or unicorn.

“I don’t think anybody takes a risk on the basis that they’re going to get a unicorn. They are very few and far between. Even in the US, if you look at the guys anywhere outside of the [Silicon] Valley, it’s far more like what we see here. If you get one, you’d be delighted but you don’t see them that often.”