(Pat Phelan, CEO Trustev)
They say every movement has a defining moment. Did that moment come for Irish startups on RTE TV’s Late Late Show on the 19th of February, when Cork-born Pat Phelan appeared on Ireland’s most-watched TV show to talk about his experiences as an entrepreneur?
Ok, perhaps I’m over-egging things a little, but Pat’s appearance certainly felt like a significant step forward in the push to improve the startup environment.
One of the main points made by Pat during the interview was one that the Dublin Chamber of Commerce (amongst others) has been making for some time: the need to cut the rate of Capital Gains Tax (CGT) that is paid by someone who sells their business. The main reason for such a change would be to encourage more successful entrepreneurs – the likes of Pat, who sold his online fraud startup, Trustev, last year for $44m – to either invest their gains in an existing early-stage business or in a new venture of their own.
It can be a complex topic to get across to non-business people. But Pat did a reasonably good job of explaining why cutting CGT would be so important.
The Irish Government did take a small step in the right direction last October when they cut the CGT rate to 20% (from 33%) for entrepreneurs selling shares in their companies – but only up to a limit of €1m. That change is unlikely to excite someone selling their company for $44m – particularly given that a rate of 10%, up to a limit of £10m, is available across the water in London.
(Colm Lyon, Founder Realex)
Pat Phelan isn’t the only successful Irish entrepreneur who has been making the CGT point. Colm Lyon, founder of Realex Payments (sold also in 2015 for a whopping €115m) has also long talked about the need for Dublin, and indeed Ireland, to be more competitive with the UK in terms of its offering and incentives to startups.
It was also a topic I discussed with Lukas Decker, the Hamburg-born founder of promising Dublin startup, Coindrum, at a recent startup financing breakfast event held in Dublin by Pagemill Partners and Duff & Phelps.
Coindrum is one of those businesses where, when you find out what they do, you tilt your head back and ponder why you’d never thought of the idea yourself. The company aims to solve the problem of being left with a load of coins when you depart a foreign country. Coindrum has developed a self-service machine which takes in your unwanted currency and turns it into a voucher which can be spent in duty free. Lukas told me that the average user goes on to spend 3x the value of their voucher, which is good news for him given that Coindrum makes its money by collecting a percentage of the spend from the airport.
Coindrum has already completed a successful trial in Dublin Airport. The firm – which employs 3 staff – has also raised a seven figure sum from outside investors. Decker and Co’s challenge now is to expand into airports around the world. I look forward to seeing how the company progresses in the next few years. And if Decker goes on to sell for tens of millions in a few years, let’s hope the CGT rules are a little kinder to him than they were to Pat Phelan.
Words: Graeme McQueen
+ Graeme McQueen looks after the Media Relations function for Dublin Chamber of Commerce. Graeme spent almost a decade working as a business journalist and prior to joining the Chamber was Assistant Editor of Business Plus magazine. He is the author of a book called ‘Start It Up‘ (published 2013), which tells the start-up stories of 20 Irish entrepreneurs.