Isle of Man: From seaside getaway to tech startup hub
The Isle of Man government is stepping up efforts to position itself as the low-tax jurisdiction of choice for the startup community. But what's it like to do business there?
Right in the middle of the Irish Sea is the Isle of Man – a self-governing British Crown Dependency in the middle of a long-running campaign to position itself as an attractive place for technology companies to set up shop and do business.
The Isle of Man Government has gone to great lengths to make entrepreneurs in Ireland, the UK and beyond well aware of the island’s robust infrastructure, which has been designed to ensure there are no single points of failure with regard to its network connectivity or energy supplies.
The government's proactive and agile approach to pushing through legislation to support the growth of new and emerging areas of technology is another benefit that is regularly talked up by the powers that be.
This has previously seen the island revamp its take on the Proceeds of Crime Act in 2015 to account for digital currencies, for example, and introduce new legislation for companies responsible for holding sums of money, including Bitcoin exchanges.
Steve Burrows, managing director of Isle of Man-based technology consultancy SBA, says the fact the island is self-governed makes it relatively easy – compared with the UK – for its lawmakers to respond to calls for new supportive legislation.
Also, with the island’s population thought to be somewhere north of 85,000 people, it’s not difficult to track down and get to know who residents need to contact to bring about legislative change.
“If you want to go and talk to government departments or a CEO of a government department, it’s extremely easy. As an individual, I know around half of our elected politicians personally,” says Burrows.
To reiterate this point, he shares an example from several years ago about how he personally set about helping the island foster an environment whereby the use of electric cars could flourish.
“Five or six years ago I was playing with electric cars, as a side hobby, but the island had no provision for electric cars at all,” says Burrows.“There was no provision in law, in tax or in the electricity tariffs, so I went out and talked to the CEO of the Manx Utility Authority, which is the organisation responsible for generating our power.”
This paved the way for the creation of the island’s first electric car tariff, and the installation of several car charging stations.
Low-tax economy
Another key selling point for the island is the Isle of Man’s low-tax economy, which excludes entrepreneurs that establish a business on the island from having to pay capital gains tax. This means that should they decide to sell on or float their business on the stock market, they get to keep all the profits for themselves.
Over the past decade and a half, these efforts have ensured 25% of the island’s gross domestic product (GDP) now comes from e-business ventures, up by 15% on 10 years ago, as an influx of financial technology (fintech) companies and online gambling firms have steadily flocked to its shores.
To ensure this upward trend in GDP continues, the Isle of Man Government is constantly looking for ways to endear itself to the tech startup community, in the face of competition from other low-tax jurisdictions such as Jersey and Guernsey.
We’ve created a proposition on the island that is compelling for startups, and we think is highly competitive
Brian Donegan, Isle of Man Government
To this end, the government recently introduced a £50m Enterprise Development Fund. This is aimed at organisations that are either starting out, looking to expand or wanting to relocate to the island, and provides them with access to grants, equity and loan investments.
According to Burrows, the fund is a welcome addition to the range of financing options available to island, which – in his experience – are not always the easiest to get access to.
“There is a quite a lot of private wealth on the island, but the channels to get to it are not very formalised and that has been a long-term weakness because our financial regulation is so strong and robust,” he says.
“It makes soliciting money in the way a UK startup might do harder in some ways because it’s more tightly regulated, but the reality is the money is here and there are people who specialise in putting you in front of the money in a way that means everyone is satisfied and protected.”
Young blood
The Isle of Man Government is also moving to address concerns about how the island will handle the growing demand for IT-savvy workers on the island as the number of tech firms that call it home grows. It will open its first, dedicated ICT university in mid-September 2016.
The ICT degrees offered by the university will provide students with the opportunity to “learn on the job” through an ongoing work placement with a local IT organisation, the Isle of Man Government's head of operations for fintech and digital development, Brian Donegan, tells Computer Weekly.
“For two days a week, students will work with private industry to get the necessary vocational skills they need to run alongside all the academic work they will accumulate over the course of their degree programme,” he says.
“We see mountains of evidence everywhere that graduates are coming out of universities with good degrees, but they are carrying student debt between £20k and £30k, while also struggling to find good-quality, high-paid employment. We think, on a number of levels, this venture will address that because they will leave with consistent track record of work experience under their belt.”
For young people living on the island, it represents an opportunity for them to continue their studies where they grew up, and for those from further afield, it represents a good way to get value for money from their education, continues Donegan.
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“If it’s the bank of mum and dad that’s providing the funding for their university education, and the student themselves topping that up, clearly the imperative is to ensure there is a job at the end of it,” he says.
“If the Isle of Man can provide that, it makes the island a very attractive proposition or location to get your qualification in ICT.”
Building work experience opportunities into the course for students is a savvy move, says Phil Adcock, founder and chief technology officer at Isle of Man-based datacentre provider Domicilium. The firm regularly brings in school leavers to inject some new blood into the business.
“We bring school leavers in, some of whom have never touched a computer before, train them over five years, and they can go as far as they wish to in our business,” he tells Computer Weekly.
“We train them in doing, and then they get their certification and we end up with much better engineers because they walk the walk.
“It’s a big investment because you have to put in a disproportionate amount of effort in upfront to get them doing useful stuff, but they don’t come into the business with any pre-conceived ideas about how to do things so it works really well for us,” adds Adcock.
He also credits the strategy for the fact his firm has such a low rate of staff turnover, because people are loyal to companies that are willing to invest in them and their future.
Open for everyone?
Despite the Isle of Man’s favourable tax regime, its responsive legislative environment, and its commitment to making both talent and investment acquisition easier for startups to negotiate, Donegan is keen to stress the island is fairly selective about who it wants to set up shop there.
“We’ve created a proposition on the island that is compelling for startups, and we think is highly competitive,” he says. “What we don’t want is startups for startups sake, though.”
With eight in 10 startup ventures failing to get off the ground, the Isle of Man Government is focused on attracting the ones with the highest potential for success because of the potential, long-term contribution they can make to the island’s economy, explains Donegan.
“From our perspective, the more startups that come in, the more pressure they’re going to put on the island’s professional service firms, which means they will have to hire more people to carry the load, which then trickles down to the wider economy because those professionals need cars and homes,” he says.
“The startup will require those things too. So ultimately that’s what’s in it for the Isle of Man is the creation of high-quality, sustainable jobs in fintech that allows the whole island to thrive.”
Firms with the potential to succeed have a number of things in common, adds Donegan.
“What we generally find is – typically with the fintech startups we engage with – the successful ones have a track record, a strong management team and some clear objectives about what they want to achieve,” he says.
“They know who their market is, and know in advance if they would pursue an IPO [initial public offering] or a trade sale as their exit strategy, and they will have a clear idea of what their business is already worth.”
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