What if we told you… that spending in R&D and Innovation, which actually sum up most of your start-up expenses, could bring you fresh cash back?
If you’re a start-up founder or manager you know a few things very well already:
The Knowledge Economy is based on talent, and talent usually isn’t easy to lure in.
Your cash flow is the Damocles sword you need to get checked. That means that saving money or getting new money is key to survive.
Most of your expenses go to R&D, Innovation and MKT & Sales activities.
Benefits of establishing your startup in the Canary Islands
In the Canary Islands we actually understand the urgency to invest all you can in new Knowledge to solve problems (R&D) and new ways of monetizing that knowledge via new products or services (Innovation). We’ll tell you more about that in a moment, but let us just tell you about some other things we also know that matters to you.
Your focus is on solving your customers’ problems in an innovative way at the best possible price and, presumably, to offer your product globally. So, in short, you’re in the business of solving problems, but you can’t do that alone. To do that you need to attract top talent and keep your company alive enough time to find your Product-Market fit and the path to profitability.
Well, let’s face it: attracting top talent in the technology field with its sophisticated and scarce skillset is a bloodbath. Not only labour costs are skyrocketing by the hour, or as a Tech Consulting Firm CEO put it ‘we’re competing for employees, not customers’, but finding talented individuals with updated skills is so rare, that many recruitment processes are considered successful when the recruiter finds someone that have a base set of skills and experience that can be developed to the desired level inside the company once the candidate is hired, meaning more investment.
So, you need to pour in good money, for sure, but that’s not enough. The typical knowledge economy skilled employee is looking for perks, quality of living and flexibility. Tons of articles have been recently written about the new expectations Millennials and Gen Z workers have when it comes to feeling content in the workplace. You will have to persuade them that they’ll make a ding in the Universe if they work for your Company but… yes, that’s not enough.
Luckily, that’s where the other Canary Islands strengths kick in: imagine a hiring interview where you can tell your future talented employee that she’ll be able to go to the nearby beach after work any day of the week, almost any time of the year, because your start-up office is in the Canary Islands.
Then you would instruct her about the best weather in the world, beautiful and diverse scenery within short distance, one of the best healthcare systems in the world and open and friendly people to meet and hang out with. Add very short commuting times and you won’t get much further than that in terms quality of living anywhere else. We’ve got you covered. You’re welcome.
So, imagine you’re able to attract top talent because your product and start-up vision is great (that’s on you, I’m afraid), you’re established in one of the best places to live and enjoy a healthy work-life balance and you get paid by investing heavily in R&D and Innovation.
Yes, you read that right: the R&D and Innovation Incentive in the Canary Islands understands your start-up will be financially vulnerable in its first few years and it helps you in shielding from that peril.
It works like this: you get a tax credit of up to 90% of your total R&D expenditure and a 45% tax credit for Innovation expenditure. You can choose to subtract that from your corporate tax at the end of the year (if you’re lucky enough to start yielding profits so soon) or you can choose to get paid, actual cash, to monetize that credit. See? We know that cash will come handy when you’re lifting your company off the ground.
But that’s not all, one more thing, you have to add this to the equation: If your Company is scaling up and growing you will do have profits. That’s where the 4% corporate tax rate is really appreciated by founders, investors and employees alike.
Having 96% of the profits generated at your disposal gives you more degrees of freedom in how to use profits, since you have more: smart move. Whether it’s reinvesting the money in the Company, paying dividends, rewarding key employees or all of the above in the amount you judge best, more money is more money and that means you have more choices.