Irish Startup scene – some thoughts….

16th of March 2007 by fergus

The Irish government always take the opportunity to talk up the “startups” in Ireland – this is a great example – 76 New High Growth Potential Start-Ups in 2006.

“Enterprise Ireland Start Up’s to Create 1,260 Jobs and Generate Exports Worth €110m over the next 2 years. Companies to Invest Over €47m with Support from Enterprise Ireland.”

As an Irish entrepreneur, I’ve been one of those “High Growth Potential Startups” or HPSUs.

We’ve had great support from Enterprise Ireland – Thanks mainly to our Development Advisor Brian O’Malley [Brian is primary champion within EI on web2.0 - and the shift to "long tail" businesses - because he know that if Ireland, and his area, the North west/West of Ireland is to build great businesses it has to be over the internet, and the "business model" does not need 15 expensive sales people based in the US].

The one bug bear I have with EI is the rigid focus on “numbers” – how can startup businesses predict with any accuracy their numbers – and you are held to those figures for three years.

So it’s with a grain of salt that i consume figures like “1260 jobs”, “€110m in exports” – and finally €47m investment.

I’d love to know where the €47m investment is going to come from. Joe Drumgoole always comes up with great posts – and this Joe hits the nail on the head for the €47m – “175 million euros sits in escrow?

To be honest Enterprise Ireland and the government need to look at alternate ways to build the indigenous startup scene in Ireland, and to create the next Google/Yahoo/youtube/etc.

Now onto the prescription….

Over in London, Saul Klein points to another great postFailing Cheaper – by US investor Josh Kopelman

“Companies used to waste millions of dollars of VC money – and entrepreneurs used to waste years of their lives – working on a failed hypothesis. Now, the cycle is much shorter.”

Josh and Saul both reference a “funding cycle” diagram from Peter Fenton at Benchmark Capital.

Peter’s colleague at BenchmarkBarry Maloney [ex-digifone] – previously had this to say on the subject

“It is very difficult to build up a semiconductor company or an enterprise software business. You need to invest $40m to $50m before you know if you have a product that works,” Mr Maloney said. “With web 2.0 companies you can find out after three or four million dollars whether it will work.”

Now back to Joe’s idea


“carve out 50m of that fund (or 75m or 20m) and just give it away in chunks of 100k to any Irish startup who meets .. criteria”

I would take it a step further – EI uses €25m – and gets Index, Benchmark and perhaps even Google [see what they are doing in India] to build the 1st “Y Europe” – helping Irish entrepreneurs and attracting entrepreneurs from around the world to Ireland.

Do you think we would do more that “76 Startups a year” ? Do you think with advisors like Saul and others that we’d increase the chances of buiding the next Google.

Let me know what you think ?

11 Responses to “Irish Startup scene – some thoughts….”

EI needs to understand that their primary role should be to get companies across the gap that exists between and Idea and series A funding. They do seem slightly obsessed with trying to make sure bets on guaranteed winners. Surely this role can be easily filled by the existing VC community?

EI needs to realise that it must hire more people like Brian before companies leave Ireland altogether. That is, hire people who understand our space. We’re unfortunate to be based in Dublin where we receive little to no help whatsoever from a Development Advisor doesn’t get this space.

The little help we’ve received has come after my finance director has spent the guts of his life completing the same forms. “Following the process” is ok (heck, business process improvement is my bag!), however, if the process doesn’t work, change/improve it.

EI could do with hiring people who specialise in business process improvement to help it improve how it works. It can then work more effectively when trying to help small start ups.

Further to my previous comment, I’m helping a few people (known to probably every reader of this blog!) setup in Ireland. Tax is their main motivation. These are people who by themselves could raise Ireland’s profile within this space.

However, I will be advising them to setup on the West coast… this does nothing to help with better collaboration in Ireland… Ireland is way too small to have dispersed talent; practically forced by EI who give more money to companies outside Dublin.

NB. I know some people setup outside of Dublin because not everyone lives in the capital.

Having dealt with EI in a previous startup, I’ve mixed thoughts.

On one hand , as a taxpayer, I’m glad that they’re being so mean with the money. On the other, it can be very ‘by the book’ when it comes to dealing with startups.

There again, given the Irish trait for favoritism, ‘by the book’ is probably a good thing (as opposed to giving the money to your mates). And yes, there will be good ideas from good people lost because of this, but what is the alternative?

Paul

Try #3

As someone on the other side of the pond and constantly peeking up to seeing whats happening in the Green Isle its good to some some dialogue on the ‘little sector’.

The issue is not some much that this is a viable sector of the industry but HOW MUCH real help does it get?
(in the USA I believe the stat is 50-99% depending on who’s figures u believe http://www.nfib.com/object/IO_32404.html. I’m not sure what the EU/IRL figure really is – some hints here at from 2003 at 60%+ http://www.sfa.ie/Sectors/SFA/SFADoclib4.nsf/wvPolicyDocs/E49B3F6260869F4C80256DE9004D2788?OpenDocument)

The tradional market is easily understood (making furniture, how mahy, what price, markup, what channels to sell etc..)

The small software startup is a whole other ballgame as the product is often ‘innovative’, customers or price points unknown and its a normal 1-3 yr provability. From the startups I’ve been involed in and seen normally the initial ‘master plan’ changes within the first 24 months and often if it doesn’t the company fails.

So finding metrics, management philosophy and known techniques that you can follow (from Sloan, Harvard and other fine schools of management) are just not there.
Its called experince, winging it and other ‘technical’ terms.

And whats more important is these “new” startups (in this new Web 2.0 crazy world) need EVEN MORE HELP. Funding and finance help is important but coaching, contacts, exposure both domestic and international (why would u not compete globally), PR and all the other ‘things’ that make up a startup is important.

When you’re a 1-5 man band outa some bandwidth starved location trying to make it (and maybe this applys to some Dublin locations :) you need all the help u can get.

The 100K and mentoring sounds like a cheap way to kickstart the next generation (that Ireland HAS TO nurture – the call centre game is waning, the tax haven 4 corporate taxes will fade away, the ‘cheap’ enginerring/IT talent is getting competition with Poland etc.. so need 2 get the NEXT BIG WAVE going)

Some other more general thoughts over at http://joedrumgoole.com/blog/2007/03/13/private-equity-conference-bernard-hensey-startups-spin-outs-and-value-creation/
Also more specific on expansion http://joedrumgoole.com/blog/2007/03/13/private-equity-conference-panel-discussion-the-global-market/

My 2 Euro’s (or as the Yanks say My 2 cents). Yah if my keyboard has a Euro symbol I’d paste it in :)

European Startups vs the US Upstarts…

There’s a buzz around the European startup community at present. Well, actually, most of it seems to be happening in London, where the passion and enthusiasm is most apparent and collaboration is easier to attain. That’s probably because it’s a b…

As it happens I sent an email to Damien Mulley today about how I think the Business Advisory he’s involved in should approach funding in Ireland. Only having come to this post afterwards I realise that everything I advocated to him has already been said here.

I’m late to the discussion but I might as well chip in:

Despite having a mandate to foster innovative technology in Ireland, EI seems to want to bet on a sure thing. I’ve seen first hand where EI have openly discussed massaging its requirements for a pure service company to get funding because they were sure it would do well. Zero innovation was involved in the project being discussed.

Ireland has too much of a reliance on large multinationals. As the multinationals are starting to look elsewhere the Government will, unfortunately, all too likely further incentivise these companies to prop up jobs rather than funding more diverse, smaller local enterprises.

Silicon Valley has a large amount of reinvestment coming back from entrepreneurs who have gone through a few cycles. Here in Ireland we have a catch-22 situation. No money coming in from (probably property generated) VC funds, harder for startups. Less startups, then less money coming in and the riskier investments.

The work being put in by Damien and Conor and others is great and it’s encouraging to see a such positive attitude within the tech community being developed.

The Business Advisory idea is great idea since a key ingredient for small companies is access to good advice. So my suggestion was that they should take the Advisory one stage further and develop a “Y Combinator / Dragons Den” facility for a collaborative VC project (Fergus Burns mentions this directly above). I think if the Irish tech community sets up its own funding facility it will be a focal point to encourage growth within the community.

Projects that are being funded and guided directly by the Irish tech community will do a number of things:

It will allow the community to help itself.
It will be a show of confidence to funding sources (VCs, government agencies) that the tech community is willing to invest in themselves.
It will generate incentive for all involved, less fear of local competition and access to a larger support base.

VC’s would be happier committing money if companies have in essence been peer reviewed and have had access to good advice. EI will get awake up call hopefully and begin to “get it”. My own opinion is that EI should oversee that money isn’t being abused, but bascially give the money away with zero expectation of a return. Failure is still not as well accepted as it is the American context. EI only investing in dead certs defeats the whole idea of whats needed to foster the best startup culture.

I’m not talking about raising a ton of money for large startups, more like following the Y Combinator model of initialing seeding up to $10-15,000 and if anything had potential help the company raise other funding through the usual support agencies or VC’s. Anybody on the funding side of this collaborative project would be able to choose where their money is invested rather than a kitty that is dispensed by somebody else.

Other benefits, are that the tech investors will “train” as VCs for comparatively little investment, leading to bigger and better things down the line. Personally, I’d like to be able to spread my own risk as small company and have some interest (however small) in other small businesses. That in itself will foster incentive for the broader community to thrive.

Lal – try ctrl + alt + 4 for the Euro symbol ;)

b…. means ? – is that a stammer or a guessing game?

David and Paul made some interesting remarks also over on http://segala.com/blog/european-startups-vs-the-us-upstarts/

the ‘Irish International Business Network’ sounds interesting and hoping it has some teeth.

David’s post had some more ideas on the “Irish tech community should setup their own mini-VC fund”
and also a topic I touched on regarding ‘camp’ http://www.web2ireland.org/2007/03/15/fancy-a-trip-to-sunny-colorado-and-go-play-at-getting-your-startup-going/ but in an Irish setting.

I’ll post seperately on that and thought/services regd. Enterprise Ireland and what ‘help’ that I can see (from outside) and some (hopeful) insight.

Take a look at what a VERY EXPERIENCED INTERNET guru is doing with his money :)

Out of enterprise into very small consumer web startups http://blog.softtechvc.com/2007/03/looking_back_at.html

Lal

Good pointer (to Clavier), Lal, he’d dropped off my blog reading radar for some reason.