Archive for December, 2008

What’s another €500m between friends?

conor 29th of December 2008 by conor

David McWilliams did an uncharacteristically bad fan-boy analysis on his blog recently of the latest attempt by the government to bootstrap home-grown high potential businesses. His post lacks any real substance and drowns in Minister-style knowledge economy buzzword bingo.

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Creative Commons License photo credit: John Griffiths

It kicked off a very long comment thread, most of which is unreadable, but which contains some real gems. The best of the lot is by Johnny Dunne who has a deep knowledge of the investment environment in Ireland.

Johnny does a brilliant analysis of how wrong-headed the €500m approach is in the short term, whilst accepting that long term it could provide benefit. It’s just a pity that those who are making these fundamental decisions are taking their advice from the foxes minding the hen-house who have already killed all the chickens.

I’m quoting it here with Johnny’s permission:

The €500 “Innovation Fund” is a great ‘medium to long term’ idea to help fund the development of businesses based in Ireland selling valuable good and services to international customers.

Our problems are a lot more urgent – we face a serious fall off in economic activity again in 2009. For example, Dell alone pulling out of Ireland with €10 bn+ / 10% of GDP gone in one go !

David, if the government can invest NPRF of €1.5 billion in ‘cash’ within ‘one month’ in a bank with ‘poor’ assets and without a CEO and therefore you would have to assume NO business plan. I have never heard of a VC or a bank investing in a company without a Chairman, CEO and agreed plan !

Why not focus the ‘special finance unit’ in Anglo (and AIB,BOI) to invest say €500 million in growth companies without taking security as the government is not doing so! This unit which exist already invest in many ‘larger’ growth oriented companies some of them would be Enterprise Ireland clients. For example, the main criteria used for lending in Anglo are people, cashflows and asset quality. The government have guaranteed the liabilities and injected cash so the banks should lend to ‘good’ people with a ‘credible’ and (dare I say it) innovative business plans without recourse to personal guarantees and propert / assets backed security.

There needs to be urgent action with a ‘fund’ launched in January with say €500 million to invest in 2009 – why not? Anglo increased lending by €9 billion in 2008! A medium term plan to invest €500 million over many years is not enough. This money may not ‘start’ investing for at least another 12 to 18 months, even then if it is in the hands of US VCs it may provide little employment in Ireland – assume investee companies will need qualifying Irish operations ? If the local VCs like Delta, Atlantic bridge and NCB can’t find opportunities with their strict ‘VC’ criteria, then the international VCs will find it harder unless we open the ‘flood gates’ to fund earlier stage / developing companies.

There is a requirement (and suggestion) for many small funds say of €10 million each investing less than €1 million in a number of firms in order to open the ‘pipe’ of funded start-ups which can access further development capital at a later stage. Enterprise Ireland’s policy with the latest round of €175 million of VC funds which 2 years after it’s announcement has only allocated to 5 of the possible 8 funds. There is a ‘believe’ within Enterprise Ireland that small funds don’t work as they don’t have sufficient fund to follow their money. There has been calls for proposals from VCs, one in 2006 and another this year for the same money as the selected VCs couldn’t seem to raise matching funds ? While over 20 funds applied on each occasion, only 8 were selected as 5 of these could only raise sufficient funds of at least €30 million inclusing state money. EI says this initial funding has leveraged €500 million for investment but already some of the more active funds like Delta and Atlantic Bridge have made multiple investments in non Irish companies. The reason ? based on their ‘investment’ criteria not sufficient opportunities in Ireland ?

So why are the Government allocating Irish ‘pension’ funds to US VC funds on a 50:50 basis now, when it could have done this many years ago when it was suggested before. Instead the ‘mandarins’ in the NPRF and ‘beancounters’ in the Dept of Finance felt it was better to invest in international equities which we know where they’ve gone – south! US ‘Tier 1? VC funds are well able to raise their own funds without state support 9this should apply where the market won’t go – remember there was 20 unsuccessful applicatns locally for the previous EI VC funding rounds). Why not just use the ‘preferential’ tax to ensure they invest through and in Ireland not invest directly when they can access other sources of finance and need to be free to invest on an international basis. Local fund and banks can invest !

There is €400 billion of loans outstanding but AIB have contributed €15 with Enterprise Ireland to a €30 million seed fund and BOI have invested about €20 million in a €70 million fund which EI would have invested a similar amount. Recently Ulster invested a smaller amount with EI in the NCB fund. We are investing over € 5 billion within 3 months in 3 banks with ‘no security’ and a relatively small return up to 10% (VCs look for 30% and use preference shares all the time but ensure they can convert to control the business if management don’t execute on the business plan). Why not pass the same terms through to ANY business certified by Enterprise Ireland or the IDA with a ‘qualifying’ export oriented operation with the potential to generate more jobs and exports in the short term generating tax revenues….

The ‘mind change’ needs to be within the Irish financial services sector to fund this ‘Smart Economy’ of the future.

Or should we just let “Science Foundation Ireland spend €7 billion on education and training in the years ahead” with no medium term opportunity of generating sales !

There must be independent advisers with experience of investing or raising VC and banking funds better placed to advise the Minister rather than ‘City folk’ from Merrill Lynch generating massive fees to ‘give away’ tax payers and pension funds money in return for no equity in the 2 major banks AIB and BOI which are obviously undervalued, as they don’t seem to understand where the irish economy is and what it needs to survive over the next decade ???

Indie Bands Rejoice

conor 21st of December 2008 by conor

The fab designer of Web2Ireland, James Gallagher, just contacted me about the re-launch of LiveWebStars and their partnering with one of my fave web-sites, DownloadMusic.ie.

livewebstars

Livewebstars.tv promotes new music by enabling up-and-coming artists to perform and interact using live on-line streaming – broadcasting their lives, practice sessions, gigs etc to an audience right around the globe.

By working together with DownloadMusic, they enable consumers to buy mp3s with their mobile phone and also watch, hear and chat to the band in real time.

This is the sort of smart partnering that makes complete sense. It benefits everyone involved and will be of huge benefit to Indie Bands trying to get noticed and differentiate themselves.

dbTwang Closes Angel Round

conor 20th of December 2008 by conor

Whilst the funding environment is very very tough right now, we are still seeing glimmers of light in the gloom.

The latest is dbTwang, a site for guitar owners, which closed its Angel round yesterday. Keith Bohanna and co-founder Fintan Blake-Kelly worked for many months with new director Gerry McQuaid (ex-O2) to raise the funds.

They are using Contrast for the design of dbTwang and Lunar Logic in Krakow for the development, aiming for early closed beta around the 3rd week of February.

If you have any good news on the funding front, drop a line to web2ireland DOT editor AT gmail DOT com

Irish Govt to pump €500 million into Venture Funds

admin 19th of December 2008 by admin

Speaking at a press conference in Dublin Castle, Taoiseach Brian Cowen, announced a range of measures to boost the economy – through a new renewal programme – around “Building Ireland’s Smart Economy -
A Framework for Sustainable Economic Renewal” – see press release and pdf document on report.

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Some interesting nuggets from the report

Up to €500 million will be generated to create a venture fund, known as ‘Innovation Fund – Ireland’, to support early stage R&D-intensive SMEs. The capital will be divided into five venture funds of between €75-150 million; [see previous post on VC funding in Ireland]

More favourable tax treatment of the carried interest of venture capital is being introduced at a rate of 15% for partnerships and 12.5% for companies to encourage the availability of so-called ‘smart capital’ for investing in start-up innovative companies who will be the employers of the future;

Entrepreneurship, business start-ups and employment creation will be driven by a number of highly-favourable taxation measures including exemption from corporation tax arising in the first three years of operation for business start-ups, a tax abatement scheme for restricted shares, and a refund in the case of forfeited shares, to
assist companies, including start-up companies, in retaining key employees;

Venture capital investment is still relatively under-developed in Ireland. When defined as formal investment outside public capital markets, which represents total start-up, expansion and buyout investments, Ireland ranks 12th in the EU-15 in this regard;

Ireland ranks 4th across the OECD and 2nd in Europe for the proportion of early stage entrepreneurs with 8.2% of adults in Ireland engaged in entrepreneurial activity in 2007 up from 7.4% in 2006;

High concentration of leading high-tech multinationals many of which have facilitated a huge technological transfer from Silicon Valley to Ireland;

Ireland is ranked as 7th out of 182 countries as a place to do business; the 5th easiest place to establish a business; and the 3rd cheapest location for starting a business. Enterprise Ireland has a strong system to support high-potential start-up enterprises and a growing international presence;

‘Smart capital’ can be defined as (a) adequate levels of early stage funds for SMEs; (b) providing value-added networks to key decision-makers; and (c) experienced investment managers. European venture funds have performed relatively poorly in comparison to US funds and so it remains difficult to attract the best (Tier 1) VCs from the US. Nevertheless, it is these types of VCs that provide the best possible networks and management experience that can develop Irish-based companies.

Just as Ireland fashioned itself to become the destination of choice for multinational enterprises, the vision is to establish Ireland as The Innovation Island through: Continued substantial investment in science and technology infrastructure and research; A substantial investment in early stage venture capital to commercialise and capitalise on this investment, similar to the Israeli Yozma Fund; The attraction of experienced and top-tier venture partners (including those described as Tier 1 VCs) operating independently to manage to raise capital and focus on deal-flow creation;

To attract high-quality mobile entrepreneurs to set up businesses in Ireland and to assist start-up companies to retain employees, we are providing for a tax abatement scheme for restricted shares;

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Also check Irish Times coverage

Now for some community feedback – please comment on this new framework….

Should Government get involved with VCs ?

admin 17th of December 2008 by admin

Techcrunch France editor – and LGiLab VC in Israel – Ouriel Ohayon has a great piece on Can governments become good VCs?

This topic came up in VC discussion at last week’s LeWeb – and Ireland was mentioned as an example.

Enterprise Ireland in a June press release provided an update on the 2007-2012 Seed and Venture Capital (VC) Programme

To date €148.75m has been committed to 8 Seed & Venture Funds.

Of these, 6 have completed first closings, including

- Delta Partners [100m fund]
- AIB Seed Capital Fund [30m fund]
- Atlantic Bridge Ventures
- Kernel Capital Partners [70m fund]
- Fountain Healthcare Partners – not for technology – life science fund.
- NCB Ventures – [75m fund] – closed its fund in November.

€275m funds readily available – and from EI press release – 8 funds [2 funds still to close] have succeeded in raising in excess of €500m for investment in early stage and growing companies.

Enterprise Ireland announced that €30m is remaining and is now available for co-investment – and a recent advertisement in the FT is targetting UK VCs for partnership.

Given the recent UK news @ Government funds for NESTA, the UK’s National Endowment for Science, Technology and the Arts, will oversee a £1bn emergency venture capital fund aimed at pre-revenue technology start-up firms – and the follow on discussion – We’d like to hear from Web2Ireland companies who have raised monies from these EI backed funds [make sure you update your Crunchbase details]

IGOpeople IGOes Live

conor 17th of December 2008 by conor

I was thrilled to hear from Campbell Scott that IGOpeople is in public beta starting today. They’ve been in stealth mode for a long time and we’ve all been looking forward to seeing it in action.

igo
Campbell describes it as:

a Network for the Real World that brings people together to Find, Connect and Converse, with their friends and with the businesses and organisations they deal with.

Sounding like a very useful mix of Social Networking, discussion boards, GetSatisfaction and UserVoice, it looks like a great way for companies to see what people have to say about them.

LeWeb – 10 great takeaways

admin 16th of December 2008 by admin

leweb

I had a pleasure of attending LeWeb last week – and here are the top 10 takeaways

Meeting Irish in attendance
Very low Irish presence – Pat Phelan from Maxroam, Conor O’Neill from Loudervoice [who also covered event for ReadwriteWeb]
- Brian Bastible and colleagues from IDA

Connecting with People
Lots of great folks attending from the US, UK, Germany, France and Spain.

Old School is best school
Got to meet and chat with Dennis, Doc and JP.

Glimpse of future
Dave Morinfacebook connect, Marissa Mayer – Google, and Susan WuVirtual Goods

Startups – no Irish… come on !!
Startup Competition – some interesting startups – and very worthy winner – some Web2Ireland companies would have done well at this event….

Failure – true stories
Morten Lund was one highlight of the event – off the cuff – very honest in his story.

Funding is hard in Europe
Lots of VCs in attendance [none from Ireland] – and the VC panel was interesting – see video. Key themes – build products that VCs will use [Fred Wilson, Martin Varsasky, Jeff Clavier] – and they don’t really believe Govt intervention @ funding is key [more on that later] – and NO doesnt mean NO.

Go Big or Go Home
Lots of usual talk @ valley versus Europe and can we build a big European web company.

Annual LeWeb bitch fight
Great fun from the sideline

Next Year
Rumour has it that the International D Conference will happen in Dublin next year

And no doubt LeWeb 09 will be another enjoyable event.

Innovate Media event in Dublin on 17th Dec, 2008

admin 16th of December 2008 by admin

Anton has the details on the Innovate Media event tomorrow

In partnership with the Media Cube at IADT, its a Mini-conference, networking event and breakfast for digital media companies focusing on those who have come through the many incubation centres around the country.

When: Wednesday the 17th of December commencing at 8.30 a.m. There is no attendance fee and breakfast will be provided.

Where: The Media Cube, IADT, Dun Laoghaire.

Skimlinks makes the life of an Affiliate hassle-free

conor 12th of December 2008 by conor

Ciaran Rooney, CTO of Skimbit, has just announced the launch of Skimlinks which makes being an Affiliate far easier than heretofore.

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The idea is that Publishers sign up for Skimlinks, and once approved, have access to thousands of merchants across 11 affiliate networks internationally. They just have to add one line of code to their site and then the entire site, including existing content, is enabled.

The Publishers continue to create content and add links to merchants’ products and services as normal. When a user clicks on these links, Skimlinks turns it into its affiliate link equivalent on-the-fly. If the user then buys something from the merchant’s site, the publisher earns a commission.

Skimlinks also offers the publisher a reporting interface that consolidates all their affiliate activity and earnings across all networks, and gives them visibility into to the traffic they are sending to each merchant. The service is currently free to use, and Skimlinks only takes a small cut of the commissions earned by the publisher.

It’s fantastic to see something new in the Affiliate space and even better to see a a solid business model from day 1 with customers like Shiny Media at launch.

Irish companies for InnovateEurope

admin 12th of December 2008 by admin

innovateeurope

I met up with Mike Sigal from Guidewire Group this week at LeWeb in Paris – and he updated me on the new Innovate Europe event they are running.

In a nutshell Mike, Chris and their team are

- Running regional “Auditions” in Europe to meet and talk to startups [22nd Jan, Dublin]

- Selected startups are invited to the Innovate!Europe’s Master Class [4-6 May 2009 in Zaragoza, Spain]

- Also participate in Innovate!Europe Trade Mission – that will visit Silicon Valley in June 2009

- One European startup will win an exclusive spot at Guidewire STUDIO, an in-residence business accelerator in the heart of Silicon Valley.

I would recommend all Web2Ireland companies to apply for Innovate!Europe