The Grand Plan – Joe Drumgoole

9th of June 2009 by admin

Following on from our piece on Patrick Collison’s IrishTimes piece, we had some great activity in the comments

Joe Drumgoole

Joe Drumgoole outlines his “Grand Plan” in the comments and its very worthwhile to get them published here.

==============

I’ve answered my own questions below.

1. A dire lack of capital at every level

For startups entry to a incubator with a business plan focused on exports and employment automatically entitles you to a CORD grant, no questions asked.

Once you leave the incubator you get a 50k grant straight away which is focused on completion a delivery of the first production version of your software. No production version, no more money.

Once you have a production version you start into the matching money game. But instead of 50/50 its 2/3 EI cash, 1/3 matching. This grant is capped at 250k from EI. You can raise more from externals but EI will still cap its contribution.

Force VCs that have capital from EI to focus on the year 1-3 startups. Use a reduced carry model to get this kind of deal over the line with the VCs.

Get UK VCs over here en mass to show cases of Irish companies. Never saw a UK VC yet at an EI event here in Dublin.

This should be enough to get all but the most capital intensive enterprises off the ground.

2. A tiny indigenous market which means you have to run (export) before you can walk (sell locally)

EI has a raft of export focused training programs but the dissemination of the the information is abysmal. They need a better website a more structured training plan and a better mentoring network. They are also focused on person to person selling whereas what Irish web companies need is a crash course in global online selling including email campaign management, web analytics, user experience, usability etc. etc.

3. A shrinking skillbase (this is the first year we have seen intake in the sciences rise)

Lots of people working on this, and science graduates are up for the first time . Finally people don’t want to be solicitors or lawyers anymore – hurray!!. We need computer programming and abstract problem solving into the primary and secondary curriculum. DeBono covers these requirements well in his writing. See “Teaching your Child to Think”.

4. Uncompetitive costs at every level

Recession is fixing this, but we need to stamp out “percentage of” pricing in the professional sector (that’s you solicitors).

5. A failure to invest in grass roots startups

Web 2.0 Seed Fund would help here. Better social network integration between the incubators. Proper metrics for success and failure that cover a 10 year period.

Refocusing EI efforts on year 1 to 3 rather than year 3-10.

Teaching startups to focus on customer growth rather than capital growth.

Tags: , ,

8 Responses to “The Grand Plan – Joe Drumgoole”

Hi Fergus,

I’ll happily accept some light editing of the more obvious typos in commentary :-)

Joe.

I agree with many of the points Joe is making (this might come as a shock to him). But would like to add a few comments.
There’s a lot of referring to CORD grants, EI etc. which is indicative of the over reliance on the state to stimulate a start-up environment. Start-ups in the very early (idea) stage are better served with assistance from the private sector as state owned and run entities are by nature not pro-active enough and have too much of a risk aversion to be able to “jump on opportunities”.
There are also too many bodies and organisation in Ireland operating in this market without coordination. The growth-chain of a company needs to be divided up the different development and support needs need to be “assigned” to different organisations. Private sector incubator can handle the very early stage (funded by angel investors or similar funds), after which the start-up could progress up the chain to a incubator associated to an educational institute etc..
Everyone has their place but there is too much confusion in the “market” at the moment.
I also think that a lot of money currently spend by the IDA etc. to attract FDI should be redirected and put to use stimulating Irish owned companies. This for the simple reason that it will ensure the long term presence of enterprise in Ireland.

Another issue is that a lot of support is encumbered by large amounts of paperwork & bureaucracy. While I agree that a certain amount of accountability is neccesary my experience (and those of others) has indicated that this fixation on form-filling is a hindrance and deadens creativity.
A system whereby early stage startups would be given a “lumpsum” investment once they meet certain criteria would go a long way to promoting entrepreneurship.

We also need to stimulate and grow a native angel/seed community. Compared to the US and the UK angel or seed investing is dead in this country. Seed and Angel investing is also not just about funding, it is also about people who have been there and done that making investment decision.
I could go on for a long while but will leave it at this for now ;-)

Read Chris Horn’s latest blog post – http://chrishornat.blogspot.com/2009/06/boxing-above-your-weight.html – a timely reminder of how a predominantly online Irish company can emerge from a financial environment that is not too dissimilar to the one we find ourselves in now.

My 0.02c? If you try to bootstrap your Irish (or any) startup by attracting private or VC funds to Ireland you will expend most of your energy chasing the funding, diverting you from investing labor in your product. Use Joe’s advice to find out what state grants/funding are guaranteed to be available and do everything you can to qualify for them.

Assume for now that private and VC funding in the current financial environment is practically non-existent and assume that will not change in the short term. I’m sure they are claiming they are investing in the same way that the commercial banks are claiming they are lending to SMEs but they’ll waste your time and reserves pretending to look busy. Wait until it is proven that liquidity has returned to the private markets and have something tangible that they can invest in (powerpoint presentations don’t count).

At the end of the day, remember that the most important contributors to success are the team and the product execution. Focus all your energy on refining your product/ideas and assembling/lining up a founding team that has the passion & technical skills to execute a product that people will want to buy. At the recent FOWA Dublin DHH mentioned that the founders of a software product/service company must be hands-on technical bodies – as he put it, there is no room for a ‘finance’ or ‘sales’ guy in a startup that only has three employees. Invest labor in your product and you will build it’s value.

Oh and read Robin Blandford’s blog archives for a perfect example of the type of single-minded passion and focus on product that I am talking about above.

Moving beyond the ideal world one if the main problems here in Ireland is getting Angel investors involved in the first place. Ironically there were a few builders who were often a great source of funding pre-dot.dom bust way back when. We just don’t do risk taking here bar those who have made money from the software/web sector in the past. UK VC’s have very little interest in Ireland and operate similiar to the Irish guys in terms of risk taking. We just don’t have a name for being a hub for new exciting companies despite the best efforts of the state agencies and some in the sector.

Another issue is that for some reason Irish companies desire publicity without actually working hard at it or investing in it. I know chicken and egg but often completely overlooked in the start-up plan. And the latter whether anyone likes it or not is crucial. How many non-revenue earning valley companies have you heard of before you saw their product? And we are as good product wise as them.

The world is full of great products/ideas and most investors in a sector have met the next big thing. What it is not full of is people who can actually say this is our market and why, how we will communicate to that market, how we will make money, who we want to link up with and where we see the company going and how you will make cash back. This is why they are investing but you would be surprised how often people forget it.

EI despite the critics is still the most successful VC in Ireland….that’s the risk adverse state ! Also people forget that despite it all they are often the only people willing to invest time and money to help people not making any cash. They are investors, on behalf of the taxpayer, but they are still investors. Treat them like you would a VC. If you can’t sell to someone who wants to talk to you then you are in trouble and you’ve missed something.

In relation to the IDA and re-direction of the small amount the state invests in FDI. Most of the FDI is value add…no IDA equals no Google, Amazon, Facebook, Apple or Microsoft, etc. They don’t come because the take a fantasy guess about where to locate in Europe. And none of those (who work with a large number of Irish companies by the way) equals no reason for smart non-Irish grads to come here, no linkages back in the US market, no reputation for Ireland as a great place for software development and no doors get open because you are Irish. They are part of the cog. How many Irish managers got their start in a great MNC ?

It has always been tough to get investment, it makes new companies focus, drop the dreaming and start talking about dirty money. And there is nothing wrong with approaching it that way either.

Hi
Great comments from all. Currently being in the process of startup and inevitably worrying about where the next EURO is coming from. Received a grant from the most excellent Wicklow CEB who bent over backwards to help us out. However, information on how to get further funding is difficult to find making it great when those who have “done it before” make this type of info available.

John, agree completely on not wasting time trying to get VC money in the current climate. Focus on all other avenues first rather than wasting time chasing a ghost is absolutely spot-on advice. If the idea is solid, funding will be found in my humble view (even if it is a loan from a family member!). As a new startup, the business owner needs to avoid getting caught up in the trap of “getting finance” over focusing on developing the business and the need to actually get some customers!

My company is tech product with my business partner and I having an IT background (management, analysis and some design). We don’t have strong build capability and are using Contrast for this aspect of work because this is what they are good at. Agree with the point that if you are a tech company that you need tech skills. However, if you can find a really solid partner who provides the necessary support to get your product out there, gives good advice and is willing to work with you, it is possible to source this element without the need to extend the workforce.

Again, thanks all for the advice – all taken on board and digested.

[...] to get funding to expand. That is hardly innovative, and this taskforce doesn’t strike me as grasping that particular nettle as others have. Share and [...]

I've been reading along for a while now.
I just wanted to drop you a comment to say keep up the good work

Thanks for information, I'll always keep updated here!