Web 2 Ireland

Yep, unfortunately the article is peppered with bald statements that don’t stand up to examination. For example,

1. Ireland has an absymal record of encouraging startup companies

Untrue. We could do a lot better, but we beat the pants of other countries of comparable size.

2. The valley was able to grow organically

Yep, after a gold rush, the best climate for market gardening in the West and a positive ocean of Darpa cash. Hardly organic.

3. Startup Stock Exchange

Bogus in the US and bogus here for exactly the same reasons. The stock exchange exists for a reason and has structures for a reason. AIM is available for smaller companies. Ireland as an economy is bareable able to sustain the ISE never mind another AIM.

4. There is no magic to Silicon Valley’s success

Nope, and for the same reason it is not repeatable. The confluence of money, weather and smarts with a massive consumer economy right on the doorstep is absolutely *not* replicable in Ireland. We need to try something different.

I have nothing but respect for Patrick Collison’s achievements, but *every single startup* in Ireland could choose to go to YCombinator and make it there. The challenge is to be successful here, despite the initial challenging conditions.

When Patrick has blown the doors of a startup in Ireland it will be time enough for him to lecture us on what we should and shouldn’t do to be successful.

I stand by those statements, to be honest.

With regard to Ireland’s abysmal record, it depends on your point of reference. If it’s, I don’t know, France, then sure. If it’s a successful start-up hub like Boston or the Valley, it’s not so good.

I think we may be interpreting the growing “organically comment” differently. I meant specifically that the startup/tech communities grew organically, which is unquestionably true. You can even point to the starting point: Shockley Semiconductor.

With regard the the stock exchange, I don’t understand your rebuttal. Of course the current stock exchange has its constraints for a reason; what I’m proposing is just something roughly analogous to one. (AIM is very different to what I have in mind.)

I might be wrong about the Valley’s success being replicable, but it’s easy forget that SV didn’t have (much) money or smarts when it started out — certainly not much compared to the Ireland of today.

Wholeheartedly agree on your point about me not having spent long running a company in Irelandwhich is why I made sure to run the piece by some people that have.

Anyway, without wanting to be trite, thanks for the feedback.

Oops, that should be “growing organically” comment.

Patrick,

Nobody in Europe compares well to the US for reasons related to the scale of the US market, the fact that it is homogenous and that the US is the largest economy in the world. Any attempt at comparison between the startup environment in Boston/SV and Ireland (or anywhere in the EU) is farcical.

DARPA dumped millions of dollars of raw cash into Silicion Valley starting with the funding of research into the creation of the Internet and continuing with a vast number of other technology endeavours, all inspired by the cold war. Anyone who thinks that growth was organic (i.e. self generated out of profits alone) is not reading their history.

The reason nobody has done an exchange like you loosely describe is that the stock in a startup is unpriceable and very few people are able to meaningfully predict a price even with full disclosure of information. Remember even the best VC’s get it wrong 9 times out of ten.

SV didn’t have as much money when it started? I’m sorry that doesn’t wash. See DARPA and economy size comments above.

Look I appreciate the sentiment, but you can’t export SV or even part of it. We need a specific solution that fits the special situation of Ireland.

Specifically you need to address,

1. A dire lack of capital at every level
2. A tiny indigenous market which means you have to run (export) before you can walk (sell locally)
3. A shrinking skillbase (this is the first year we have seen intake in the sciences rise)
4. Uncompetitive costs at every level
5. A failure to invest in grass roots startups

I’ve been working in this sector and every year somebody comes up with the idea of “exporting Silicon Valley” to Ireland. You might as well suggest towing Ireland over to the west coast and making it the 51st state. Forget about replicating it and instead start thinking about what works in an Irish context.

I lived in Palo Alto for a year and saw the easy military research contracts that percolate into Berkeley and Stanford. When you can depend upon multi-million research funding for your meal ticket, it’s a lot easier to commercialise other products in your company. Some start-ups that I watched used those military contracts like Irish entrepreneurs use nixers.

In his commentary above, Joe Drumgoole makes salient points better than I have raised in this short comment of mine.

Joe,

From an operational standpoint, don’t see how the scale of the US market matters much. It’s certainly advantageous to be around other start-ups, but how would, say, Facebook be worse off in Idaho as compared to Ireland? (PCH, to pick a successful example, has its HQ in Ireland, is based in Shenzhen, and does most of its business (and raised its money) in the US.) If you’re building technology, nobody cares if you’re a dog located in Ireland.

The “most VC's get it wrong 9 times out of ten” point is a common misconception. (See, e.g., http://www.unionsquareventures.com/2007/11/failure_rates_i.html.)

The Silicon Valley vs DARPA stuff isn’t too important, but it’s probably worth pointing out that DARPA had nothing to do with the Valley’s founding. HP was started in 1939, Shockley Semiconductor in 1956, and Fairchild Semiconductor in 1957. DARPA was only created in 1958.

Anyway.

The five new issues you raise are certainly real. I’m not sure how to fix them. Would be interested to hear what you think should be done, or how you’d address them.

s/most VC’s/best VC’s, above

But at the end of the day, we don’t have a Berkeley or a Stanford, we don’t have an entrepreneurial culture or technology focus within our educational system that will tip on to create a Berkeley or a Stanford, we don't have a civil service that is able to adapt, improvise or overcome obstacles that it faces, we don't have a monied class to act as angel investors (unable to invest in anything as their apartment block in Budapest is still empty)

Monied classes obstacle easiest to fix, the educational changes the hardest

Silicon Valley Ireland won't happen until at least three of the above are tackled

I’m an external examiner with HETAC.ie where I know several other externs who are trying to imbue entrepreneurship into elements of the third level curriculum in Ireland.

Ireland has a long way to go towards nurtuing a Stanford start-up culture. I think you have to create a cluster dynamic in only a few Irish cities and fund only those clusters with State aid. Anybody with a box closet and a college librarian can get State funding nowadays. You cannot cultivate a cluster dynamic that way.

Patrick,

The stats you quote are for one VC and don’t reflect the sector as a whole. On average the if you can do 1 in 10 that makes you a very successful VC. Most do a lot worse than that.

If you think the scale of the market has no bearing from an operational standpoint then I’m nonplussed as to what you think does have a bearing. The key questions every investor will ask is a) What size is your market? b) How to you acquire your customers. If the answer is millions right here on the doorstep then achieving profitability is that much easier.

Idaho faces similiar challenges to Ireland, but guess what, Facebook didn’t start in Idaho, it started in Harvard Boston, the closest thing to Silicon Valley outside the valley. But even Boston is jealous of Silicon Valley.

If you are arguing that Silicon Valley would have developed organically with out truely massive injections of capital from DARPA, well who knows? The reality is DARPA did inject massive amounts of capital and we can’t ignore that fact. It certainly helped.

Joe.

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 focussed 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 focussed on completion a delivery of the first production version of your software. No production version, no more money.

Once you have a production version youn 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 fromn 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 focussed 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 focussed 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 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.

[...] on from our piece on Patrick Collison’s IrishTimes piece, we had some great activity in the [...]

Well well well, negative Nancy’s. I liked the Article, I liked some of the ideas. I liked that after it, i was left feeling positive, and wanting those changes and ideas implemented. It created the appetite and energy to want change, which is always a good start.

What i hated was the shooting down of Patrick. Sure Ireland is not and will never be Silicon valley. No point in repeating that. Its good to be different. But we can at least aspire, and aspiration is part of what makes silicon valley what it is. Aspiration travels well.

We should also remember Israel is a small country, similar in size to Ireland. It has a great tech startup ratio. They are doing very well..yet they are not silicon valley!

We dont have to be silicon valley, but we should totally aim as high as we can, and higher than silicon valley, just for the craic. What can we produce?

The UK has a tech industry! Does it need sun? I dont think so.

There is plenty of money about, we just have to convince Seamus and Mary to invest in startups, instead of going to the pub or spending it on the national gambling obsession Horse racing and the like.

That aside, and as usual, instead of people saying YES, we have people saying, heres the million ways you are WRONG. Thats very Irish. And to me in my mind _thats_ our biggest obstacle right there.

When there IS a booming tech sector, a real one, then we can refine and criticize to make it better.

But any encouraging article that brings attention too the quandry, and perhaps changes minds, (particularly grey haired older Irish males in the bureaucratic system) then we should be positive about it, as its something good to embrace.

The whole tearing apart of the article with negativity was an eye opener.

If you want an Idea of some home grown success (yes waaaay outside silicon Valley) and recent at that, look no further than our own Robin Blanford (D4H). Great product, Made in Ireland, tested and Sold Worldwide.

regards.

Israel receives enormous financial support from the US for the the year 2010 Barack Obama plans to give Israel 2.8 billions dollars.. Hardly a comparative example.

My point Telemakus is that you can’t import Silicon Valley. Realistic appreciation of what is possible is vital.

I am aware of d4h and have strongly encouraged Robin in his endeavours. I believe that the future of Ireland’s software sector lies in companies like DecisionsForHeroes, MobaNode, CoClarity, Contrast and EchoLibre and these people should be supported energetically.

None of these companies needs imported founders, crack brained alternative share trading schemes or sunshine to be successful. Nearly all have utilised some form of state assistance (though there are notable exceptions) and all are bootstrapping their businesses.

Specifically they are all realistic about what can be achieved and understand that raising a 5m seed round at a 50m valuation is the wrong model for Ireland.

As I have said before, we 100 exits at a 10m valuation each year not 10 exits at a 100m valuation.

I think this is a great discussion and fair play to Patrick for getting it started with the newspaper article. I don’t think Joe meant to be a negative Nancy, its just that he knows more than most about the situation here in Ireland at the moment.

So, now that we have all the history and we-can’t-do-that-because out of the way, let’s figure out what we can do about this.

There’s a load great ideas at:

1. The comments on on an older blog post from Pat Phelan
http://patphelan.net/how-can-we-foster-start-ups-and-innovation-in-ireland-today/

2. Patrick’s Grand Plan
http://web2ireland.org/2009/06/08/the-grand-plan-by-patrick-collison/

3. Joe’s Grand Plan in the comments above

Here’s what I suggest:

a. We all read the lists of ideas
b. We brainstorm for a while longer here in the comments to uncover more ideas
c. I’ll collate all of them into a group on igopeople (http://www.igopeople.com/g/646-startup-ireland-ideas)
d. We can discuss and vote on each one there
e. We select five of the ideas we think we could do something about
f. Decide what specific next actionable thing we can do about each of the five ideas
g. Do the specific next actionable things
h. Go to the pub

Oops here’s the link to the igopeople group http://www.igopeople.com/g/646-startup-ireland-ideas

Patrick,

I agree with your points in general and they perpetuate the thoughts behind Ycombinator clearly.
However I wonder how you can make these statements while you were critical of the Greenhouse plans at the same time.
Surely the Greenhouse operates along a similar train of though of what you are suggesting?

Just after reading this on the paper, great to see a debate starting. Time to jump on the box.

Irish kids didn't grow up selling lemons on street corners as many American children do.
Necessity is the greatest motivator of them all. More start-ups across all sectors will appear in the coming year I reckon. Government funding is not the blue pill to solve all their problems. A couple of other far cheaper solutions exist. For example simple to understand legal documents should be made readily available to help these thinking about starting. These would be dissected in the national media and people would have a much greater knowledge of what's needed to really get started with their idea from company formation, to allocating shares between founders(50/50 is not always the best idea) and what to expect in their first term sheet.

Ireland has lots of investors willing to invest in companies; a boom does not exist in a country for 10 years without large amounts of people just sitting on extra cash. For this reason I believe, the Irish public began to engage more with share dealing as this was in the papers every day. So any article which will bring to peoples attention that there is an alternative(aka with greater risk, but also potential for far greater rewards) way to invest their money should be at the very least encouraged.

Joe, you mention the uptake in science recently, which is encouraging. Our university system are not great (only in certain focused areas do we lead Europe in R+D) but these are the areas we must focus on. Information on what PhDs are studying / researching should be more readily available, so that companies can see if there is any overlap where partnering up would be beneficial. In fact, they should often be fast tracked for funding to further develop their products if there is a proven market for what they are working on(this is across all sections, not just IT).

April Fools day joke this year on Web2Ireland, was that money was been pumped into promising techniques and ideas. Why doesn’t the government do this of course everyone says? Easier for us to answer, why don’t companies that receive Government funding do this? Would love to see 10 companies reading this come together and raise enough between them to support a couple of ideas. IQ Content did it. If nothing else, it gets the word out to the general public about this (still mostly invisible) section of the Irish economy.

The best chance to see emerging ideas is at the final year presentations of colleges nationwide. Yet when I was doing my in 2005, along with 300 others, not one small company came in to look at the ideas been presented. This was presented to us as normal. After working on an idea for 5 months, these students are at the one time of their life when they would be most likely to turn their product/idea into a company. If you want to encourage entrepreneurs in colleges and schools, certainly this is not the way to start.

Irish CEOs of start-ups have debated to end the lack of VC money available. True, that is an issue. VCs oddly enough are not the solution for most start-ups, but that's a different matter. So instead of pumping more money into start-ups, why not give government money to get them over here instead (VCs on a plane!) . Or have a nationwide competition to select 5 companies to fly over to Palo Alto to Enterprise Ireland's office right in the center of Silicon Valley to talk directly to VCs. A plane ticket costs 300-380 euro each way. The paddywagon tour(Irish CEos self organised a trip with support of EI) to San Fran was a success 2 years I believe, has this since been repeated?

Sure, military contracts may have boosted the start of S valley, as they would be a large receiver of the initial computers, etc. But I can't imagine the military investing too much in Web2.0 technologies or start-ups in SV nowadays (Most recent I can think of is America's Army).

I wonder of the many companies which have received Enterprise Ireland investments, what percent of them have successfully exited, etc. Also what level of employment (full time) do they provide in total between them vs. the amount of money EI invested?

Dragons Den has been a great tool to get people thinking about start-ups and realising that they should be based on real figures rather than dreams. Most important issue is that people, no matter your view point, gets talking about this.

Vinny (Y Combinator alumni)

Patrick,

Silicon valley got weather and Stanford grads.
That is a massive advantage.

If Ireland wants to educate talented people that come here to research they need to incentivise it for them to stay here if the Irish based “Knowledge Economy” is to become a reality. Otherwise it is a waste of millions of yo-yos.

However I’m all for progress and I think that things need to change at the secondary and possibly the primary level in the schools to foster an Irish entrepreneurial culture.

A quick one for Telemekus, have a quick look at the major VC firms in the US and see how many operate an Israeli arm of their firm and fund and how many operate the same for Ireland. Like for like doesn’t necessarily mean demographics.

I liked Patrick’s article and agree that these issues need to be raised in the public eye to be taken seriously but Joe’s proved time and time again there aren’t many out there who know the Irish market and the requirements for startups better. I love your new plan for EI funding and support it wholeheartedly.

The lack of capital and tiny local market issues are the main killers of an idea of every competing with anything like SV

Enjoyed reading Patrick’s article. Ireland has shown several times that when it comes to attracting investment, it is flexible enough to make the sort of dramatic policy changes he suggests. $50 million for 50 start-ups, and sensible immigration rules? It could happen.

But if we offered it, would they come? And would they be right to come? From the perspective of someone currently doing a start-up, Ireland’s problem is mostly that the talent base is too small. It’s easy to move cash around the world – good founders can get funding from abroad. Getting people is much much harder.

What can we do about it – not too sure. Nothing soon. A 1st class research university (current count: zero) would help. It is just about possible that if we kick-started a start-up scene with a dramatic gesture, the talent would follow. Risky, but that’s in the spirit of the thing, right?

Great debate/discussion here everyone, keep it going. Just in relation to Vinny’s point above – “Would love to see 10 companies reading this come together and raise enough between them to support a couple of ideas” – I’d like to point to a related idea I posted on Joe’s blog just now -

“What I'd like to see too is more €6,000-ish grant schemes like the level 1 awards made by Social Entrepreneurs Ireland each year. I was one recipient of such a grant last year and it gave me the opportunity to invest a lot of time getting my project off the ground. @keithdkennedy is after announcing on Twitter that he has just received news today that he is to receive a level 1 awards through this year's scheme. And I know that's going to make a big difference to him in terms of the commitment he can give to his project idea. In some terms there's not a lot you can do with €6k but in other ways there is, as many other alumni of Social Entrepreneurs Ireland have proven over the last few years. And access to the Social Entrepreneurs Ireland network is invaluable.

I often wonder why us Tuesday-pushers don't create a similar 'crowdsourced' grant scheme where we use Pledgebank or similar crowdfunding service to fund (non-social) business ideas IQ-prize style by the group of people donating to the fund and I do mean donating. We could then provide advice/feedback on an on-going basis in the same way Social Entrepreneurs Ireland do, through an on-line forum/network/twitter.

I for one would be happy to pledge €60 to such a fund and I'm sure we could find 100 other on Twitter, Facebook, LinkedIn and so on. In fact I'd be happy to make such a donation every couple of months. Anyone want to help make it happen?

[...] Links Spirited comments on web2ireland.org regarding The grand plan by Patrick Collison and Irish iPhone App School [...]

[...] of universities – generally in Ireland there is such a famine of VC and startup that many pare back their vision in the first two years to stay alive and hope for funding once they have proven they won’t [...]

Ys…..I agreed with you.Ireland has an abysmal record of encouraging technology companies…..deliver innovative, competitive, cost-effective and quality solutions in the domains of Software Development.
http://www.dataentry.ie

[...] the details of the funding issues in Ireland which are well discussed elsewhere. Most succinctly by Joe Drumgoole in his commentary on this article on Web 2 Ireland although I would contest his idea that the weather has anything to do with it. I will say though [...]