Entrepreneurship will fuel fire of economic regrowth
Ireland cannot have a smart economy unless it has courageous entrepreneurs who operate in a culture where risk is accepted and failure tolerated. Without risk, there can be no rewards.
Funding: It is clear as day that better financing and supports need to be made available to help companies in all parts of Ireland and at all levels of development, whether university spin-outs, young existing firms or the efforts of local businesspeople to reach overseas markets. This element is key in competing environments such as Silicon Valley and Israel.
The big picture: How can an economy such as Israel, for example – similar in scale to Ireland – have hundreds of technology and biotechnology companies listed on NASDAQ, while Ireland has just two? Thinking big is fundamental to the future; dreams must be encouraged.
The environment: A culture where entrepreneurs are not afraid to try and try again is vital to the emergence of an entrepreneurial, indigenous base that will march in step with the continued success of this country’s multinational community.
Attitudes: Intolerance of failure in Irish society needs to change. In other words, entrepreneurship is as much a product of a society’s attitude as other supports, such as funding and education.
Legislation: Outdated legislation that prevents company directors from returning to directorships for 12 years if a company fails needs to be abolished and new legislation enacted to remove the fear factor that is the spectre of any business start-up.
Ethics and accountability: While outdated legislation and societal attitudes to risk and failure must change, it is clear that no change in the system will be complete without a matching drive towards ensuring proper business ethics and accountability are foremost in any entrepreneur’s mind.
Starting early: Sowing the seeds of entrepreneurial culture in Ireland must begin early in life in terms of education. Business studies in Irish schools must embrace entrepreneurship as a vital ingredient in the curriculum.
“The FDI era is over. Real economic investment will be indigenous
and growth will come from investment in new ideas.”
- Craig Barrett, ex-CEO, Intel
Craig Barrett, Intel's former CEO
There is a dangerous school of thought doing the rounds that Ireland can no longer rely on foreign direct investment (FDI). That thought is as dangerous as it is stupid. The reality is FDI investments – of which Ireland has the greatest proportion internationally – are what is currently keeping the island’s economy afloat.
Indeed, IDA Ireland has just unveiled a strategic plan entitled ‘Horizon 2020’ that envisages 105,000 new FDI jobs by 2014, the lynchpin of which will be social and economic regeneration of cities, towns and regions.
However, if there is one thing that is resoundingly clear it is that Ireland cannot rely solely on FDI exports alone. We need a powerful, entrepreneurial, indigenous industrial base that marches in step with a consolidated, healthy FDI community that has services, R&D and advanced manufacturing at its core.
We are an export nation and we have to get better at supporting start-ups and scaling them into thriving global exporters.
The US as an example of entrepreneurialism
We tend to look at the US a lot in terms of entrepreneurial flair. The US is not a bad example, especially if we are thinking about regenerating the Irish economy and improving living standards via entrepreneurialism. A Deutsche Bank study of what makes US entrepreneurs, particularly high-tech ones, tick, pointed to one of the major insights of growth theory – modern economies cannot raise living standards indefinitely by accumulating evermore capital or labour.
“Instead they need to lower costs and create desirable products. Innovation is needed to spur technological progress and raise prosperity. Innovation is based on knowledge. Scientific breakthroughs, R&D and other forms of creativity add to the stock of knowledge. But knowledge in itself does not create new products.”
Ireland has quite rightly invested heavily in its scientific infrastructure – science investment escaped many of the recent Budget cuts – and many of the CSETs (Centres for Science, Engineering & Technology) are on the verge of spinning out high potential, cutting-edge companies that could generate jobs.
The book Knowledge-Driven Entrepreneurship –The Key to Social and Economic Transformation, which was co-written by the director of Intel Labs Europe and NUI Maynooth professor Martin Curley, argues that Europe must look towards developing and harnessing its knowledge and entrepreneurial skill set in order to develop a true ‘smart economy’ and ‘smart society’.
This book identifies knowledge-driven entrepreneurship as the current shift from the mastery of physical assets and tools such as buildings and factories to that of intangible assets such as education, patents and sociocultural tools.
“It is crucial that Ireland plays to its strengths and brings knowledge to the fore of its ‘smart economy’. In particular, high-expectation entrepreneurship, where disruptive technologies and high ambition meet, will be crucially important to drive sustainable growth,” said Curley.
“Solving grand challenges like climate change, clean energy, and aging societies will add significant societal value while creating the opportunity to build and develop strong export-led businesses.”
The three pillars on which a smart economy can thrive
At a recent meeting of the Royal Irish Academy, Curley’s former boss, ex-Intel CEO Craig Barrett, pointed out to 600 members of Ireland’s business and academic elite that there are three pillars on which a smart economy can thrive – smart people, doing smart things in a smart entrepreneurial environment.
Barrett said the problem for Ireland now is that the FDI-focused blueprint is no longer practical in a world of 3 billion new capitalists and it needs to do something new. He said 90pc of countries around the world see themselves as potential leaders in the knowledge economy.
Barrett added that Ireland until now led its growth from external investment, but will need to focus on growth from within and supporting entrepreneurs and start-ups.
“The FDI era is over. Real economic investment will be indigenous and growth will come from investment in new ideas.”
He said Irish universities need to become wealth generators in the tradition of Stanford University and Massachusetts Institute of Technology.
For countries to succeed in the 21st century, a smart environment, where smart people and smart ideas can thrive, is essential.
“Ireland needs to ask itself how hard is it to start a company? How entrepreneurial is your economy?”
Barrett hit out at Ireland’s punishing regime for entrepreneurs where if a business fails or if bankruptcy is declared individuals are prevented from starting up again.
“In Silicon Valley, half the people who make presentations to me have failed two or three times,” he said, adding Ireland really needs to examine the societal aspects of risk-taking.
This view was qualified recently by one of Silicon Valley’s most successful venture capitalists, Tim Draper, who jokingly told members of the Irish start-up community at Trinity College Dublin (TCD) that half the billionaires he knows have either been bankrupt or in jail at some point.
Venture capitalist Tim Draper
Draper, the man credited with creating viral marketing, as well as being instrumental in the success of Hotmail, Skype, eBay, Baidu and Overture, manages funds valued in excess of US$7bn.
“Ideally, you want a Government that wants to attract venture capital. There are many ways to do that by having low or no capital gains tax.
“You have to feel like failure is OK. The venture capitalist has to feel like failure is OK, too. Where a banker cannot fail, a venture capitalist has to – more than half of venture capital investments fail. We take big chances on big ideas, big problems, things that start small and grow organically.
“The reason I was successful had a lot to do with the willingness to fail. I failed many more times than I succeeded and the few times that I did succeed were really big successes.
“Ireland is doing the right things. Whenever an economy is in trouble it tends to be the entrepreneurs who bring it out of trouble. It is entrepreneurs who create new jobs. It is a perfect time right now to create a new company because people are out of work, there are good people available.
“Big companies are looking for alternatives to the way they did business before because they need to save money, and so entrepreneurship is a great way of hauling an economy out of the dumps.
“But I think that the things Ireland can do to improve the system, such as allowing people to fail, are very important because then they feel that the sky is the limit. If there is some sort of a catch-all, such as the good bankruptcy laws we have in the States, people realise they can’t really go too far below zero.
“But if you feel like you have to take a big risk and you may go far below zero, it can be very painful. So people are less willing. To get the break-out success story, requires an economy that is willing to allow people to fail.”
Irish companies spun out from Irish universities
Ireland has invested hundreds of millions of euro in its science infrastructure and the hope is that our universities will produce spin-out companies that will generate jobs.
One such example is the CRANN Institute at TCD, which is focusing on nanotechnology.
CRANN director Prof John Boland argues that the challenge is finding the funding vehicles to help the spin-outs and that our bankruptcy laws and societal attitudes to failure are out of date.
“The goal is to create companies that will come out of entities like CRANN. It’s a slow process, a lot of it is about learning to create companies; we don’t have the history here.
“Craig (Barrett) was saying that to try and to fail would be a badge of honour in the US, but not so here. The problem is we haven’t had people who have tried and failed and even succeeded and come back to provide the learnings into the system.
“We haven’t had that feedback yet but it will take time. There is unease in Ireland about the level of investment put into science and the rate of returns. But you have to count the other returns: people, education, linkages with other companies. The next wave will be slower; we have several potential spin-outs in the pipeline and are looking for the funding to get them out there.”
Barrett agrees: “Ireland was swamped with FDI for years and that was the growth mechanism that grew the high-tech sector. That is a great way to get something jump started but is not a way for long-term economic development.
“There has to be an indigenous component here but it’s dependent on the environment to facilitate that.”
ACTIONS TO BUILD A MORE ENTREPRENEURIAL IRELAND:
1. A change in mindset to tolerate failure and encourage people to keep trying with their business ideas; that’s what makes successful entrepreneurs.
2. Revamp Ireland’s outdated and draconian bankruptcy laws that punish business failure and prevent executives from holding directorships for 12 years.
3. Teach entrepreneurship at post-primary level as part of business studies.
4. Along with new bankruptcy laws, bring out new regulations around ethics and accountability.
5. Make good use of municipal resources to provide budding entrepreneurs with infrastructure to get started.
6. Encourage greater collaboration and mentorship between successful entrepreneurs and new start-ups.
7. Ensure greater information is available to people to consider setting up their own businesses.
8. Instil a global outlook amongst business owners – global is local in the digital age.