Economic zeitgeist needs to change if start-ups are to have a chance

12 Mar 2009

Political paralysis, press panic attacks, depression-inducing radio and a slash-and-burn approach to costs could stifle the emergence of a proper start-up culture in this country, experts on start-ups said yesterday at University College Dublin Business School.

“One of the problems I see in Ireland is that there is no systematic policy. It’s all about cost-cutting and taxes, instead of saying the recession is not an obstacle, it’s an opportunity,” Professor Dan Breznitz of Georgia Institute of Technology told an audience of entrepreneurs.

“The fear with Ireland is that there doesn’t seem to be any thought process taking place; it’s more like cowboys in the Wild West. If people come up with ideas and start a discussion, a strategy should be put in place.” said Breznitz

“Money for entrepreneurs should be a part of public policy to turn this problem around, and the Government shouldn’t look at it as a return on investment (ROI). Once you tell someone you are looking at ROI, you tell them you want success within a limited time frame and this limits their ability to take risks, get creative and indulge in innovative ideas. Take a more holistic approach and focus on what Ireland needs to be in the future, what can be done and who can do it.”

Eddie O’Connor founder and chief executive of Mainstream Renewable Power said that culture effects entrepreneurship and Ireland is way down the learning curve.

“If you look at US culture, it respects the accumulation of wealth and recognises the individual over the collective, celebrating the individual’s achievements. A man who has failed and then succeeded is deemed a hero. We don’t celebrate innovation enough, and I would love to see it celebrated more and see the Government take more action here.”

Commenting on the barriers for start-ups at this time, O’Connor said: “If you have a big enough need to prove yourself, you’ll find a way to do it. There are barriers, for instance, Ireland is very insular and you can get a very good or bad reputation overnight. Another barrier is the existence of big lobby groups, and that’s where directives coming from the EU are a great counterbalance.”

“When you’re driven by a real sense of purpose and good values, you’ll find people who will agree with you. If you have a value for respect, you can move around the globe. It translates. A respectful attitude comes across, even if you don’t understand the culture or share the same language.

“The next most important thing is great talent. A business leader should never be afraid to stand on the shoulders of giants. You should get your strategy, ethics and values right, and recruit the right people who will be motivated to work toward a shared goal,” O’Connor added.

While the Global Entrepreneurship Monitor (GEM) recognises the Irish as the most entrepreneurial people in Europe, with approximately 15,000 companies started here each year, the vast majority of Irish firms fail to show outstanding growth. So the question is asked: in 10 or 20 years time, what is going to be the growth engine of the enterprise economy in Ireland?

Sean Gallagher, managing director of Smarthomes, said we need to think big. “Nobody starts up a big business. There’s a vacuum as venture capitalists move up the value chain and private investors disappear. Our connections with Europe have enabled the enterprise.

In today’s climate, success for the next 12 months is based on survival not growth, Sean Melly, telecoms entrepreneur and chairman of Powerscourt Investments, said. “But we do need to be inspired and master self confidence at a time when it’s all doom and gloom.

“Now is the perfect time to start a business because market expectations are realistic, and if you think you have a business that’s viable in this market condition, I think you will have a business that’s viable in any market condition.”

Breznitz predicted that if the state lowered the risk for early stage companies the incentive would be there for people to start their own company. He said, “Venture capitalists are not the magic formula and they cannot be seen as the only answer. If the Innovation Fund is a success, it will not solve the problem of finance for the early stage and small companies in Ireland.

“What the State should do is lower the risk and, one way of doing that, is giving some of the cost of the R&D to entrepreneurs. In the case the entrepreneur succeeds, they can give the money back to the State, and in the case they fail, the money stays with them. For an economy the size of Ireland, 70 start-ups a year is not enough.”

Breznitz was referring to an announcement by Enterprise Ireland earlier this week that the taxpayer supported the establishment of 71 “high potential” start-up companies last year.

Julie Sinnamon, executive director Entrepreneurship, Regional Development and Human Resources, Enterprise Ireland added, “It’s critical that we have an increased emphasis on new ventures going forward. I think there has never been a better time to set up a new business with companies pulling out of Ireland. It means we have a talent pool with a can-do attitude.

“You just need to go outside of Ireland to see what we have, which is a good, pro-enterprise culture. So if you have the desire to do it, do it in Ireland. We need new business models, and everyone including Enterprise Ireland and other enterprise bodies around the country need to work together to support and maximise these. We also need to focus on the commercialisation of research, which is a challenge.”

This thought was echoed by Melly: “We need to build a bridge between research and building ideas in Ireland.”

According to Breznitz, the construction boom almost caused stagnation in entrepreneurship in Ireland, and a shortage of early-stage financing is a fundamental problem that Ireland must now address. “Once you decide what kinds of activities you want, that’s when you can start to think about education and specific sectors,” he said. He is of the view that Ireland needs to decide strategically on the kinds of companies and activities it wants to have within the country.

“If you look at Israel and how much investment was needed in order to make a true transformation to the economy, it’s a fraction of what the Irish economy is spending on saving banks. We’re talking about a few million a year; we’re not talking about billions of euro. Finland and Israel have done it and we have to move forward in this way,” said Breznitz.

By John Kennedy

Pictured at the seminar Nature or Nurture: How to grow the Irish entrepreneur at UCD’s O’Reilly Hall were Dr Eddie O’Connor, founder and chief executive of Mainstream Renewable Power, and Professor Dan Breznitz of Georgia Institute of Technology with entrepreneurs of tomorrow, Brandon Lyons and Chloe O’Neill, both age five