The threat of recession has made it harder for Irish tech start-ups to secure finance from conservative banks and venture capitalists
What makes the current crop of technology start-ups in Ireland so different from their predecessors like Iona? It’s the unusual dichotomy of wisdom and hindsight, mixed with an appetite for somewhat risky business.
You see, these guys have all learned from observing the disaster of the dotcom bubble. They are likely to have a mobile- or web-based business, which holds a twofold danger: banks and venture capitalists (VCs) can be averse to funding such projects, while figuring out a revenue model for online tools or services can be tricky at the best of times.
Alan O’Rourke, owner of online email newsletter service Toddle.ie, knows this only too well. Toddle.ie is entirely self-funded by its parent, design company Spoilt Child.
“Right now in Ireland, it is already difficult to get funding. We sought a simple loan to expand our office and the amount of hoops we had to jump through for €10,000 was ridiculous so we sourced our money from clients.
“The downturn has made banks and VCs more conservative but there really needs to be more understanding from them around the value of web-based businesses. Looking to Silicon Valley and beyond, Ireland is five years behind the curve.”
Banks may be nervous in the face of the current economic downturn but this does not quell the “huge amount of passion” O’Rourke sees in the Irish start-up community, passion that rivals our Valley friends.
At a recent networking event, CrunchLudd, Toddle.ie was among eight other burgeoning technology companies demonstrating their products.
“For me it was about getting constructive criticism, ideas were flowing, it was really valuable and on top of this there is exposure because people in marketing and media were there to watch.”
“Social networking sites, instant messaging, tools like Twitter: these all connect technology entrepreneurs via the web, who are then driven to meet up and collaborate offline.”
The dotcom bubble was when all this web entrepreneurship was supposed to be happening the first time around and that was eight years ago, says O’Rourke: “The new wave of Irish start-ups has not been quick at all. It has been a long time coming
Even at that, Ronan Higgins, co-founder of location-based mobile phone service Locle, points out that tech start-ups are still not seen as mainstream and funding is as difficult to come by as ever.
“It’s always difficult to get funding, period. The Irish VC community doesn’t have a strong track record of investing in consumer-oriented websites or mobile application businesses. It’s more risk-averse than its US or continental European counterparts and is looking for defensible IP more than mass-market ‘experiences’.
“There are a couple of exceptions, but realistically to get a straight web/mobile app play funded, you’ve got to hop on a plane (or ferry),” he adds.
However, it’s not all doom and gloom: “Ireland is the next best place to start a tech firm – mainly because of state assistance. Where the VCs drop the ball, state assistance is very strong.”
Being Irish has its strange advantages too, says Conor O’Neill, CEO of consumer review site LouderVoice and voice of Web2Ireland.org. He has seen Irish and US start-ups with the same great idea but while the US company has funding thrown at them, the Irish one has to struggle on.
This Irish firm still exists, while the US one blew all its cash and folded long ago, observes O’Neill.
Having said that, O’Neill feels at the end of the day many tech start-ups want to be acquired by a Google or a Yahoo! and so need to seen and heard by VCs in the US. But it seems we’re just not as good as our US counterparts at blatant self-promotion.
“It can be about making a hard push into the US. Sometimes it seems as though we are beating our chests but nobody is listening.”
By Marie Boran
Pictured: The Toddle team: Bartek Czerwinski, senior designer, with chief executive, Alan O’Rourke and studio manager, Jackie O’Sullivan