Co-founder Barry Lunn discusses the phenomenal growth of Arralis, a Limerick aerospace start-up.
A University of Limerick-based start-up called Arralis is already taking on some of the giant electronics players focused on aerospace, and is winning.
The company, which was established in 2013 by aerospace engineer Barry Lunn (CEO) and Mike Gleaves (CTO), has already won major contracts with the European Space Agency, the UK Ministry of Defence, Beijing Bluesky Aviation Technology and Sinotek.
‘We are growing fast. This time last year, we were 12 people, and now we are at 35 people. Our first factory will be commissioned at the end of July’
– BARRY LUNN
In recent months, it emerged that Arralis secured €50m of funding from a consortium of Hong Kong-based investors, which will enable it to expand its operations and employ 25 more people.
Lunn will be guest of honour at this week’s Startup Grind fireside chat in Limerick, supported by Bank of Ireland.
“Mike and I set up the company at the end of 2013. We had both worked in the aero defence industries for 15 years in areas like radar engineering.
“We were looking at 5G and what was coming over the horizon in terms of millimetre-wave technology that would require more bandwidth, and higher radar systems that would be expensive and bulky.
“We decided somebody has to do this on a commercial scale.”
Lunn’s hunch was right. Companies such as Elon Musk’s SpaceX are talking about putting up to 4,500 satellites into orbit.
“Our main customers are aerospace and satellite companies, and we are working with seven of the world’s top 10 aerospace companies as well as automotive companies.”
According to Lunn, the next stage for Arralis is to move into mass production of its high millimetre-wave systems, which could revolutionise emerging industries, including self-driving cars.
This is Lunn’s second start-up. Both he and Gleaves previously ran a company called Amideon Systems.
“We could see where the technology was going and we built our own intellectual property (IP) around millimetre wave and decided to focus on that.
“We basically quit everything else because we believed the opportunity was big enough.”
After just three years, the company is growing at a rate of 500pc a year. The biggest challenge is ramping up production to meet demand.
“This means finding the right people. We are growing fast. This time last year, we were 12 people, and now we are at 35 people. Our first factory will be commissioned at the end of July. We need to get into production fast. Our technology is so specialised that we can’t outsource it.
“Also, because of the nature of contracts, our biggest commercial customers are very secretive because the things they are working on are commercially sensitive.”
The innovator’s dilemma
‘There has to be balance. The only advantage an indigenous company can have over multinationals is to offer share options but if that’s impossible, then it’s no good’
– BARRY LUNN
Lunn, who is based in Vienna, spends most of his time on the road.
He said there is an opportunity to build a manufacturing company that could put indigenous Irish industry on the global map.
“Multinationals are our competitors. We would compete for business but also for people against companies like Analog Devices who are only just down the road from us in Limerick.
“As an indigenous company, it is very hard to pull people away from these organisations.”
Lunn’s biggest bugbear is Ireland’s outdated and underpowered share options and capital gains tax regimes, which he said are not fit for purpose.
“There is a big opportunity being lost because of capital gains tax. The share options system is a nightmare in Ireland and we need to sort that out to make Ireland an attractive place to do business.
“We need to be realistic,” he said.
“If we want home-grown companies to flourish, then there are lots of things we need to sort out. We need to make Ireland a good place to start a company. It still isn’t the most attractive place to start a company. Share options are important and Ireland isn’t good for that. Capital gains tax? Ireland is not a good place to exit or take money off the table. In Ireland, we are competing with Google and others who are good employers and they pay well. The only way we can compete with multinationals for employees is to give workers share options but if that’s impossible, then it’s no good. We need to get these structures right. That’s what will keep Irish companies growing jobs in Ireland.”
Lunn points out that most of Arralis’ business is overseas – in Europe, the US and China – and frictions such as CGT and share options are not helpful for a company determined to expand here.
“Ireland needs to be realistic. If we want to create good, home-grown companies, then there is a lot of stuff we need to sort out.”
Flying without (share option) wings
Lunn said that Enterprise Ireland has been an excellent support to the company in opening up new markets. “That said, it is hard to sell a product that you haven’t sold in your home country. But that is down to scale and Ireland has no aerospace or aero defence industries to speak of. It hasn’t held us back and, as you can see, we are making international headway. Our challenge now is keeping up with demand and for that, we need talented people.
“It’s a real frustration. We would hire every radio-frequency engineer we could find tomorrow, but the biggest inhibitor to getting them is share options.
“We are well funded, but how do you get the best people? You have to have a great package to offer them and options are the key.”
Lunn has no intention of letting this get in his way, but he hopes the Irish Government sees sense on the matter.
“The next year and a half will be about getting to mass production to serve markets like Central Europe, China and the US.
“Our ultimate path is to IPO. For that to happen, we need to reach critical mass.
“Where we IPO is a good question. It will either be the US or in Asia. We have been spending time in the Valley talking with investors, and the key is to get to a critical mass,” Lunn concluded.
“I believe other Irish companies can go global, too. But, for that to happen, the Irish Government needs to facilitate the right structures to allow companies to be on the same footing as anywhere else.”