Ireland’s start-up community is fragmented and lacks cohesion

16 Oct 2017

Monopoly board. Image: Urbanbuzz/Shutterstock

There is no doubt that the start-up community in Ireland is buzzing. But, when it comes to really pressing issues, it lacks cohesion, writes John Kennedy.

I believe in karma. I also believe it is important to treat people well on the way up because, I can guarantee you with certainty, you will meet them on the way down. And those encounters can be awkward.

The truth is, however, for every 10 start-ups I meet or write about, only perhaps one or two will make it. And by making it, I mean remaining alive as a brand, not just a happy (or often not-so-happy) exit.

The rest of the road is littered with the debris of broken dreams, broken friendships and relationships, and bittersweet memories.

Start-ups are hard work. Don’t fall for the false glamour.

But, if so many start-ups fail, why write about them so earnestly? Well, first and foremost, we need to get behind our entrepreneurs. Start-ups are fragile, and every bit of support and encouragement is worth it. They need us, we need them and, fundamentally, they need each other.

Also, I believe more needs to be understood about entrepreneurship. While start-up life has attracted a cool factor, rightly or wrongly, the reality is not so cool. Added to this is the instinctive distrust of entrepreneurs that hides behind the friendly, benign smiles of official Ireland.

Personally, I have a fascination with discovering start-ups in the early days of their journey, much the same way you could wonder what it was like to meet a famous writer or musician on their way to success, to understand the essence of the person or the idea before fame distorts everything and ego takes over. You know, like discovering Bob Dylan in the 1960s in New York’s Greenwich Village, Simone de Beauvoir or Jean Paul-Sartre in a 1930s Parisian café, Velvet Underground’s Lou Reed and Nico at Andy Warhol’s The Factory during glam-rock-era New York, or a penniless JK Rowling scribbling furiously into a notebook at The Elephant House in Edinburgh in 1994.

Despite their success, some people in the Irish tech start-up world stay the same and retain the exact same infectious enthusiasm that characterised their early days. For example, entrepreneurs such as Chris Horn (ex-Iona, currently an investor with Atlantic Bridge), Pat Phelan (ex-Trustev CEO, currently at TransUnion) and Colm Lyon (ex-Realex, currently head of Fire Financial Services) are as potent today as they were at the start of their journeys. Highly accomplished entrepreneur and investor Brian Caulfield of Draper Esprit always takes time to listen to entrepreneurs and is refreshingly candid in his opinions.

Others will just disappear behind velvet ropes in the VIP areas of certain tech events, surrounded by a phalanx of PRs and lawyers. Some on their way to success will furtively glance over my shoulder looking for the TechCrunch or The New York Times writer in the room. It’s OK. I have developed a thousand-yard stare and I can see these coming a mile off. I avoid them just as readily.

The Irish start-up scene is characterised by an amazing mix of characters and individuals who are both brilliant ambassadors for this country and who do their fair share to bring people together. Bank of Ireland’s entrepreneur in residence Gene Murphy has been a tireless community organiser, bringing together events such as SUXmas (a Christmas party for start-ups too small to splurge on parties), numerous Startup Weekends and, more recently, the Startup Boost pre-accelerator. Paddy Walsh’s First Friday at Dogpatch Labs provides an invaluable countrywide service. In Galway and the Connacht region, Bank of Ireland’s Tracy Keogh is helping to foster the entrepreneurial vibe and bring people together. Connect Ireland’s Andrew Parish (formerly of Startup Ireland) is also a tireless supporter and mentor in the entrepreneurial community. Axonista’s Claire McHugh is a worthy ambassador for the quality of Irish entrepreneurs and gives freely of her time to tell her story. Niamh Bushnell and the work of TechIreland to create a living database of the start-up landscape could be invaluable, too, in giving everyone an understanding of all the moving parts of the Irish start-up ecosystem. The list goes on.

The point is, however, as vital as the community is, it lacks cohesion.

United we stand

I came to this conclusion this week when the Budget once again failed to address the topic of capital gains tax (CGT). Not a reaction from anyone, really. And, even though the Government has set in train the potential for the KEEP scheme to allow key employees to get shares in the SMEs they work for, there was still not much of a reaction from anybody except people such as Caulfield and Gill Brennan of the ProShare Association, who we reached out to.

This contrasts with a year ago and even earlier, when organisations from the Irish Software Association to Startup Ireland lobbied vigorously for what turned out to be peanuts in terms of CGT.

A movement appears to have petered out.

I am currently studying Europe’s start-up ecosystem, looking at how different cities are doing things differently. In the UK, as we all know, there are the innovative Seed Enterprise Investment Scheme (SEIS) and EIS schemes as well as a generous CGT system that allows a lifetime allowance of £10m, and you only pay CGT at 10pc of that. In Italy, legislation passed by the government of Matteo Renzi has made it easier for innovative new companies to excel. Start-ups under five years of age with revenues under €5m, and which have yet to pay a dividend, are exempt from certain taxes and can create flexible employee contracts that include payments in stock options.

And Ireland continues to dodder. You would think that a young, articulate Taoiseach would influence matters. Hey Leo, do something to help entrepreneurs, it would be ‘totes amazeballs’. Am I speaking your language?

The core point is that the start-up movement in Ireland lacks lobbying force. Last week, Caulfield hit the nail on the head. “It seems they [the Government] just don’t get start-ups, and the start-up community is badly organised and fragmented and does not have a powerful lobby in the same way that the farmers or the tourism sector does.

“Failure to resolve CGT is yet another missed opportunity. To some extent, there is a sense of, ‘Well, sure aren’t they doing grand’, which is informed by the perception of the rude health of the tech economy they read about in the newspapers.

“But, as we all know, young start-ups and small tech companies are struggling to keep the show on the road.

“While Enterprise Ireland has been supportive of efforts to address the issues of taxation and share options, the reality is that there isn’t an influential lobby to persuade the Department of Finance to take action on this ongoing problem.”

The situation was summed up neatly, too, by Brian Norton of Ridge Road, who is also trying to foster Dublin’s fintech potential. “I think about this a lot and one of the things Dublin does very well is a host of things; from Startup Grind, to First Fridays at Dogpatch Labs, the NDRC – lots of different things. Lots of disparate things.

“But the problem is a lack of cohesion. You can run around and attend a lot of events and meet lots of people but you can never quite grasp the full picture.

“I wish there would be a bit more coordination and a coming together of the various supports. There are various start-up funds, seed funds and pockets of money all directed at fintech, all doing the same thing. So, there needs to be more cohesion and a critical mass to be more effective.

“If you start up tomorrow, there is no single, reliable place to get advice and do brainstorming. The disparate nature of the supports that do the same thing makes it harder to navigate than it should be,” Norton warned.

While researching European start-ups, I happened upon Copenhagen last week and something stood out about its start-up community: it coalesces around a a body called #CPHFTW (Copenhagen For The Win), a community led and organised by start-ups whose ambition is to place Denmark and the Öresund Region firmly among the best places in the world to start a business.

Study the organisation and you’ll find there is no apparent figurehead. And that’s the key. It is a coterie of start-ups led by start-ups. Isn’t that an interesting idea?

The reality is that the Irish start-up community has a good thing going. It just lacks cohesion. And it lacks real understanding and buy-in from the State on core issues such as taxation and share ownership. It is not a lobbying force, but should it be?

It needs to be listened to. Otherwise, there will be many a good start-up that will not be given the chance to even pass Go!

Monopoly board. Image: Urbanbuzz/Shutterstock

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John Kennedy is a journalist who served as editor of Silicon Republic for 17 years