ChannelSight CEO John Beckett argues that targeted liquidity supports from the Government are necessary to keep innovative Irish start-ups afloat through the Covid-19 crisis.
Creating revenue growth with technology and innovation is achieved by following a relatively simple formula – a concept or idea is developed into a product or service, it is brought to market in a limited way to test, then if customers adopt it, it is scaled and pushed out to a wider audience of customers.
Cycles of continuous improvement and innovation ensure more customers adopt or stick with it and continue to pay for the service, and ‘moats’ are added to protect against the inevitable competition that springs up once success is proven.
There are many nuances to this model depending on the type of innovation and the product or industry, but broadly this is how high-growth companies are born and mature into world-beating, profitable businesses that employ hundreds or thousands of people.
Indigenous companies at risk
Ireland, like many countries, has firmly embraced the benefits of creating economic success by following the Silicon Valley playbook to foster high-growth, innovative companies that create jobs and wealth in the economy.
The IDA has done a remarkable job of attracting more mature high-growth technology companies to base their European operations in Ireland, using tax and other incentives, to springboard into the EU single market from here.
Enterprise Ireland focuses on fostering indigenous innovation and is now the largest investor in seed or early-stage companies in Europe and the second largest globally. More than 220,000 people are employed by Enterprise Ireland-backed companies, with over 60pc of those being based outside Dublin.
The unprecedented crisis we are in as a result of the coronavirus pandemic puts all of this hard-won success at risk. Unless the government acts decisively to provide appropriate supports to these indigenous companies, many will not survive the immediate months ahead.
While helpful to many businesses, the supports that have been put in place to date are simply not fit for purpose for most high-growth businesses.
Other countries in Europe – France, Germany, Switzerland, as well as the UK and especially the US – already have comprehensive mechanisms to deliver appropriately robust supports to these R&D-focused businesses.
We are now playing catch up, and jobs are being lost today as a result.
‘A tsunami of company failures’
In ChannelSight, like many other high-growth companies, we have changed our immediate focus from growth to sustainability, and have already taken difficult decisions that have impacted every member of our team, slashing our costs in the last month.
This has involved painful salary reductions, shorter working weeks for some team members and, unfortunately, some lay-offs. We have already been forced to reduce investment in the R&D that will power the engines that drive our growth and success tomorrow.
But we are just the tip of the iceberg.
I have spoken to dozens of founders and CEOs in the last two weeks, representing companies that employ thousands of people. There is about to be a tsunami of company failures unless we get appropriate supports put in place now.
I cannot stress the urgency of this enough – many substantial companies, our best and brightest innovators, are one to three months from bankruptcy.
Targeted liquidity supports
At the same time as we face increasing international pressure on our low-tax model of attracting overseas later-stage innovative multinationals, we face losing a generation of our most innovative indigenous companies and the jobs that they have created and will create.
This must be prevented at all costs if we are to remain viable as an international hub for innovation and R&D. The future of Ireland’s innovation economy is under grave and immediate threat.
I am not advocating across-the-board bailouts for risk-hungry tech companies and their win-or-bust founders and investors who took wild gambles on trying to become the next ‘unicorn’ or billionaire.
I’m proposing we urgently support Scale Ireland’s call for targeted liquidity supports that include a mix of debt, equity and grants, with the specific purpose of retaining high-quality jobs and R&D capacity, while protecting the huge State and private-sector investments that have been made in the innovation economy over the past two decades.
In many cases, these supports involve simple tweaks to existing policies or programmes to unlock relevant support for the companies that need it. This is not rocket science and can be delivered in days once the will to act is there.
Remaining a leader in innovation
When I started my career in the tech sector over 20 years ago, there was much more limited innovation infrastructure in Ireland, and we were just beginning to understand the power and potential of the internet and technology to forever disrupt traditional business models and create endless opportunities for countries like Ireland.
Since then, we’ve become a genuine global leader in innovation and R&D.
It’s vital that we don’t squander all that effort. We must put in place measures to support the most innovative high-growth companies at their most fragile stage during this period of such enormous uncertainty.
Let’s enable these companies to go on to become the global success stories of tomorrow, and deliver the jobs and exchequer returns that come with that success. There is absolutely no time to waste.
By John Beckett