Failure to scale is the biggest threat to Ireland’s start-up sector

14 Dec 2015

A large portion of start-ups in Ireland (42pc) were formed in the last three years

Despite record numbers of start-ups being created, very few are scaling successfully. That was the stark finding of a survey of over 400 early-stage entrepreneurs in Ireland.

The survey by Startup Ireland and Amarach found that 48pc of start-ups were inspired to start their own businesses because of their own direct experience of a problem and related work experience.

The main focus of start-ups in Ireland tends to be in either consumer/internet or business/enterprise products and services, with only 10pc looking at opportunities in life sciences and biotech.

A large portion of start-ups in Ireland (42pc) were formed in the last three years.

However, 81pc of all start-ups surveyed admitted to having problems scaling their business, up from 72pc a year ago.

The key obstacles are talent and funding in 79pc of cases.

A UK study by the ScaleUp initiative found that just 1pc of start-ups scale to achieving £1m in revenue six years after they start, suggesting if the experience is the same in Ireland then the majority of start-ups may never scale.

Scale blighted by skills and funding shortages

“If Ireland can get the fundamentals right at the beginning of the journey for start-ups then there is the potential for larger numbers of start-ups to be able to start, scale and succeed from Ireland,” said Startup Ireland CEO Eoin Costello.

“Based on this representative sample there appears to be insufficient awareness amongst entrepreneurs of what supports are available, not enough accessible supports for scaling and entrepreneurs perceive that the start-up sector in Ireland is not cohesive and aligned.

“Our survey highlights the fact that coordinated action across the private and public sector is needed to enable Ireland’s start-up sector to deliver to its full potential.”

The study found that shortage of working space means 49pc of start-up entrepreneurs start their businesses from home, up from 40pc a year ago.

This could be a major problem because research by Startup Grind found that entrepreneurs working from home lack networking opportunities and as a result could struggle to scale up.

While 78pc agree that Ireland has the potential to become a global start-up hub, 79pc do not believe Ireland’s start-up sector is performing to its full potential.

Start-ups most vulnerable at the early stage

Seasoned entrepreneur Colm Lyon, who started Realex Payments in 1999 and sold it this year to Global Payments for €115m, said that if more and more people are being encouraged to create start-ups then it is only right and responsible that they are given every chance to succeed.

“More people are engaging in setting up businesses of their own and it is imperative that we have the best start-up ecosystem in place to support these entrepreneurs,” Lyon said.

“However, most respondents to the survey (79pc) believe we are not performing to our full potential. To build jobs, enterprise and wellbeing we need more businesses.

“The early stages of a business are its most crucial and we must focus our attention on ensuring that no stone is left unturned with respect to the support we can provide to early-stage businesses.

“Perhaps the most important – and often most misunderstood aspect of that support is the availability and easy access to early-stage funding. We must make early-stage funding easier and more accessible. In doing so, we accelerate the development of the business so it can adapt faster, learn more and increase its chances of success,” Lyon added.

Scale up issue image via Shutterstock

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