Unenterprising Ireland

16Oct07

Niall Larkin blogged the other day about Paul Graham (he of Viaweb and Y Combinator fame) and his somewhat contentious remarks that if you’re serious about your startup you should move to Silicon Valley. You can read Paul Graham’s original post here and his follow-up here but essentially his point was that investors on the west coast of the U.S. are much more aggressive and less risk-averse than their east-coast counterparts. You’re more likely to get funded early if you go west young (wo)man!

There were some interesting comments on Niall’s post¹ not least of which was one about the barrier to entry for startups being a lot lower these days, especially if you’re in a web business, thereby reducing the need for early stage funding. Despite this being true, you will still eventually need an injection of cash at some stage if you really want to grow the business. My comment stated that in my limited experience it is really hard to get any kind of serious funding here unless you are independently wealthy yourself, know someone who is or don’t need the money in the first place².

Anyone who hasn’t had experience of them would think that Enterprise Ireland are probably a good bet to get funding. However if you think that then the story of the Collison brothers who started Auctomatic and then tried to get funding from EI is eye-opening. It’s a really great idea and, like most great ideas, really simple. Sure they were young, inexperienced and just out of school with no corporate background but they were smart. Here’s a brief snippet of Patrick Collison’s bio from the Auctomatic website:

When he was just 15 he wrote his own programming language which won him Irish Young Scientist of the Year and runner up European Young Scientist of the Year. [..] Patrick gained admission to MIT aged just 17 but decided to move on so he can could [sic] dedicate himself to redefining selling online.

Smart guy eh?

EI turned them down.

Fair enough. They must have seen something they didn’t like.

Having been turned down by EI, the Collison brothers approached Y Combinator. By co-incidence Y Combinator were also talking to two guys in the UK who had a similar idea. They brought them together, brought them to the west coast and they have now raised something in the region of $400k in funding from multiple sources³. The product is looking good and has potential to make some serious money. Oops… looks like EI missed the boat on that one!

It strikes me that if Enterprise Ireland is supposed to be encouraging Irish businesses it should be prepared to take a risk with relatively small amounts of money⁴ to encourage just these types of startups. Age or lack of a corporate background should never be an issue. I’m not necessarily suggesting it was in this case but if it was it was very shortsighted. If this post, part of a recent debate on the age profile of tech entrepreneurs, is anything to go by, basing funding decisions on age and experience of the founders could easily make EI look a bit like the record company that turned down The Beatles because guitar bands were out.

According to this posting by Damien Mulley today it seems that EI are going one step further though and they are now more than happy to give money to a VC firm that is investing it in UK-based companies.

It seems that despite their name Enterprise Ireland are interested in neither.

– Fintan

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1 – Niall had some WordPress problems and lost the post. He managed to get it back but had to attach the comments directly onto the end of the post.
2 – And can get an introduction to a VC. They don’t take cold calls.
3 – There’s a great interview with the Patrick and John Collison from a Limerick OCC in August here talking about Auctomatic and the whole experience of getting up and running.
4 – Y Combinator is an angel fund whose deals are typically in the region of $5k with an additional $5k per founder for around 6% of the company.

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