Setting up a business comes at a price, with everything from a feasibility study to product development, to marketing and staff costing money. On top of that are commercial rates, insurance bills, water charges, electricity, premises rental, telephone charges and running costs.
Grants can make these costs less of a burden, according to Peter Connor, founder of accountancy software firm Bullet.
He, along with his co-founder John Farrelly, successfully applied for and received three government grants when they set up their software firm. "Start-ups are adventures you undertake without a map. As a founder, it's your job to navigate your company through a treacherous and shifting landscape," Connor says.
“We found the whole grant application process a painful experience and we weren’t alone. Often if you get one grant, you can’t get the previous grant. We also kept hearing from other people that they didn’t know what grants existed.”
The two have since compiled a guide to start-up grants in Ireland named How to get €100,000 Free off the Government.
While the capital required to start a business has dropped, according to Connor– and in the case of digital business has plummeted – getting your hands on that initial capital can still be a major hurdle.
He says young start-ups end up lost in the grant funding landscape, instead of the market landscape where they belong. “There are too many companies surviving from grant-to-grant, focusing their energy on unlocking the next drip of public funding.”
While he admits it’s possible for a lone programmer to create a useful app in days and get it into the hands of millions of people before a venture capitalist has time to return an email, more often than not, entrepreneurs will need cash for their start-up.
“Even in leanest bootstrapped companies need money to keep the lights on and the credit-card companies at bay, and ideally that money has to come from a source that won’t distract you too much,” he says.
“We’re lucky in Ireland to have so much start-up funding available, relative to our population. However, much of it is ultimately public money, and accessing it involves dealing with some inevitable bureaucracy, essential for public accountability if nothing else.”
He says the New Frontiers Entrepreneur Development grant is the best grant for start-ups to apply for: “They put €2,500 in your bank account each month and you receive €15,000 in total. Unlike other grants you don’t have to pay VAT on it, which is crazy being taxed on a government grant.”
He says entrepreneurs applying for grants should remember free money is not easy money. “If you think filling in some forms to get money from the Government is painful, wait till you have to deal with VCs who are gambling their careers on you.”
There to be used
That said, entrepreneurs should not feel guilty about applying for and availing of grants, according to Scale Front chief executive Sean Blanchfield. "Grants are there to be used by entrepreneurs, who will be truly responsible for bringing wealth and employment back to Ireland."
Connor says cash strapped start-ups often use equity as a means to get by, when they could be using grants. Getting equity investors can lead to terrible problems when you realise the person is the wrong fit.
"Do everything you can to get to know investors before agreeing to investment; ideally they should add value in addition to the capital, but at the very least they should not prove difficult," Bebo co-founder Michael Birch says.
He says entrepreneurs should ask venture capitalists about other investments they’ve made and reach out to the CEOs/founders of those companies to understand what role they played post investment. “If you can arrange to speak with them on the phone it’s surprising how honest they’ll be.”
And if anyone should know about start-ups, it’s Birch. He sold the online social networking site Bebo to AOL in March 2008 for $850 million.
Bill Liao, an Australian entrepreneur and venture partner with SOSventures, says the days when it really mattered that you had a big name angel on your board are gone.
“People only really care about traction, and real traction is expressed in cash from happy customers, and so real traction is accretive; investment is always dilutive.”
Delusional
"Also, many angels and other bodies do not follow on their investments if you need to raise growth capital at a later stage, and so they stop delivering value after one investment. This means that subsequent investors can be put off because the original investors are not stepping up."
However, the CoderDojo co-founder warns that start-ups are also a dangerous game with huge risks and so are not suitable for people who need huge rewards or have large mortgages.
“If you are joining a start-up to get rich, then 95 times out of 100 you are delusional. Start-ups are hugely rewarding and super stressful, and no one really knows who generated the most value at the end, so as long as you have enough cash to keep the lights on and to keep everyone from eating cat food, that is all the remuneration a cash-strapped staff member in a start-up should reasonably expect.”
Aspiring entrepreneurs can get the How to get €100k Free off the Government ebook by tweeting @bullethq. "We thought it would be a good idea to use the social network as a currency."
