With a population of just 4.5 million, the Irish market does not have the scale to deliver the returns on the founders’ efforts. Equally, the availability in Ireland of growth capital to build out a global company is limited. So where and how should Irish technology entrepreneurs look for new customers and investors?
For software companies, Silicon Valley is Hollywood. It’s where the stars live and work, the sun always shines and the deals are done.
According to PricewaterhouseCoopers National Venture Capital survey 2013, 46 per cent of US venture capital was invested in Silicon Valley/San Francisco and 58 per cent of all US venture investment was in software.
Add in access to the US market of 300 million consumers and the numbers answer the question of where.
Anybody who has raised money for a company knows the amount of networking, lunches, meet-ups and pitches required to get funded. Fundraising usually takes about 30 per cent of a serious start-up CEO’s time.
Trying to do it from Ireland means either it will take half your time or else you won’t get it done.
At Altocloud we made a deliberate decision to be in Silicon Valley from the start. Our engineering team is in Galway but one of my co-founders is based in California along with our head of marketing. Other Irish founders have also chosen the US route.
Openet is an example of an Irish technology company that has successfully scaled globally.
CEO Niall Norton says having a strong US presence provides easier access to capital, to reference customers of scale and to new business opportunities.
“A startup has to ‘surf where there are waves’. You will not attract US customers, or funding, without some fixed US presence”.
Trustev chief executive Pat Phelan, who has recently moved to the US, says trying to build a global business solely from Ireland is difficult: "We were on a plane four weeks a month and it's impossible to sell at any scale out of the back of a rental car, you need to be in situ to close the real big deals."
If you make the decision to go west, the next question is whether you should send one of the founders or hire locally. I have no hesitation in saying the right answer is that one of the founders should get on a plane and move.
There are a few well-known horror stories in the Irish tech industry of companies who have been advised to hire a hot-shot US sales team. Bringing in a team of strangers who don’t care about the soul of your company, without founder oversight, will end in tears.
Six months and half a million dollars later you will be back to the drawing board.
“You will need to establish a place of business and transplant founders or senior people there for a period of time at least to demonstrate commitment and to develop the culture,” Norton says.
“ There is no middle ground – you have to be there and be there a lot. Openet went down the route of transplanting senior people to the US market and hiring Irish folks in the US initially.
“This provided a bridge from Openet (Ireland) culturally and technically to the US-based employees and from there we broadened the employee base to more mainstream US employees.”
Phelan cautions that it is critical to have a strong team on both sides of the Atlantic: “I think the key is a founder out first to build a team, of course this is only possible when you have a strong team at home. I was very lucky in that regard with my co-founder Chris Kennedy and our COO Stephen Fanning”.
These are big decisions but pioneers like Norton and Phelan have shown how it’s done.
There are great supports available from Enterprise Ireland such as the Access Silicon Valley Programme.
The Irish Technology Leadership Group is a great network for connecting Irish companies with customers and investors.
Silicon Valley is the most open business environment in the world – ask someone for help and chances are you will get it.
Great CEOs are always constructively paranoid about missing out on new models or markets.
Datahug founder Connor Murphy has written of his admiration of the bootstrap funding model of Irish start-up Teamwork.com and worries that he is missing out on a huge opportunity in Asia.
“If I was 22 and had just graduated I would be on a plane to Singapore, Hong Kong, Myanmar, Beijing or Hanoi and begging someone like Liam Casey to give me an internship.
“My relative ignorance of the Asian markets really concerns me as I see nothing but huge opportunity in Asia. America has been the obvious (and easy) choice for so long, but I believe the most rapid growth opportunities today are out east,” Murphy says.
Go west is the right answer now but the world is changing quickly and, as Murphy says, the future may be "go east or bootstrap". Barry O'Sullivan is a dragon on Dragon's Den and CEO of Altocloud, a Silicon Valley tech company which also has a base in Galway
