Copacetic

I love EI and both the development advisors I have had have been super, BUT, the web site still sucks. It has always sucked. Why does it suck? Because instead of being organised around customers needs (i.e. the Irish Entrepreneur) it is organised around EI’s needs to publish information on web.

So ten tips for EI to make its web site better,

1. Make it Social: Give you HPSUs a login and create a social network around startups in Ireland. Only you know about all of us. Better still start something on Ning or Facebook or Google Groups
2. Add a Blog: Add an Blog and RSS feed for breaking news that way everybody gets the news rather than the select few who make it through the venn diagram nightmare of EI mailing lists
3. Give Me The Money: We want your advice for sure, but first we want your money Rapid front page “give me the money links” would take visitors right to the core of the matter, CORD, Innovation Vouchers, RTI, Equity Investment, Seed Capital and BES
4. Search more than your Site: Put up a decent search engine that links all the relevant resources. Here’s one I made in ten minutes, Government Websites for Irish Entrepreneurs
5. Automated Mailing Lists: Using a mailing list manager so when I register interest I can also unregister interest without requiring some manual step to remove me from the list. And, wait for it, let me choose what I’m interested in
6. Show us the World: EI has fantastic resources overseas lets seem them on the web site, how do we engage with these people, what can they do for us?
7. Share the Success: EI runs great events all over the world, lets hear about them online
8. IE is not the only browser: Make it look right in Firefox, this is not rocket science lads. 90% of your visiting customers are using Firefox and the rest are using Safari
9. Word is a proprietary format: Stop publishing documents in MS Word. There are far better and more palatable alternatives including OpenOffice, PDF, HTML etc. etc. How long before somebody publishes a new document in Office 2007 and all us poor saps with Office 2003 get screwed?
10. Pick One: Pick any one of these and run with it, then ignore the rest for now

How would you improve the Enterprise Ireland web site?

BTW: All this goes double for the Irish Software Association Web site!

Silicon Republic reports recently that,

Enterprise Ireland said that to date it has committed some €148.75m to eight seed and venture funds which have succeeded in raising in excess of €500m for investment in early-stage and growing companies

Feargal O Moráin, executive director of Enterprise Ireland, goes on to say,

The 2007-2012 Seed and Venture Capital (VC) Programme, the third such programme to date, has been extremely successful in raising finance for investment in Irish companies at all stages of development … With over half a billion raised for investment to date, this is of particular benefit to seed and early-stage Irish companies

Eh, no Fergal this is of no benefit to  seed and early stage Irish companies. I have no record of any of the VCs that have raised funds investing in any seed or early stage companies to date. The reality is once EI throws it money into the VC pot is has zero control over how that money is disbursed by the VCs. Nor should it have, that’s not howVCs interact with their limited partners (which is what EI is).

Luckily we have the director general of the IVCA, Regina Breheny who offers a more honest assessment of where this money will go (again in Silicon Republic),

Most of our investments would be in software firms that can grow to scale, not in dot.com companies or because someone has a nice widget … Funding in Irish companies is at its highest now since 2001, but much of these are follow-on investments in existing companies. There is still a lot of work to be done in raising money to seed new start-ups. Venture capitalists are currently raising money but it’s debatable how much of these funds will go into new plays in the next five years

So thanks for the millions EI, but we are unlikely to put it where you want it to go.

I’m all for a thriving VC market in Ireland but my own view is that EI’s co-investment strategy is a more effective vehicle for ensuring that Irish early stage and seed startups get the required funding they need.

It will be very interesting to review the protfolios of the irish VCs (Delta Partners, the AIB Seed Capital Fund, Atlantic Bridge Ventures, Kernel Capital Partners and Fountain Healthcare Partners)  who have taken the EI shilling at the end of their current investment cycle.

From the Special Report on eGovernment,

“In 2002, the Government set a target of having all public services capable of on-line delivery made available by 2005.  This was clearly unrealistic”

Right lads, I know what to say at my next EI audit review.

There’s more,

The Public Services Broker was planned as a single website which would facilitate data sharing between public service providers and link together all the public services associated with significant events for members of the public, such as the death of a relative or setting up a business.  The aim was to make it easier for members of the public to find and use services.  No budget or timetable was set for the Broker project when it got initial Government approval in May 2000.

The Broker concept was innovative and ambitious.  Its feasibility, however, was not examined early on and planning was weak.  A review of the project in 2002 led to a scaling back of the proposal.  In May 2003, a less ambitious project was approved with estimated development costs of €14 million.  This project was due for completion in August 2004 but was not completed until December 2005 at a cost of €37 million.  Annual running costs for the Broker are in the region of €14 - €15 million.

37 million? For a project that essentially failed to deliver. With 14-15m annual running costs. Can you say return on invesment?

Hands up here any software startup that would be happy to share in that 37m in chunks of less than 100,000? Who would leap at a chance to implement a Government system at cost just for the experience and referenability.

The Irish government needs to scale down the size of its IT ambitions untils it learns how to manage them properly.

Patricia O’Sullivan the M50 programme manager wrote an excellent comment on my previous post about EI funding. I’ve given her this post because her information is too valuable to bury in the comments.

==> Patricia O’Sullivan Speaks

Thank you for putting this blog up Joe, it is something a few of us have had on a ‘to do’ list for years!

I have been the manager of the M50 EPP enterprise programme for
almost 6 years and have assisted a large number of companies prepare
for CORD, EI equity investment and the other grants you mention. This
experience allows me to add some comment having seen the workings a
number of times. I hope they help.

EI and Equity Investment

Yes, the EI staff are on your side and they do want to give you the
money in point of fact they are constantly trying new initiatives to
get even more companies to approach them. EI however must work within
their remit and are closely governed in what they can / can not do by
both the Irish Government and by the E.U.. You must therefore ensure
that your company meets all the criteria and that it is at a stage of
development where there is enough evidence to show that the likelihood
is that it will be generating the bulk of revenue from export, meeting
employment figures, etc.. Above all they are not a charity fund – your
company must reflect a good investment – whilst EI are softer than a
venture capital company or even than many professional business angles
they are still reviewed by their superiors and must account for their
investment decisions so the risk / return must look acceptable (even if
a little more risky than others might accept). And, remember that under
their remit EI’s hands are tied and their investment is only allowed to
cover a percentage of your R&D expenditure – not your sales and
marketing activities much as they wish they could.

Something Joe did not mention and which I am not sure if it is
still essential but in every case that I have experienced the DA has
visited 3 or 4 customers or potential customers at least two of which
had to be abroad (UK did not qualify) to confirm that the product or
service will sell. Another point worth noting is from the date of
application to the day the cheque is in your hand can be longer than
people expect – typically between 8 and 12 months in my experience due
to the time for all the various steps Joe outlined so clearly and to
the necessary revisions of documents not to mention silly summer /
Christmas seasons and vacations of key people. This point catches many
people out because as Katherine Lucey so wisely said the matching funds
are not what is in your bank the day you apply or what was invested in
the past but rather what is there after some point in the EI process
which tends to occur before final approval. This critical point catches
many people out because they have their BES or other funds spent too
early. You need good financial management to ensure that you do not get
caught out this way and end up having to raise more private funds and
lose yet more equity – BE WARNED.

Your EI Development Advisor (DA)

These people are critical to your success in obtaining grants and
equity and most of them are very good BUT from what I have been told
each of then can have up to 65 companies allocated to them at any one
time so they can not keep up with them all. That is before we take into
account the need to attend internal meetings, external events and the
usually bureaucracy that goes with a large organisation. So you MUST
help your DA by keeping them in the picture with regular updates. I
suggest a short monthly email with a short list of bullet points under
a couple of headings e.g. ‘Achievements this month’ and ‘Issues we are
facing’. Then a few days later follow up with a quick phone call to see
what they think – to get them thinking how they can help you they need
to know what is going on. It is too late after an event if you are told
“we could have paid for that�.

Incubator Programmes

Yes, I
recommend the incubator programmes. There are many of them around the
county and participation on many of them entitles you to ‘apply’ for
CORD funding. Other reasons for attending incubator programmes are (1)
to mix with others in the same boat; (2) to benefit from the advice and
experience of others who know the ropes; (3) to be made aware of
various things i.e. grants and other supports you would not have known
about (see Ian Snipper’s reply about CEB); and (4) this is the reason
quoted by successful entrepreneurs who have sold a previous business,
and it is to have a discipline placed on you to get out of your comfort
zone and do some of the not so pleasant but necessary things for
success.

CORD Funding

CORD funding,
if you qualify for it, is effectively 50% of your previous year’s
salary to a maximum grant of €38k (there has been talk of increases in
this figure for some time but no sign yet). The grant may have an
expenses element if 50% of your previous salary is less than €38k to
take you up near to or to that max figure. If you are on an incubator
programme that pays you a stipend then the value of the stipend ‘may’
be deducted from the CORD grant. The CORD money is paid monthly in
arrears like a salary. There is a lot of confusion about whether it is
taxable or not. A number of my former participants have got letters
from Revenue saying it is not, another was told it was but later got a
refund, many take the view it is a grant and say nothing (sort any
potential future consequences at the time). The advice of EI is that
you should seek direction from your accountant. The EI staff are not
tax advisors and are reluctant to give any advice on this matter for
obvious reasons.

Feasibility Grants

Whilst it
is rare you can actually qualify for a Feasibility grant and the other
grants Joe mentions whilst in receipt of CORD. I have had a number of
participants do so successfully. However you should note that EI will
not double fund the same activity so it must be for a different
activity. Let me give you an example of a recent case. A participant
was granted CORD in January this year to “investigate the feasibility
of a software services business and prepare a business plan�. During
the research activity he conducted in the early months on the incubator
programme he discovered that the usefulness of his offering would be
seriously limited unless he did some R&D in the field of
electronics to widen the market for his software service. In early
summer he applied for and received a feasibility grant which is 50% of
total expenditure (50% of €60k if I recall), used it with his own cash
to pay a third party to undertake the work and is currently integrating
the hardware and software prior to launch. This was clearly a different
activity and therefore qualified. I have seen others get key person and
other grants whilst on CORD – the activity to be funded and status of
your company are what is important.

Sorry about the length of this post but this is a complicated area and I hope that my post has helped a bit.

At the FOWA Demo Bar Conor O’Neil and I were exchanging notes on getting funding out of Enterprise Ireland. We are in the process of completing the R&D Equity grant process with Enterprise Ireland so here is our story.

This information related specific to our application (which is for a R&D grant associated with a software company) your mileage may vary in other sectors. The process is not adversarial and the EI staff are on your side. They (by and large) want you to get the money.

You should also be aware that EI offer a host of other incentives to businesses and I encourage your to trawl the EI web site with your sector in mind.

Do EI know you exist?

The first step in this whole process is to get on the EI radar. You have two goals 1) achieve HPSU status and 2) Get a Development advisor assigned. HPSU = High Potential Startup. A HPSU is a a company likely to generate employment or exports in the near term (next 3 years). The best way to get this (in Dublin at least) is to join an EI endorsed incubator program there are several to choose from, we participated in the HotHouse Program based a East Wall.

On the HotHouse program each batch of ten companies was a assigned a group DA. The DA (DA=Development Advisor) is your mentor and guide and you next job is to get your own personal company DA assigned. This will happen when you start to make overtures regarding any one of several grant schemes that EI operates.

The first grant available to us was CORD (commercialization of Research and Development). This is strictly speaking designed for commercialization of university research but we got this pretty much because we were participants on the HotHouse program. You have to submit a two page business plan and some three year financial projections, but as long as you meet HPSU criteria (Exports and Employment) and sound reasonably credible you are in the gang (I think 8 out of 10 in our program got the CORD grant).

A CORD grant will net you up to 31k euro tax free, but you must be an Irish national and must have paid at least that much in tax in the previous year i.e. this is essentially a refund of your tax. They will go further back, but it gets tricky. Word to the wise, this is where that note on the top of your P60 that says “this is a valuable document” comes home to roost.

As I was investing in my own startup I started to engage with EI directly towards the end of the HotHouse program (around Sept 2006). At this point EI assigned me my own Development Advisor. Bingo, now I was in game.

What’s Available to early stage startups?

So once you have a DA there is a bunch of grants available. Now there is some subtlety here that often eludes people. EI loosely allocates around 65k in startup funding to each HPSU. This can be drawn down as,

• CORD
• Feasibility Studies
• Market Research
• Strategic Consultancy
• A host of others with more specific markets in mind

However, they will not “double fund” an initiative. So for instance while I was drawing down CORD I couldn’t apply for feasibility or any of the other grants.

We did use a strategic consultancy grant to get our final application into shape, but the key thing to remember for most of these grants is that they are nearly all (with the exception or CORD) offered on a “spend it to get it” basis. So if you are a penniless startup they are about as much use as a chocolate teapot.

To really crack open EI’s coffers you need to apply for R&D and/or Key Hire funding. These are often bundled together (as was the case with us) into a single grant application.

Applying for the big money

EI will help fund the growth of your business if you can demonstrate the ability to raise matching funds yourself. This typical grant for software startups like PutPlace is offered as a 50% 35% subsidy on your total R&D spend over a period ranging from one to three years. EI expect you to demonstrate the ability to hold up your end of the project for its duration, typically by demonstrating you have cash in the bank to cover the costs of the project over its duration (along with the EI cash). So the first you have to do is raise (or plan to raise) a pile of cash. The Business Expansion Scheme has been used by ourselves and several other companies to give angel and early stage investors an opportunity to to get a 40% rebate on their investment.

Its important to note that EI will not value your company for you. So, in the absence of a third party setting your valuation (e.g. a VC) EI will invest using a financial instrument known as a Cumulative Participating Preference Shares. These are shares that convert to ordinary shares at a discount to the final price set by a third party investor (typically at the next round of investment).

The first step in the process is to fill out a R&D application form. This gives an overview of the project and is the base document that will form a launch pad for a host of other submissions. Don’t be obsessive about getting your EI submission documents perfect, its much better to get something in early as they can all be revised right up to final committee stage. You champion and the person who will eventually pitch your idea to the funding committee is your DA so its important to keep them informed and onside. (We didn’t do a great job of this at the start, but we got better as time went on).

The R&D application will typically be followed by a meeting to discuss the project and if you and the DA are happy with the application at that point you can proceed to the next stage. Your DA may also propose a feasibility study to analyse any gaps perceived in the initial R&D application. EI will often grant fund this study.

They key things to outline in the R&D application are,

• Novelty: What makes this different. new, unusual, deserving of R&D funding. You don’t want to pitch incremental improvements to an existing service.
• Difficulty: Does this initiative require significant effort to resolve serious technical problems?
• Cost: A detailed breakdown of the costs and associated headcount
• Benefits: What will the be the key benefits to accrue from completing this R&D (remember, employment and exports are what light EI’s fire)

Technical Assessment

If the DA likes your R&D application he will assign a technical assessor. The technical assessor is there to establish,

• Your technical credentials
• The actual novelty and or difficulties associated with the project
• Your ability to deliver
• The key challenges associated with the project
• A validation of the costs and headcount

The interview takes a few hours and will typically range all over the project.

Financial Assessment

After technical assessment you will need to produce a detailed financial data sheet that detailed your costs using an EI supplied template. This is essentially a rework on the initial costs submitted and needs to be aligned with a complete set of financials for the business typically out to three years in the future. The financial assessment is initially reviewed by your DA, but the final assessment is done by an assessor who is based inside the EI commercial evaluation unit. A key goal of this phase is to provide external assessment of the overall project viability and to minimize the effects of DAs who have gone native

The Committee

If you make it this far then your DA will prepare a presentation for review by the EI funding committee. The committee meets twice a month so you need to align yourself with one of those dates. You should meet with your DA and technical assessor a day or two before the presentation to do a final review so they are fully briefed. Make sure to keep them up to date with what is happening both with your business and in your sector (Twango got bought just before our presentation which helped price our proposition in the minds of the committee).

Its extremely rare for the committee to bounce a proposal (I’ve never heard of it), which is why so much preparation goes into the process. The answer will come on the day the committee meets, so stay on the phone.

The aftermath

If your successful (of course you were successful with all this help!) then you will need to amend your company articles and memorandum to reflect the new share holding and draw up a new share holders agreement to reflect the EI provisions for shareholding.

Other Points to Note

EI will never hold more than 10% of a companies issued stock so make sure you proposal represents 10% or less of the issued share capital.

EI often offers key hire grants along with R&D equity. They rolled our grants into our equity package but if you can keep them separate that would be peachy, ‘cos then their a straight cash grant and not equity.

They will not take a board seat, but the audit requirements over the lifetime of the project can be a bit burdensome. For instance you will need paper copies of signed time sheets for all time that is eligible for EI grant assistance.

Only full time PAYE employees are eligible for cover under the R&D scheme.

EI will only fund against future spending, you cannot get grant aid retrospectively.

… To have a meeting with Enterprise Ireland, where they don’t mention in hushed tones, that its tax payers money, after all.

I am at this shindig today at the Crowne Plaza Hotel (WIFI 15 euro for the day). Is IBM going to lob a bit of cash at the Irish Software Sector? Oops, they just said they are not an investment house, they want to partner and “add value”. I’ll get my coat

Hang on, they are interested in acquisitions they might buy me. Ok, that’s cool, we can go with that.

In Dublin IBM’s technology Centre  is focused on RFID. 

This is going to be a state of the art facility (not built yet, planned to open in the Summer).  There is a terrible graphic of the centre, the entrance looks like an old Cray computer.

IBM is focused on working collaboratively with VC backed partners at seed, early stage and late stage VC backed companies. The seed guys are pretty far out there on the slide. i.e. I can’t see LouderVoice, Sxoop, MySay and PutPlace getting a lot of attention.

Objectives of the centre:

• Build relationships with business partners
• Assist VC backed companies leverage IBM products, services, research, mentoring
• Open eyes and ears
• Assist VC backed companies in driving revenue

Question: What are the qualification criteria for access to the centre’s services? Deborah in next section will answer.

Question: Will IBM provide VC? No.

Deborah Magid - The IBM model for supporting entrepreneurs and Startups

• Innovation that matters is innovation applied
• Innovation is technology + business
• We have offices in every country in the globe it is legal to operate in
• Business Strategy - Business Value, Infrastructure Value, Component Value
• Business Management Focus - Core Business, Growth Business, Emerging Opportunities
• Emerging Opportunities : test business models, prove viability, test growth e.g. RFID, Open Source, Retail, Web 2.0, Virtual worlds, Web Services/SOA, CleanTech/Energy, SaaS
• Will evangelise partners technology when appropriate

IBM Corporate Venture Group

• Its not about money, its about the innovation ecosystem
• No investment via cash, more about technical and marketing resources
• We build relationships between VC and Entrepreneurs
• Group has sector and geographic focus
• 1300 venture backed partners today
• Go to ibm.com and click on the link for partners program to join

What do we do?

• Exchange ideas with VCs (business models, technologies)
• Connect high potential companies with VCs
• Scout for companies that may fill gaps in the IBM portfolio
• Introduce promising business partners at partner world
• Act as a channel for strategy, information and exploration of business opportunities

Partner program has Member, Advanced, ISV Advantage and Strategic Alliance levels. More IBM go juice is available at each level.

IBM goes to market by vertical  industry (IBM’s industry definitions).  Its pretty much focused on business play’s so companies like mine are SOL.

There is a partner portal (yawn). It has social networking (double yawn).

The innovation centre will give you access to IBM software and hardware for testing (both locally hosted and remote access to mainframe).

IDC says IBM has the best partner program (go IBM!)

They listed five European companies as successes. Has anybody else heard of Volubill, Unicorn (IBM acquired), dbMotion, Definiens or LightSands Communications? Are there no Irish successes that IBM has been involved in?

In 2006 4.1bn dollars of of VC was placed. Biggest investment in 4 years.

Michel Duponchel - Digital Convergence

• Movement from Massive/Passive TV viewing public to “Coolkids/Gadgeteers” who want much more control over what they watch and how they watch.
• There is a generational chasm between these groups
• Interactivity is the key
• The beginning of the end of TV is emerging
• Content is accessible from a number of sources and devices (not just TV)
• The threats to existing players, Telcos, Google, Yahoo, Microsoft, Apple
• Digital home value chain - Content, Access, Platforms
• The layers in this chain are currently linked together by a single vendor e.g. Sky
• Consumers want choice and the ability to pick and choose the best of breed in each of these layers
• TCP/IP as a distribution medium disintermediates TV companies (and governments!)
• Telcos deliver quality of service

Michel finished his talk with a bunch of slides indicating some architectures that IBM was using to resolve the issues existing telcos, network operators and content producers are facing. Lots of big hardware with Tivoli, WebSphere, MQ and BPEL4WS (for the love of Christ!). Think about getting no change out of 10m dollars and you’ll get the picture.

I asked him how IBM was planning to address the issue regarding businesses (such has content producers) who are starting to operate on margins and can’t afford the huge sunk cost of an IBM techstack? He said they would service the service providers who supply such services.

Didn’t seem to know about EC2 and S3.  Ouch!

So Enterprise Ireland doled out 175 million euro to Irish VCs last year on the basis that they would find matching funds and thus inject new vigor into the Irish VC market. Since then, well not much has happened. No Irish VC to date has raised a new fund, and none looks like doing so in the immediate future (please comment if you know different).

So here’s a suggestion, carve out 50m of that fund (or 75m or 20m) and just give it away in chunks of 100k to any Irish startup who meets the following criteria,

• Are in or have completed an Enterprise program, such as the one at the PDC or the M50 program at Tallaght. There are others but these are two I know about
• Meet standard HPSU criteria (will generate employment and export markets)

That’s it. You get a 100k (It can be tranched but that’s more management overhead, better to just chuck it out there) and go and start your business.

Even 50m would mean you could fund 500 startups. How many HPSUs are there?

That would still leave 125m to prepare the ground for those startups once they need to raise serious money from the Irish VC market.

Conor O’Neill leaves a valuable clarification in the comments,

A key requirement is that matching funds are NOT required from the startups

Enterprise Ireland Payment in Advance

Originally uploaded by Joe Drumgoole.

I got the attached letter today. If you can believe it, Enterprise Ireland, the government agency charged with fostering, encouraging the support of small businesses now wants payment in advance for its services.

Why? Why? What possible reason could their be for this other than some idiot bean counter ruling the roost.

Everybody I meet in EI is consistently helpful and well meaning, buts the organisation seems to an excellent example of lions led by donkeys.

Who makes these decisions? What is the justification?

I was at the Docklands Innovation Park Awards tonight to see Jonathan Mulligan of OpenPlain receive a cheque for €10,000 as the overall winner of the event.

OpenPlain is a subscription service that allows businesses to track the productivity of their employees by getting them to install a piece of software that monitors which applications are running and being used at any given point in time. It differs from the usual employee spyware in that it offers the user the ability to modify their own behaviour by showing them the stats that have been collected and comparing those stats with their peers. Yes I know, lots of people don’t like the idea of this kind of software, but so does Jon and more importantly he quantified it. 30% of customers won’t touch which leaves a very healthy 70% market share thank you very much.
Two other companies were up for the big prize. Pedantix (warning website has annoying audio), represented by Frank Fowley, and The Wealth Shop represented by Ray Langan.

Pedantix have developed automated software called FlightPAD. FlightPAD connects flight information display systems (aka, FIDS, the big board at the airport) with personal address systems and converts FIDS messages to PA messages that can be routed to wherever they are required. The software has been sold successfully to several Irish Airport authorities and their are obvious cross over markets to Malls, Train stations, bus stations etc.

The Wealth Shop is a retail play offering flat fee (€200) financial advice and planning to middle income earners (30-80k bracket) . They have software package that can produce a financial plan for each customer and they opened their first retail outlet in the OmniPark, Santry in Dec 2006. They have plans to open several more retail outlets over the coming year. I want Ray to do my presentations in the future, he was fantastic.
In general the quality of offerings and presentations were excellent and what was most encouraging was that all these businesses are currently revenue generating.
Three companies also won highly commended awards on the night, PutPlace.com (blush!), G20 Technologies and Tochar Technologies. The commended companies only got to do a 90 second elevator pitch, so I encourage you to visit their websites for the full story, as opposed to compressing it even more here.

The standard was universally high and it’s a crying shame there isn’t a dollar of VC available at the moment from the big players in the Irish market.

Enterprise Ireland where is that 175m when we need it?