Copacetic

If like me you thought The Digital Hub died along with Media Labs Europe then you should take a visit as I did today. The PDC HotHouse Program I am on finishes at the end of September so we are looking for new office space. The Digital Hub offers two kinds of office space to elegible companies (your company must do something related to Digital Media), the Digital Depot and The Digital Hub proper.

The Depot is associated with Enterprise Ireland so they need to endorse your project before you can take up office space there. The offices are housed in the old Guinness printworks beside the Window just off Thomas street. The outside is a 1950’s build but the inside is very Web 2.0 with pastel colours and lots of steel and glass. Office space comes at €55 per desk per week and that includes furniture, broadband (3mb link) and a VOIP phone. You also have access to meeting rooms at no extra charge.

If you want something more traditional (or don’t have an EI endorsement) you can go the The Digital Hub itself. They are currently renovating space in an old redbrick down towards St James Hospital. Space there is €75 per desk per month with similar broadband and VOIP facilities.

The Hub offers a range of other services to companies including a website and forum for companies in the hub to communicate and a CEO forum to allow exchange of ideas and to provide some social networking.

All in all I was very impressed and I hope to move into the Depot (EI willing!) in October.

So instead of whining about it, I decided to scratch my itch. So here is a feed for Enterprise Ireland upcoming events scraped courtesy of feed43.com.

Add http://feed43.com/enterprise-ireland-events-2006.xml to your favourite feedreader. Service only guaranteed while they keep to a consistent format.

What great organisation, everybody I meet there is helpful, responsive, they’ve been invaluable in getting my business started, especially the CORD grant.

But why does your website still not render properly in FireFox? Why is there no RSS feed for breaking news and events? Why is the Leadership 4 growth page still advertising places when you closed this course to applicants several days ago.

Why can’t I register to get email telling me about every possible event in the software sector that Enterprise Ireland has involvement (I have yet to find about any EI event directly from EI).

Don’t get me wrong, you do a great job, but these are small things that could make an entrepreneurs life so much easier!

As you may know, Enterprise Ireland intends to disburse €175m to Irish VCs in the period 2007 to 2012. This is a follow on to a previous scheme which ran from 2001 to 2006. EI has produced two documents related to this scheme the first entitled, “Enterprise Ireland, Seed Venture Capital Scheme, 2007-2012, Guidelines for Calls for Expressions of Interest” and the second a shorter document which is the text for an advertisment.

These documents reveal some of EI’s thinking in this area. The impetus for the whole exercise is defined in the opening paragraphs,

Many firms have found it difficult to access growth and development capital because of the lack of private equity being invested in small to medium sized enterprises (SMEs). Irish entrepreneurs have continued to testify to the difficulties in accessing funding. The Small Business Forum stated that, “despite the broad range of finance sources and the fact that interest rates are at historically low levels, small businesses continue to report difficulties in obtaining sufficient finance for start-up and growth�.

On this basis EI want to seed investment in small firms by increasing the amount of VC capital available. This is all well and good and it makes sense. Every dollar invested in an Irish VC leverages many more dollars overseas.

However EI wants to have its cake and eat it. While expecting the Irish VCs to play ball and divert these funds into “…those sectors that are difficult to finance” (e.g. SMEs and early stage startups especially those outside Dublin) it also wants proportional treatment,

Private sector investors and Enterprise Ireland will be treated proportionally in terms of both dividends and capital distributions (sharing of risk and reward in line with relative amounts invested)

So EI wants the VC to make riskier investments when using EI money, but EI gets to play on level playing field with the other limited partners? Well why would an LP invest in a fund like that? The VC model is simple, give us your money and we’ll beat the market by 2-5 times by leveraging risk against return. Its not about developing an export market for Irish companies or developing a vibrant tech sector or a fledgling biotechnology industry. Those are accidental byproducts of VC investment. Why would I take on more risk than I need to?

So if EI wants to develop these areas surely the right thing to do is to subordinate its investment so that it gets paid last, and then it can swing the big stick over the VCs and get them to fall into line and focus their investments on the SME sector. As it is, they will have all the rights of existing limited partners, which is to say, give us your money and we’ll tell you how we’re doing every year, with very littly actual clout to leverage those investments in a direction it would prefer.

Final bit of advice to EI, you might do a better job of selling this kind of thing to your constituents (the SMEs of Ireland) as opposed to lobbing it over the wall to be picked up in dribs and drabs by the press.

Brian Caulfield of Trinity Venture Capital visited the HotHouse Program today to do a two hour presentation on Investor Documentation. The subtitle of the talk was From Term Sheets to Sale and Purchase Agreements and everything in Between. Brian was a co-founder of two succesful Irish software companies Exceptis and Similiarity Systems.
He kindly provided a copy of the slides after the talk, but the slides don’t communicate the wealth of personal knowledge Brian has in this area. He made a number of key points that stayed with me,

• Don’t obsess about the percentage of the company you will retain after investment. Instead focus on the “cash waterfall”, e.g. what is likely to be left after the preferences pile has been discharged and any interest or other exit options have been exercised. He worked through three examples of investment and three exit scenarios where the share spilt on investment and exit was radically different.
• People confuse good leaver/bad leaver. If you leave the company as a founder and the VC doens’t want you to go, that that is considered a bad leaver e.g. you leaving will impact the valuation of the company. If you leave the company and the VC can’t wait to see the back of you, then that is a good leaver. Bad leaver is likely to feel the full weight of any penalties because of their impact on company valuation, good leaver is likely to get a pretty reasonable goodbye package just to get him out the door.
• A Well Thumbed bible is a problem. If you are spending a lot of time consulting the investor documentation then you are probably in trouble. These documents are not instruments that should be used to run a company.
• Multiple Exit prefs and ratchets are less common. The penal terms circa 2001 are less common this days. Exit multiples proved to be a complete turn off to subsequent investors and ratchets encourage very short term thinking.

An excellent talk all round for anybody starting a company who is planning to raise VC money.

Enterprise Ireland has just circulated copies of the presentations made at the recent Web 2.0 conference at DCU.I’ve taken the liberty of converting these to HTML and providing them here.

• Judy Gibbons, Accel Partners,

• Web 2.0, The Virtuous Circle

• Digital Lifestyle Aggregators (Mark’s talk didn’t really have a title)

• Web 2.0, Key Factors for Success

• Web 2.0, The Investors Perspective

• Web 2.0, The Exits

In addition to the speakers the following Irish companies made presentations regarding their businesses.

• Sxoop - PXN8
• Infacta - A Technology Marketing Company
• Herbert Street Technologies - Encryption Technology for Business
• InnerWorkings - Briefing to Web 2.0 Ireland Conference
• Alatto - Mobile Search
• Tablane - Your Internet Research Tool
• Nooked -RSS Marketing Made Simple

Apologies if I got the ordering of the Irish companies wrong, but I an working from memory.

If any of the original authors would prefer not to have their content hosted here, drop me a line and I’ll remove it.

(Apologies for the weird indentation, wordpress voimits all over nested lists)

EI is running a one day Software Process Improvement Conference  that will be presented in both Cork and Dublin. Its free, and you can register online. However you will have to use IE to register as the page doesn’t render properly in Firefox.

I spent this morning a the ISA Conference 2006. I had hoped to have a bash at live blogging but there was no WIFI so I was reduced to taking notes. It was a fairly sedate affair with only Pat Brazel managing to get a few laughs out the audience. The theme was new models, new approaches but the speakers spoke mostly about old models and old approaches. The topic of new models was addressed much more credibly at the recent Web 2.0 event held by Enterprise Ireland.

My notes are on the sidebar. Fergus Gloster of Salesforce.com had a few interesting things the say about SAAS and Pat Brazel did a very quick and useful presentation on acquiring companies and being acquired.

The rest is leaving my memory as I type this, bye,bye…

I run a small startup called Secantus. We are running on a tight budget and are currently focussed on development. I recently inquired as to the price of joining the Irish Software Association. Get this, the special deal startup price for companies like mine is €800!

To put it in perspective, my subversion hosting, and a dedicated hosted server costs about the same price. The loose rule of thumb is you can get a Web 2.0 company started for around $100,000. €800 is about $1000 at todays prices so I’m going to blow 1% of my share capital on membership of a local club.

The HotHouse incubator program in Dublin stamps out ten to fifteen new startups every six months, a significant proportion of which are Software companies. I don’t know of any that have joined the ISA. If the ISA truely wants to represent the Irish Software community then they are going to have to make a bigger effort to include the startups.

Is there even an appetite to recruit this kind of member in the ISA? You would think in this Web 2.0 world they would have a click here to join button on the website with a credit card form and integrated wiki, email and forums. But no its a very sedate email and inquiry form (no mailto: links for these guys, you’ll cut and paste the address like we did in the old days) an once you get access, rest assured its no Alice and Wonderland website in the members area.

So what could they do,

• Drop the fees to something that doesn’t make me sweat, think less than €100
• Take credit card bookings directly on the site
• Add wiki, forums, mail groups, blogs and company editable web pages to this site. All this technology is freeable available and can even be purchased for next to nothing as a hosted option.
• Target the startup companies, these companies are the future of the industry. Where was the ISA are the recent Enterprise Ireland Web 2.0 event? Will they be at the next one in Cork?

If they did this I’d join, what about you?

Several newspapers report on the plan for the government to provide 200 million euro to directly fund Irish VC companies. Damien Mulley asks what entpreneurs think of the idea.

Well first of all lets look at it from Enterprise Ireland’s perspective. They divest themselves of significant sums of money each year through CORD, RTI and a host of other schemes. They also co-invest in venture backed initiatives and the Irish “big three” (Trinity, Act, Delta) are the guys they bump into time and time again. So its clear that somebody had the brainstorming idea of saving a huge amount of the tax payers money by directly investing in these companies and leaving them to it. I’m presuming that these funds will be invested under the standard terms as a VC limited partner.

So does this mean that EI will not be offering matching funds anymore? Or is this in addition to the joint investment model, which introduces the concept of double funding, something EI has shied away from in the past (every try to get an RTI grant while you’re receiving CORD money? not a chance buddy). What will happen to the Seed Capital Scheme? Nobody has answered these questions as yet.

Now saving the tax payers money is never a bad idea but its not really EI’s job. EI’s role is to foster the creation of export driven businesses that enable Ireland plc. to compete in a global market place. They have to be efficient for sure, but efficient at what? This gambit seens like a low cost way of disbursing funds rather than a way of adding value to the creation of strong businesses that can compete with the best in the world. Lets be clear, this is not a dig at the irish VC community, but with the best will in the world their job is to generate 10x returns for their limited partners. If that can be achieved by flogging the IP overseas and closing down the Irish arm of the business so be it. This is not exaclty congruent with EI’s goals.

At the the Recent InterTrade Ireland Private Equity Conference several themes emerged. The first is that VC investment and regional development are not well aligned. So don’t expect much of that 200m euros to land outside the pale. The second is that early stage investing will never be a marketing mediated activity. So nobody in the irish VC community is going to pay you 50-100k to develop your idea, investigate the market, learn about your customers etc. This is the gap that EI needs to fill with its 200m, not subsidising successful VCs with money over which it looses control the day after it is invested.