Nooked have unveiled their new product, FeedCommerce, which has been in  production on several sites for sometime now (most notably, Ryanair).

I like the concept, and Nooked have the track record to deliver it as well. Good luck to them.

The Devils Dictionary by Ambrose Bierce is available on Google Books. Some choice quotes,

• Accordion: An instrument in harmony with the sentiments of an assassin
• Appetite: An instinct thoughtfully implanted by providence as an answer to the labour question
• Back: The part of your friend which it is your privilege to contemplate in your adversity
• Mayonnaise: One of the sauces that serve the French in place of state religion
• Misfortune: The kind of fortune that never misses
• Riot: A popular entertainment given to the military by innocent bystanders

Evert Bopp is offering a cool prize to someone for helping to rename his Tipperary-based company.

“My main venture at the moment is a company called 802.EU. This venture’s main product is a captive portal solution for use with wireless hotspots, hot-zones, municipal wireless networks & wisps….. We’ve recently heard several comments that the name ‘802.EU’ basically sucks.”

I have to agree 802.eu does suck, black hole style.

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.

Delta (via Silicon Republic) have closed a 100m euro fund. Good news for the tech sector. Send in your Web 2.0  business plans now.

New Zealand 18 – 20 France

So New Zealand face there first real contest in the world cup and crash out. Fantastic performance from France! Maybe the group of death was the best test for those who graduated.

Via TechCrunch UK, this did make me chuckle. (Not Safe for Work!)

This looks bad for Eircom. If its true they have inadvertently created Ireland’s largest free WIFI network. Good man Eircom!

(via Damien) 

Chinese electronic equipment manufacturer Huawei has taken 3COM private.

Who are Huawei? Well anybody using mobile broadband in Ireland is using a Huawei connector.