Start-up Nation: Sharing of services provides solid base

In 2005, Carrick-on-Shannon born Alan Phelan and his business partner, Seán McKeague, sold their UK-based telecommunications company for £20.7 million. Three years later, with the ownership transfer complete, Phelan returned to Ireland to start a new business.

“I had no real plan,” he says. “I wanted to look at what was happening, particularly in technology start-ups, to see what route we might take.”

Phelan looked at 120 business ideas over two years while based in the incubation centre at NUI Galway. "The key evaluation criteria were: does the technology really work? If so, is there a market for it and is that market big enough?

“We’re not interested in something that could generate maybe a million but not much more. As a result a lot of ideas fell by the wayside,” Phelan says.

Technology innovation
In 2010, the partners set up the Nucleus VP Group with the aim of building a significant-sized technology group headquartered in Ireland.

Phelan is impressed by the US-based Idealab which accelerates technology innovation by providing early-stage companies with a growth infrastructure.

Nucleus VP will be similar, with the focus on software, telecoms and waste-to-energy technology. Group companies will share services such as finance, planning, IT, HR and marketing.

“When I returned to Ireland I found most start-ups had limited management experience and were generally selling out very early to multinationals,” Phelan says.

“As a result, Ireland is not ending up with enough technology companies of a decent size. It would be great to see more Irish companies IPO, but if anything, this is getting more difficult as the revenue level required is increasing rather than decreasing.”

Phelan graduated in engineering from NUI Galway in 1990 and moved to the UK where he worked for a large engineering group (now BAM) until 1997.

“I met Seán (who later became my business partner) when I joined his company to lead its projects division. I subsequently became a director and shareholder and then managing director and we grew the business to a £25 million turnover.”

Nucleus VP's first investment was in satellite telecoms provider Onwave, which was set up in Ireland in 2008 and acquired by NucleusVP in 2011. It is has offices in Mullingar and Britain.

“In Ireland, Onwave concentrates on satellite telecoms. In the UK our next generation offering is ‘hybrid’ – a portfolio of solutions in a single managed box that allows customers harness the potential of ADSL, fibre and EFM, Satellite and 4G to dramatically increase the quality and quantity of connectivity.”

Procurement software
Nucleus VP's second investment, also in 2011, was in SourceDogg which designs procurement software. Nucleus acquired the majority of the company in 2012.

SourceDogg has offices in Britain and Ireland and its cloud-hosted service is aimed at those with a buying function within an organisation.

Phelan says a key selling point is that it can save a company up to 15 per cent on its procurement bill and up to 65 per cent on buying time.

The software is currently being launched in Canada, with the US and other English-speaking countries to follow.

NVP Energy is the third company in the group and it has just launched following three years of research and development of its (liquid) waste-to-energy technology, in conjunction with NUI Galway (a shareholder in the company) with the support of Enterprise Ireland. Typical potential customers are dairy companies and brewers.

Nucleus VP employs 89 people and Phelan says the aim is to develop the group by 50 per cent per annum across its three divisions.

“I think Ireland is a great location as the cost base is now reasonable, we have a young educated workforce (I’ve heard people moan about Irish grads but we’ve recruited great people), there are a lot of supports available and Enterprise Ireland is particularly useful when you want to expand overseas.

“It is also reasonably easy to get meetings with large companies and we have a great diaspora in senior positions in companies globally who are happy to help,” Phelan says.

Enterprises of scale
"I'd like to see Ireland create its own Mittelstand [German SMEs which are increasingly being given credit for Germany's economic growth] and maybe we can also find some of Israel's secret sauce which had led to its economic miracle.

“With a handful of exceptions, we are not great at creating enterprises of scale in Ireland, maybe because follow-on development funding isn’t there.

“There are some good incentives such as the R&D tax credit, but it would be much better if it was paid at the end of each tax year rather than pre-profit companies having to wait to get it paid over three years. Most fast-growing innovative companies will not be in profit for a few years,” Phelan adds.

“We should also be tapping the European Investment Bank to bring the cost of capital down for investment in key areas such as green energy and the expansion of indigenous companies.”