Seed funding is silver lining of banking crisis

WHILE THERE was plenty of positive news provided in the tech sector by multinationals in 2011 – Intel investing $500 million in new facilities, Twitter coming to town, Microsoft and Google building new data centres – the start-up scene also defied the wider economic picture.

The State is now literally awash with seed capital (possibly the only positive aspect of the banking crisis), there are thousands of job vacancies unfilled at 600 local software companies, and big multinationals are swooping to acquire Irish firms as a beachhead to Europe or to fill out their own portfolios.

But if one company stood out above the rest it was Openet. Five years ago it was a relatively obscure telecoms software company helping mobile operators bill for pre-paid services. But the explosion in apps and data means it is a company in the right place at the right time and is on course for revenues of about €100 million this year.

Contracts with giants such as AT&T, Verizon and Vodafone have won mainstream recognition for Openet, notably in founder Joe Hogan’s and chief executive Niall Norton’s winning the Ernst Young Entrepreneur of the Year award in October.

A legal case taken by a larger Israeli competitor has put a mooted Nasdaq flotation on hold.

That means Cork-headquartered, but predominantly Asia-based, PCH International is odds-on to beat Openet to flotation. PCH and its founder Liam Casey had another stellar year; beefing up its management team, raising $56 million in venture capital and acquiring Dublin distribution company TNS.

While Openet and PCH continue to grow independently, other notable names cashed in their chips.

The year began with financial software group Norkom accepting a €217 million cash offer for the business. Other notable sales include Curam to IBM for somewhere in the range of €150 million, Newbay’s acquisition by Blackberry maker RIM for $100 million, a British competitor paying $80 million for AEP Networks, Data Electronics Group becoming part of Telecity in a €100 million deal and CarTrawler selling a majority stake to a private equity group for more than €100 million.

While most of those firms were founded or got capital for expansion in the late 90s or early noughties, a new crop of web-based start-ups has come to the fore, fuelled by readily available seed funding.

Companies as diverse as online wedding planner Eventovate, trading platform Zignals, and social media news site Storyful, have benefited from the seed funds established by AIB and Bank of Ireland as part of the payback for State-funded recapitalisation.

Email software provider Datahug and Swrve, a maker of games development tools, proved you don’t have to up sticks and move to Silicon Valley to succeed, with both firms securing investment from California “super angel” investor Ron Conway. This was also the year when Ireland started to attract start-ups from around the world that believe we offer a fertile environment to build firms. Profitero, founded by two Belarussians and a Ukrainian, raised €750,000 and won the IBM Smartcamp event in London, while the two most recent winners of the National Digital Research Centre’s LiftOff competition, Adjuno and B-Smark, have Canadian and Italian founders respectively.