Chris Horn: Irish startups have always had their eye on the great game

The Man from the IDA said: “Listen lads, you’re not playing in Croker.”

We were three academic cofounders of a tech startup and, all told, we had hardly any commercial experience. With no track record, we had no investors. Meanwhile the IDA had allocated one staff member for all of the indigenous technology companies, and was otherwise totally absorbed in foreign direct investment.

It was 1991, and Enterprise Ireland would not emerge for a further seven years. However, thanks to the IDA, Ireland had one key asset for startups that no other country had. Prominent tech hubs at the time, including Silicon Valley, Tel Aviv and Boston, were beginning to envy what was happening in Ireland.

Ireland had a high density of multinational operations, many in manufacturing, sales and support services, and some in new product development. We duly drove to the industrial estates in Sandyford, Ballybrit and Raheen and introduced ourselves. Sometimes there was no interest, but most people wanted to be helpful.

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One particular company, ICL (now a part of Fujitsu), had a centre in Sandyford and became particularly intrigued by what we had created. Others noted that while our work was irrelevant to their Irish operation, there were colleagues in their US headquarters or R&D centres who might take an interest. They duly made the necessary introductions.

Ultimately, we closed a strategic relationship with Sun Microsystems (now a part of Oracle) in December 1993, leading not only to an investment but an invaluable endorsement by their chief executive and board of directors, which then gave us considerable global credibility.

Sheer density

Today, Ireland still has an incalculably valuable asset in startups that no other tech centre anywhere can touch: not even Silicon Valley, still less Tel Aviv, Singapore, Berlin or Bengaluru. The sheer density of multinationals with operations in a relatively small geographic area is absolutely unique. From the days of just software and electronics in the early 1990s, Ireland has now also attracted medical devices, pharmaceuticals, clean technologies, financial technologies, aviation leasing and several other sectors.

The effect on our economy is dramatic, with nearly 200,000 jobs as a direct result and some €130 billion in exports. The opportunities for the indigenous startup community to partner and sell both alongside and even into the multinationals have never been richer.

But the world is changing. China joined the World Trade Organisation in 2001, is growing its international trade and is increasingly active in countering climate change – this year China ratified the Paris accord. Ironically given its leadership to date, the United States appears to be about to enter a period of retrenchment, withdrawing from international trade, and choosing to ignore climate change.

The cry to bring jobs back to US soil, to repatriate earnings held overseas, and to bring sovereign cases against other trading partners will place considerable political, fiscal, legal and social pressures on American multinationals. At the same time, European commissioner Margarethe Vestager continues to investigate the tax treatment of multinationals across the EU, and not least Apple’s tax affairs in Ireland.

What will encourage American multinationals to continue investing in operations in Ireland? It is increasingly apparent that our level of corporation tax will not remain low relative to competing jurisdictions. The US may reduce its corporation tax rate as low as 15 per cent; the UK, under pressure after Brexit, may well decide similarly, and tax harmonisation will inevitably emerge across the European Union.

New Europeans

Pensive, I recall a prominent banner at Dublin Airport arrivals way back in 1991. It showed young Irish graduates proudly boasting that “We are the new Europeans”. Today, however, it is clear that Ireland is no longer investing in its third-level educational system as a competitive economic strategy. I remain surprised that the Irish electorate, Irish parents and Irish students seem so unconcerned in our falling third-level educational standards.

I believe the breadth and quality of our indigenous startups and tech community will attract and retain high levels of foreign direct investment. Multinationals frequently struggle to develop new products and open new markets precisely because the levels of entrepreneurship and risk involved is difficult to justify concurrently with their core revenue generation and product focus.

It can be far more attractive to let new ideas, business models and products emerge from young and innovative companies, and then wait for them to be commercially proven in the market. Licensing and partnership arrangements then become attractive.

In the same way that a young company could in 1991 visit Sandyford, Ballybrit, Raheen and other industrial estates, today a multinational can visit the PorterShed, the Digital Hub, Nova UCD and other centres to explore a wealth of new ideas and enthusiastic proponents.

Perhaps the changing global geopolitics will influence both the IDA and Enterprise Ireland to consider how Irish national policy can benefit from the mutual synergies still largely latent across their respective portfolios. Multinationals are attracted by leadership in insightful and experienced innovation. Indigenous companies want to scale globally.

The Man from the IDA was correct. For all of us in Ireland, it is a global game. It is not just about wanting to play in Croker, but about taking on the best in Soldier Field, Madison Square Garden, AT&T Park, the ANZ Stadium and the Birds Nest.