Fail again, fail better, Ireland's tech-set is told

Learning from failure is key, a Dublin event heard. JACK HORGAN-JONESreports

AMBITIOUS YOUNG technology start-ups and venture capitalists would hardly expect such pessimism, but last Friday night in a Dublin bar, the technology editor of the Europe edition of the Wall Street Journal, Ben J Rooney, told them they were bound to fail.

It’s a brave thing to say to a group of people who have been told that they are at the vanguard of the knowledge economy and whose innovation and energy may lift Ireland out of its economic malaise.

Rooney, who ended a whistle-stop tour of 10 European “tech” cities in Dublin last week, said: “The best thing about my trip has been meeting entrepreneurs like you, who don’t accept that life is s**t, and want to change it and make it good. And you will fail.”

For Rooney, in an industry where companies are created and destroyed at an alarming rate, learning from failure is essential. Even among the swashbuckling venture capitalists, the rate of failure is such that “if you average out the returns in the venture capital market over the last 10 years, you would probably be better off putting your money in the post office”.

However, this marketplace of ideas and investment is where Googles and Facebooks are founded. Having seen the best Europe has to offer, he said Dublin was more than qualified to consider itself among the top 10 European “tech” cities. “We’re seeing a lot more jockeying taking place amongst countries in Europe as to who is going to be the start-up hub of Europe.

“Dublin certainly has a lot going in its favour. It plays host to major companies, it’s not a financial centre but the financial centre of Europe is London – you’re an hour’s flight away from there.”

He’s also enthused by what he considers a vibrant start-up community, a view that’s shared by Brian Caulfield, a partner at DFJ Esprit, one of Europe’s leading venture capital firms. The firm usually provides injections of between €2 million and €5 million, and Caulfield is hoping to announce investments in Irish companies in the next few months.

“I’m seeing a lot of companies that have been able to get to initial revenues with relatively small amounts of capital and are now looking to scale the business. I think it’s a really interesting time to be an investor in Ireland, and it’s an interesting time for the Irish start-up community.”

Once those investments are made, Caulfield estimates that 65-70 per cent is spent on hiring new employees. In the frantic early days of a tech start-up, reinvestment in human capital is essential. This was the case for Caelen King , who founded his company, whatclinic.com, four years ago. The site is a price and service comparison tool for elective medical procedures worldwide.

During the first 3½ years of operation, the company didn’t turn a profit as revenues were diverted into expanding the workforce from two to 10 people.

King’s company was one of about 100 present at the open discussion last Friday night. These small operations, with their energy and agility, have real capacity to drive the economy, says Rooney.

“Where does growth happen in an economy? Growth happens in small and medium-sized businesses. It doesn’t happen in big companies. Big companies shed jobs, they don’t create jobs.”

Rooney believes that to remain relevant at a time when Europe is uncompetitive on costs with other regions, “we have to innovate our way into the future. And where does innovation happen? Innovation happens in small to medium-sized companies”.

He says the European venture capital industry is harder to extract cash from than its US counterpart, which may be a blessing in disguise. Many observers are fearful that skyrocketing IPOs and share prices may be symptomatic of another tech bubble which could rival the dotcom bomb of the early 2000s. He says venture capital that is too easy to access “devalues the entire economy”.