The growth of start-up accelerators in Ireland has picked up pace in recent years. Start-ups that once would have had to fend for themselves or press State agencies for funding can now try their hand at an accelerator designed to give them expert mentoring, advice and office space.
They have programmes designed for everything from generic digital businesses to more specialised fintech applicants. They have had some success, providing invaluable support to start-ups on their way up the ladder.
However, according to Karl Aherne, the former head of Telefónica’s Wayra accelerator in Dublin, the accelerator model is fundamentally broken for the start-ups which have to give away equity and for the funds that are inking money into new ventures, which is often a risky business. On the outside is corporate innovation, which is struggling alongside the more risk-averse nature of its structure.
Aherne’s new project, Red Planet, is not an accelerator despite its roots. The company was born from the ashes of the Wayra Academy in Dublin, the accelerator set up and funded by mobile operator Telefónica. But when it sold O2 Ireland to Three, the days of its start-up accelerator here were numbered.
Perhaps the mobile giant will come to regret that move; after all, it was Wayra that produced the likes of Trustev, BragBet and PopDeem, among others. But Wayra Dublin shut down earlier this year after its final intake graduated from the programme.
Almost immediately, the staff moved to a new project. Headed up by Aherne, the group moved into a shared office with Katawave in the IFSC and began working on Red Planet.
“From all clouds there’s a silver lining; the silver lining for us is that we’ve gone on to create a new company,” said Aherne. “We are creating a new model for acceleration. In my mind it’s a model that drives much more impact.”
Rather than look for innovative start-ups and work from there, Red Planet is taking a different approach. In fact, Aherne says, it ignores start-ups in the first instance.
“We work with the corporates,” he says. “We go into corporates who are at the top of their ‘S’ curve. They’re focused on optimsation, price competitions, etc; they find it very difficult to innovate their way to the next ‘S’ curve.”
As a result, businesses are finding their comfortable worlds being disrupted by new players which are more agile than the long-established firms. Internal innovation is being hampered too, Aherne says, leaving corporates at risk.
“We work with them firstly on what impact digital is having on their business, on their customers, on their channel, and look at what’s happening in the world, industry and their company,” he says. Taken into consideration with all that are trends in customer behaviour, tech trends and general predictions for their industry.
“Ultimately we get to a point where we identify specific digital challenges that the corporate is experiencing,” he says. “We uncover what is the ideal solution for that corporate, and we design it, on paper, in high level. The goal is to identify the key ingredients of that ideal solution. Then we go out to the start-up world.”
Each has something the other needs. While corporates have the resources and the distribution channels to the market, start-ups have the agility and speed needed to react to changes in the market, and will to drive innovation. The key for Red Planet, Aherne says, is to bring them both together.
It’s a more targeted approach than many of the accelerators are currently taking, and Aherne thinks it may ultimately be more beneficial for the start-ups and the corporates. Red Planet identifies who can supply the solutions needed by the corporates and brings them into their co-working space. There, they get access to mentorship, office space and expertise.
Red Planet works on a subscription basis. Corporates who want to work with the company to find solutions to their innovation problems pay a subscription to the firm; for start-ups, they don’t pay anything until they sell the product they have been developing to one of Red Planet’s members.
For the corporates, it means they can invest in innovation; the cost of the fee is “significantly lower”, Aherne says, than what they would have to pay on internal innovation. For start-ups, the attraction is clear.
“We don’t take equity, we don’t charge for physical space, access to mentoring and experts,” he says. “All we ask for is that when the start-up sells a product and generates a revenue stream, from our corporate membership, we’ll take a small percentage of that revenue. That’s our upside. but it’s very much ‘no foal, no fee’. If they don’t sell their product to our members, it doesn’t cost them a penny, and they’ve got a whole lot of benefits along the way.”
The company is in the final stages of signing up its first members. Aherne says they are talking to consultancy houses, consumer and fast-moving consumer goods (FMCG) companies and large utility firms. The feedback the company is getting is that it’s an area in which there is considerable interest. It’s even inspired the name.
“The idea of ‘Red Planet’ is that it’s known by everyone but they can’t get to it; it’s big, it’s audacious, it’s a big human challenge to get to Mars, but it’s not easy,” he says. “What we’re talking about, everyone knows what the objective is, everyone wants innovation, everyone wants growth, but it’s very hard to do. What we’re here to do is to help companies – both corporates and start-ups – to create revenue.”
At the moment, Red Planet is sharing an office with Katawave in the IFSC. The company plans to keep this on as its city centre office, but is also looking for a larger space that would give Red Planet room to accommodate more teams. That would be much more a Wayra-type space, Aherne says.
The company has placed a couple of offers on different locations, but wherever Red Planet locates its new office, it will be somewhere with transport links such as the Luas or Dart, and it will be on a grander scale, about 50,00 square feet. That effectively rules out the city centre.
“One of the issues I’ve seen is that success has created a problem,” he says. “The IFSC and Silicon Docks: both fantastic successes, but what they’ve achieved as well is an increase in the cost of land and an increase in the cost of rent. That’s pushing ‘scaling’ and younger companies out of the city centre. The problem is that there is no one other space they can go to, so they’re going everywhere. That’s dangerous for the community, because you’ll end up losing the heartbeat.”
It’s clear he feels it will be a success. Aherne has been funding the business himself, although he isn’t disclosing just how much he has invested yet. Getting the second office for the company will be a key part of the puzzle and will bring back something that the start-up community lost when Wayra went: another open space to use when needed.
“It won’t be just a space for Red Planet, but will be somewhere every start-up can access a desk, resources, intelligence, corporates. We’re looking at creating a singularly large hub that would be the biggest acceleration space in the world,” he says.
“Wherever we go, it can’t be soulless. It has to have a heartbeat. If we play our cards right and do something clever, I think we can create that. I think we can create something very special for Dublin and Ireland.”