Why it makes ‘no sense’ for Dublin to try to become a second Silicon Valley

Dublin’s tech hub status can be improved with some tweaking, but aping the Silicon Valley model may be beyond it or any other city

Dublin’s digital heartland near Google’s offices on Barrow Street, Dublin 4.  Photograph: Bryan O’Brien

Dublin’s digital heartland near Google’s offices on Barrow Street, Dublin 4. Photograph: Bryan O’Brien

 

If you have ever inter-railed around eastern Europe there’s a good chance a tour guide or two has tried to convince you that their city is “the Paris of the East”. While many of the cities have their own charm, in reality there is no Paris of the east.

According to Tel Aviv-based IT investor Michael Eisenberg, no matter how much other cities may want to present a different image, there is no second version of Silicon Valley out there either.

Eisenberg told The Irish Times that “there is no sense” in trying to ape the achievements of the west coast centre of technology.

Head of VC firm Aleph, Eisenberg is addressing the findings of new research from Dublin-based firm Prosperity Recruitment, which specialises in the digital and web sector.

The research looks at four regions – Dublin, Israel, Manchester and Singapore – vying to be Silicon Valley ‘mark II’, with a heavy leaning towards examining the start-up and funding scene in each area.

The full Prosperity report is available from this morning from the company website. In Dublin’s case, the research indicates an IT skills shortage, access to finance and relatively high cost of labour among other factors may curtail progress of the digital sector.

Meanwhile Ireland’s 12.5 per cent corporate tax rate should be, as Prosperity co-founder Jim Murray, tells The Irish Times,”held on to for dear life”.

“I think the English language, the euro and the corporation tax [rate] as well as the accessibility to the government are seen as the plus major factors here.”

Added to that, as his fellow co-founder Gary Mullan points out, a salary survey conducted by the company (see side panels) found that there is a “5 to 10 per cent” rise in salaries over the past year in the ICT space.

Eisenberg’s homeland is, says Prosperity, “the golden child” for tech outside of Silicon Valley and in terms of the companies heading for billion-dollar status, Israel is more akin to China, Germany and both coasts of the US.

One only has to look at the recent case of Israeli vehicle “collision prevention” innovators MobileEye, whose IPO on the New York Stock Exchange at the start of the month raised an Israeli record of $890 million, even as the latest conflict with Gaza was raging in the background.

Combined with generous government grants to start-ups and a flourishing VC community, it has helped “technology- rich” products account for about 70 per cent of the nation’s exports.

Californian-born Jonathan Medved is chief executive at start-up investment firm OurCrowd. He believes there is “no other contender for Silicon Valley ‘mark II’ [other] than Tel Aviv, and Israel in general”.

With investment figures of “$2.2 billion” going into 650 start-ups there last year, Medved says that “this year, that looks like it will be over €3 billion despite all of the recent troubles”.

Standard of living

According to Prosperity’s figures regarding how much money it would take to live in each city, for someone coming to Dublin to work or start a technology business, the standard of living – rent, food etc – on a monthly take-home salary of €3,900 in Dublin would cost €3,430 in Tel Aviv.

In Manchester, where rental prices come in at 17.91 per cent lower than in Dublin, that figure stands at €3,530.

In Singapore, however, you would need nearly €4,800 a month to maintain the same standard of life that you can have with €3,900 in Dublin, with rental prices an incredible 102.52 per cent higher than in the Irish capital.

Rated for six years now by the World Bank as “the easiest place in the world to do business”, Singapore has a newly thriving technology venture capital community investing $1.71 billion in businesses there last year, compared to $27.9 million in 2011.

Moving on to Manchester, it may seem like the most curious of the four choices on first glance.

However, a thriving creative and digital media sector currently employs around 63,400 people in the greater Manchester area.

Murray, though, is “unsure” whether this corner of western Europe can maintain two large-scale tech hubs, noting that rumblings of the UK leaving the European Union would “almost certainly” have an effect on investment in the region.

Joan Mulvihill, chief executive of the Irish Internet Association, says that for a “well-funded start-up choosing between Manchester and here, some of the decision will come down to the people, other decisions will come down to the brass tacks of – well, tax”.

Mulvihill adds: “Businesses are going to ask ‘am I going to be financially better off if I’m in Manchester’ and, if they [highly- skilled employees] will travel to Manchester to live, they will travel to Dublin to live”.

As for Prosperity’s report card on Dublin, its digital economy growing at 16 per cent a year front and centre, while the total number of ICT enterprises in Ireland is, according to Murray and Mullan, approximately 5,400 – 233 of which are foreign-owned.

Alongside a need to tackle the skills shortage, the current rising rental and house prices in Dublin also count against the city, according to UCC economics lecturer Séamus Coffey.

“Property costs, in relation to commercial space, residential space, cost of rent etc, if they’re high they’re likely a disincentive,” Coffey says, adding that “they do appear to be higher in Ireland than in different countries”.

Some small tweaks

Karl Aherne, director of the Telefonica-backed Wayra Ireland start-up accelerator programme, which welcomed in its latest batch of recruits this week, believes though that “with some relatively small tweaks, we could be the focal point for start-ups in Europe by 2020”.

Those “tweaks” include improving on a “lack of willingness to embrace failure and instead punishing it” with “social welfare discrimination against entrepreneurs that fail”, running almost totally against the ethos that exists in Silicon Valley.

In addition, Aherne says, creating a major “physical location for start-ups in Dublin” akin to the IFSC would be of huge benefit, alongside larger companies benefiting from the friendly tax system here to “reinvest 1 per cent of that corporation tax saving into the Irish eco system” as standard. Comparing wages in IT – Dublin, Israel, Manchester and Singapore As part of Prosperity Recruitment’s new regional comparison of areas hoping to become the “next Silicon Valley”, the company has released a salary breakdown for IT roles in each place.

In Dublin, they find that a digital marketing manager will likely earn €68,000. This compares to €56,000 in Israel, €52,000 in Singapore and €60,000 in Manchester.

A multilingual online sales representative with three years experience can expect to be paid €45,000 in the Irish capital, €44,000 in Israel, €40,000 in Manchester but just €29,000 in Singapore.

Digital account managers with three years experience will earn €76,000 in Singapore, though, and between €42,000- €46,000 in Israel, Dublin and Manchester.

A Java developer with five years-plus experience will earn €69,000 in Dublin, €68,000 in Israel, €69,000 in Singapore and €74,000 in Manchester.

UX designers who are working for five years or more in the area will earn €70,000 in three of the four locations studied, with Manchester the exception on €76,000.

Data scientists, one of the more sought-after areas of expertise, according to many in the IT industry, come in at less than €50,000 in all four locations, while online project managers earn €65,000 in three of the four areas Pros- perity studied, with Manchester again the exception, coming in at €70,000.

Project managers: Big winners in salary survey Prosperity also created a deeper dive in the Irish market with a salary survey for Ireland across six areas – retail; blue chip; portals/publishers; e-commerce; media/creative/ad agencies and finally, gaming.

Among their findings in the portals/ publishers sector were that the big earners are program managers, who come in at about €80,000 to €100,000.

Project managers who may start on €32,000 a year could see that figure rise to €90,000 per annum after five-plus years.

Similarly, software development engineers taking in €28,000 when they first arrive can end up on €70,000 after half a decade.

IT test engineers have less of an upward scale, though, moving from a possible starting figure of €28,000 to €45,000-plus after the same amount of time.

In e-commerce, data analysts can shoot up from a starting point of between €28,000 and €38,000 to €65,000 after approximately five years.

UX researchers and designers will earn around €30,000 when they start but could be earning between €50,000 and around€60,000 after five years.

Mobile designers, too, can expect similar numbers.

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