The grand plan


Ireland’s tech boom was a mirage, but we could yet become the next Silicon Valley. Don’t laugh – all we need is a few bright ideas and a little bit of State cash, writes wunderkind Patrick Collison

IN A SENSE, Ireland’s frequently proclaimed goals of encouraging innovation and creating a “knowledge economy” are unfortunate: it’s hard to see how to do something about them. How do you sit down and start fostering innovation?

When we talk about this, and the Lisbon agenda and all the rest, what we really mean is we want to become more like Silicon Valley, the canonical hotbed of innovation.

Though there are many unique things about the Valley, at its heart, it’s all about start-ups. And so the above goals can be boiled down to a single tangible aim: how can we encourage start-ups in Ireland?

At a glance, it would be easy to conclude that Ireland has a thriving technology industry. After all, a huge number of technology companies have some sort of operation in Ireland. The real picture isn’t so good.

Ireland has an abysmal record of encouraging technology companies, especially start-ups. This is masked by our stellar ability to attract companies for financial reasons. Though we have a few truly great companies, we have mostly failed to create a start-up community worthy of the name. (Quick – try to think of an Irish technology company with revenues of more than, say, €50 million.)

And we might wonder: How could we possibly create a multitude of companies on the scale of Google, Yahoo, Sun, Facebook, Twitter and Cisco?

The crucial bit of detail missing from this view is that Silicon Valley didn’t do it either. Not one of the founders of these companies grew up in the Valley. A majority aren’t even from the US.

In Ireland, if we want to build a successful start-up scene we’re going to need to approach things the same way. The question we need to ask is not “how can we encourage more Irish people to start companies?” – though that is useful – but “how can we encourage founders (or people likely to become founders) to move to Ireland?”.

Before people even consider starting a company, the Valley is already ahead: with Stanford University (and to a lesser extent, Berkeley), it attracts some of the brightest students in the world. Running a world-class international university doesn’t come cheap, though – Stanford charges its students $48,000 a year. In Ireland, we have to accept that we can’t have our cake and eat it. We’ll either have university fees and world-class universities, or neither.

Ultimately, though, the biggest draws of the Valley for founders are the investment communities (Facebook relocated from Boston for this reason) and entrepreneur/programmer communities.

To build a critical mass of either is hard. The Valley was able to grow organically, since it was the first such hub. But any future hub will probably have to be more bold.

Paul Graham, a well-known Valley investor, suggested a would-be start-up hub should give $1 million to each of 50 start-ups, just to get them to relocate. $50 million is a tiny amount of money when weighed against the benefits it would bring (it’s less than a quarter of the cost of the regeneration of Croke Park). And yet, such a move would, overnight, turn Ireland into one of the biggest start-up hubs in the world.

Assuming we got start-ups to relocate, many would need funding. Silicon Valley has a huge number of angel and venture capital investors. Though Ireland could probably eventually grow something comparable given enough time, some sort of bootstrapping is likely to be required.

One creative option would be to create a start-up stock exchange – a website where early-stage companies could sell some fraction of their stock, and any member of the public could invest. Start-ups could post their latest news and, most importantly, their metrics (as opposed to their financials, as in the case of a real public company).

An investor would get a comprehensive list of credible start-up companies, with detailed information, tiny transaction costs and, critically, no barrier to entry – you wouldn’t need to know the right people, or have pre-prepared funding documents. From a start-up’s standpoint, it could be the holy grail – easy access to capital.

I’ve often wished this existed in the US. It’d never happen there, though – too many laws would have to change. But there’s nothing stopping Ireland from making it happen.

Of course, US bureaucracy doesn’t just inhibit new ideas like this. It’s also a major source of pain for any conventional start-up. In particular, tax and immigration issues are the bane of many a founder’s life.

The complexity of the US tax system creates a distracting and expensive proposition for start-ups.

Immigration to the US is absurdly difficult. Examples abound: working on Auctomatic, it cost thousands of dollars in legal fees and countless days to get the visas we needed. Liam Casey, a Corkman and chief executive of PCH International, left the US and now employs hundreds of people in China because he was unable to obtain a visa. One of the smartest Irish guys I’ve ever met, and an MIT graduate, was forced to leave New York after his employer failed to secure a work permit for him. In 2007, Microsoft set up an office in Canada, a few miles from the US border, for the sole purpose of circumventing US visa regulations.

These are both great opportunities for Ireland. The US is needlessly handicapping itself, creating an opportunity for some smarter region to gain an edge by doing things better. In the case of tax, Ireland should allow a start-up to defer all tax for a few years, or until revenues have reached a certain threshold. With immigration, make it as simple as possible for a start-up to hire whoever they want, wherever they may be from.

Two final ideas. Though full of good people, Enterprise Ireland still take several months to make most investment decisions. This is crazy – it encourages good companies to get their money elsewhere.

Lastly, New York has had great success with its 311 service. It’s an easy way for residents to report non-urgent things that need repair or attention (like, say, illegal dumping). We should create a similar service for bureaucracy. When people encounter something broken, they should be able to request an evaluation by the new Bureaucracy Repair Department.

On the face of it, for Ireland to aspire to the success of Silicon Valley is crazy. Shouldn’t we set a more realistic target – like, say, becoming as successful as London?

I don’t think so. Why shouldn’t Ireland be as powerful a hub of innovation as the Valley? There is no magic in the Valley’s success, and it could conceivably be replicated.

A region that realised the importance of start-ups, worked hard to help when necessary and stayed out of the way the rest of the time would be a force to be reckoned with.

In a lot of ways, the proposition of turning Ireland into a pre-eminent start-up hub is like that of a start-up itself. The goal is attainable, and some region will probably do it eventually. The question is whether we’re smart and driven enough to make it happen. Are we?