Joe Drumgoole is the VP of Product Management at mobile app development company, FeedHenry. We talked with him about the state of startup culture in Ireland.
What are you most opinionated about when it comes to startups?
There are no supports in Ireland for what happens when a startup fails. We know that 80% of startups fail, and so there’s this huge opportunity for startup salvage.
What do you do for your founders? How do you get them back on the horse? Right now, everything explodes and goes away, but I think this is where Enterprise Ireland can help.
You could take some of the initial money and escrow it, as an insurance fund that can help in the case of liquidation. It would help people over the hump. Liquidating a company with shareholders costs at least 2,000, and you’re in the worst place to pay those kinds of fees. Involuntary liquidation can leave a founder bankrupt, or with a bad taste, and they might not be willing to try again.
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We don’t do enough to help entrepreneurs recover. We have incubators coming out of our ears, but what about a recovery system? Entrepreneurs are a valuable resource, but failing is a depressing moment. I’ve done it a few times and there’s no support, and no help — you’re essentially abandoned by the system.
Nobody talks about failure — it’s really the wrong language in Ireland, and has horrible connotations. Saying “embrace failure” is like saying “lick a razor blade” — it sucks. Don’t fail. A better meme than “fail fast” is “learn fast”. Try not to fail, use your mistakes to move the proposition forward and move on.
It’s going to happen to everyone. The lucky ones knock it out of the park the first time.
How has startup culture evolved in the last few years?
I started my first startup in Ireland in 2002. There were four or five enterprise platforms, and there was no equity. They were year-long programmes. And this predates social networking, so you had all of these people working in isolation. Social networking, which really kicked off in 2004/2005, made linking and group forming ridiculously easy.
And then there’s the development of true incubators: Startup Bootcamp, Dogpatch, Launchpad. They have money, and they’re short and aggressive. They get you started and get you some cash to get off the ground.
In 2002 you had nothing to fund your business unless it was friends and family, or you were wealthy. Now if you have an even half-decent idea and some coding ability, you can pick up about 50,000 for free in about ten different places. That’s huge and it broadens the base.
Enterprise Ireland wants a billion-dollar company that goes public and returns lots of cash and creates huge employment. You don’t build that by building one company, you build a base of companies where VCs have successful exits. You start with a million, then 10 million, etc. You’re not going to invest in a company today and it’s a billion dollars tomorrow.
It needs to be a 50- to 100-year vision, and you need to create a lot of entrepreneurs. The more you create (and help them recover when they fail) the more likely you are to get those billion-dollar exits in 20 years’ time. It’s a pyramid: you have to build it from the base up, and not the top down.
What’s the most frustrating aspect of it?
There’s still a funding gap. The early stage funding is pretty much solved – you can get 50 or 100k relatively easily, but there’s still a colossal gap between that and the first 500k to 2 million euro investment, and it’s tricky to cross.
And people don’t understand the cost of building a consumer business. You have to figure about ten dollars per user, and we don’t have the funding structures in place to outperform competitors in the US. A guy in the US is going to raise money faster, and he’s going to outspend you in consumer acquisition.
It’s hard to be competitive in the Irish marketplace – you have to put your CEO somewhere like Silicon Valley. For example, with Intercom.io, Eoghan McCabe raised angel funding. He’s moved to the US, but the engineering team is here. It’s not a consumer product, but it has a lovely viral model and a compelling offering, targeting businesses. It’s a lot easier to sell to enterprise because they have more money to spend, and you need fewer customers to make your targets.
And what’s the most exciting?
What’s really exciting are businesses emerging in the last four or five years: Orchestra and Engine Yard, Intercom. And then people like Robin Blandford, with Decisions for Heroes, which is a service for emergency response teams, and has this clever vertical marketing. There’s also WhatClinic, which is a medical clinic search. It’s had seven quarters of growth, they’re hiring in Dublin, and they’re making a profit – WhatClinic doesn’t even need investment anymore.
What do you think startups in Ireland need most right now?
The thing that people are worst at is customer acquisition. That means managing, costing, analyzing and understanding how customers get acquired. You need to know which cohorts will give you money, and which one are kicking the tires.
Posted on August 14th, 2012 by Jenny