Managerial skills deficit ‘limit Irish startups’

A lack of business development expertise among Irish managerial teams is holding firms back and preventing them from reaching their full potential, according to a former senior Enterprise Ireland executive.

The agency’s former software division chief, Pat Byrne, believes many Irish managerial teams lack the skills necessary to scale a business, in contrast to their peers elsewhere.

Irish startups tend to be particularly strong on the technical aspects of their business but relatively weak in other areas, Mr Byrne said.

“Irish technology companies tend to be quite good from a technical perspective [but] they tend to be weak in business development expertise,” Mr Byrne said.

“I’ve been in this area for 13 years now and I’ve seen so many companies that got the funding, have the seed capital backing, but they blow the money in terms of trying to develop the technology to the nth degree without taking really serious cognisance of the fact that there’s another very critical aspect of the business, which is getting out and actually getting someone to buy the product.

“In the past there was less value placed on that sort of expertise than there was in terms of technical capability or finance capability. I would classify it as unbalanced management teams… from the point of view of the skillset they have.”

The former Enterprise Ireland executive, who last month departed after 13 years with the agency, also sees access to finance as a barrier to firms scaling up.

A Government decision to encourage venture capital firms to invest in early-stage firms has left a financing gap for companies looking to take the next step.

“Companies can get early stage finance but it’s very, very difficult to raise between €2m and €7m,” said Mr Byrne.

“The Government pumped a lot of money into the venture capital firms [VCs] to do seed capital funding and told them they were going to be monitored not necessarily on the performance of the VC investment but on the number of investments they made so that forced the VCs to basically start writing cheques for seed capital funding.

“All of a sudden, you’ve lots of companies starting off who are able to get €250,000 from a VC and can match that with EI funding of €250,000, so you’ve €500,000 in the bank.

“You blow that €500,000 in whatever commercial way you’re going to do that over say a period of 18 months and then you go looking for €3m or whatever it may be and that’s where the problem is.”

Mr Byrne, who is now acting as a private consultant to technology companies, also believes the Government should look to forge stronger alliances between IDA and Enterprise Ireland.

A number of advantages could be garnered from developing stronger links with the two agencies.

The IDA works to attract multinational companies to Ireland, while Enterprise Ireland is responsible for fostering Irish firms and helping them scale. Despite both bodies being strong brands in their own right, there is merit in studying the possibility of joining the agencies.

A spokesperson for the Department of Jobs and Innovation said there were no plans to merge the two agencies, which “have very distinct objectives and strategies based on the different needs of Irish-owned entrepreneurs and businesses”.

The spokesperson added that the two agencies have extensive collaboration agendas in place.

Mr Byrne also expressed concern over the restrictive nature of our research and development tax credits and the tax structure, particularly around capital gains tax, which was altered in this month’s budget.

He added that the lack of office accommodation was becoming “a critical issue” and potential limiting factor in Dublin and suggested there could be a lot more interaction between multinationals and startups in the city.

The Irish startup scene remains strong, however, with enterprise software firms proving to be particularly successful, he added.