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Submission in respect of views on the reform of the

National Micro & Small Business Support Infrastructure

The Dublin Deep Pool Project
Docklands Innovation Park
Eastwall Road
Dublin 3

Contributors: Eoin Costello, Brendan Butler
19/12/2012

Dear Sir/Madam,
Please find below our submission in response to the request by Minister Bruton and Minister
Perry for submissions of opinions in respect of ‘Reforms of Supports for Micro-Enterprise’.
Stated Objective – To create a national support ecosystem which can provide relevant support
to the right people at the right time and at the right level.
Sections of the terms of reference ( http://www.dceb.ie/News/Final-Reminder:--Reforms-of-
Supports-for-Micro~Enterprise ) relevant to our submission include the following:
“The key elements included in this planned reform programme are:
“Create the best possible local environment for small business by combining enterprise
support for business at local level with the business support service and expertise of Local
Authorities”
“Develop a strong network for entrepreneurship by working with local business and the
wider community”
“Specific targets will be set for the new structures to deliver, including on:”

“• Increasing the number of and 5-year survival of new start-ups”
“• Increasing job-creation and innovation in the sector”
“• Increasing exports from microbusiness and small business”
Dublin's Start-up Ecosystem – Maximising our national and international potential
In order to achieve the Government’s objective of creating a national support ecosystem
which can provide support to the right people at the right time and at the right level it is
necessary to examine
Dublin (from the Gaelic "Dubhlinn" meaning black or deep pool) has a deep pool of talent,
capability and supports in the start-up sector and is rapidly establishing itself as a European
hub for tech start-ups. The Dublin Deep Pool Ecosystem Project is a voluntary research
project aimed at providing information to potential Irish and international start-ups that intend
starting up in Dublin. Our objective is to contribute to the goal of establishing Dublin as a
leading start-up hub and securing Dublin’s entry in the international top 20 start-up capitals
internationally (as ranked by Start-up Gnome - http://techcrunch.com/2012/11/20/Start-up-
genome-ranks-the-worlds-top-Start-up-ecosystems-silicon-valley-tel-aviv-l-a-lead-the-way/ )
In the context of this submission the first part of this report will examine five of the most
important practices that the best start-up ecosystems in the world have implemented
effectively. It will then examine how Dublin might implement these best international
practices and what effect this could have on Dublin’s ecosystem. This report is based
primarily on data collected from the Start-up Genome Ecosystem Report and The Global
Entrepreneurship Monitor (GEM) Annual Report for Ireland.
Finance / Funding
Empirical evidence from the most successful ecosystems in the world has shown
that access to sufficient capital throughout all stages of a start-up development is
absolutely essential. While many ecosystems, including those within the top twenty,
provide funding during the validation phase, many ecosystems fall short when it
comes to the early and late stages of development. The most successful ecosystem in
the world, Silicon Valley, provides funding at all stages of development.
This is not an issue however which is purely aimed at securing more government
funding. Indeed the evidence has shown that the higher the percentage of funding
which is provided from non-government sources such as Angels, Super Angels and
Venture Capitalists, the more likely the business is to succeed. The best examples of
this would be Silicon Valley and Tel Aviv which are both essentially completely
privately funded, with 53% of funding coming from previously mentioned private
sources and only 11% coming from Incubators and Accelerators. Indeed all of the
American Accelerator / Incubator programmes are privately funded.
1
Tel Aviv relies
even more heavily on private funding and is ranked second in the world.
2
Despite

1
Genome Project, "Start-up Ecosystem Report 2012", pg 13
2
Ibid, pp 21 - 22
this lack of governmental support, Silicon Valley, Tel Aviv, Los Angeles, New York
and Boston are consistently ranked among the top 6 ecosystems in the world.
3

The amount of personal funds (and those raised from friends and family) is also
significantly lower in the top ecosystems. For example the Canadian ecosystems
although they are in the top 20, all rank significantly lower than their U.S
counterparts, primarily due to the fact that they provide little or no funding and the
start-ups are mostly self-funded.
4

Entrepreneurial Culture
A trait which seems to be extremely prevalent among entrepreneurs within the top
ecosystems is that they all have a culture of hard work: from the very first phase of
the start-up the vast majority of them will work full time. This helps to exhibit their
genuine enthusiasm for the start-up and a willingness to do whatever it takes to
succeed. This enthusiasm, especially in ecosystems such as Silicon Valley, could be
a major factor in their success.
Within ecosystems such as Silicon Valley there is a culture which embodies very
little fear of failure. If an entrepreneur fails it does not mean that s/he should never
try again; in fact, according to the Genome Project, it is seen as an opportunity, a
reason to try again and learn from your mistakes. This entrepreneurial culture also
makes people more likely to take risks and target larger audiences.
5
This is not true
for all of the top 20 of course as there is a fear of failure in many ecosystems.
Indeed, the majority of the top twenty are quite cautious and go after smaller
markets.
However the statistics show that taking risks and targeting larger businesses such as
those worth a billion or more is a better choice for start-ups. Again Silicon Valley is
the best example of this as the companies that are willing to take risks usually profit
from the experience. Tel Aviv is 46 % less likely to target these large businesses
which may be why it holds the number 2 spot.
6
As such many of these observations
are not set in stone and cannot be applied to every situation; many of them need to
be adapted to different markets.
Support
Support is probably the second most important factor in developing effective start-up
ecosystems. Having sufficient mentoring, services and a culture of support from

3
Genome Project, "Start-up Ecosystem Report 2012",, pg 2
4
Ibid, pg 53
5
Ibid, pg 10
6
Ibid, pg 21
alumni and/or other entrepreneurs is essential. The Genome Project again shows us
that the most successful ecosystems have very effective support systems in place,
especially mentoring systems to help guide start-ups at all levels of development.
Silicon Valley is a fantastic example of a culture where not only mentoring is used to
support start-ups but also entrepreneurs supporting one another. In Silicon Valley
there is a culture of sharing ideas and helping one another.
7
This can be extremely
important as the concept of clustering and grouping entrepreneurs together has shown
that mutual support is extremely important in a field which is usually thought of as
being quite lonely.
8
This works in Silicon Valley as there is very much a culture of
‘pay it forward’, with people who have been fortunate, wanting to give something
back to the community.
The statistics in the Genome Project also show that Support and Funding are
dependent on one another. An ecosystem with the greatest level of support in the
world will not be of help if it provides no funding. This is illustrated by comparing
Silicon Valley to Santiago. Santiago has nearly 25% more mentors than Silicon
Valley; however it is in 20
th
place on the table compared to Silicon Valley in 1
st
place.
This is primarily due to the lack of funding available in Santiago. The same can be
said of Vancouver which also has 25% more mentors than Silicon Valley; however it
is in 8
th
place due to its lack of funding.
9
The Genome Project also indicates that the
culture of camaraderie created by the mandatory military service and immigrant
population in Tel Aviv has a very positive and supportive impact on
entrepreneurship.
10

Customer Base
According to the Genome Project it would seem that most of the best start-up
ecosystems generally have a mix of consumers, enterprise, and SME’s as their
customer base instead of just targeting one segment. This applies to most of the top
10 ecosystems such as Silicon Valley, Tel Aviv, Boston, Los Angeles and
Toronto.
11
It is also extremely important to note that the start-ups from these
ecosystems usually have a large international customer base. For example due to Tel
Aviv’s lack of a large local or regional market they are forced to have an almost
exclusively export orientated ecosystem.
12


7
Genome Project, "Start-up Ecosystem Report 2012", pg 10
8
Mark Alan Hughes, "Ways & Means: Measuring the Impact of Innovation Clusters"
9
Telefonica, "Start-up ecosystems around the world fast challenging Silicon Valley"
10
Genome Project, "Start-up Ecosystem Report 2012", pg 24
11
Genome Project, "Start-up Ecosystem Report 2012",, pg 22
12
Ibid, pg 23



Job Creation
The Genome Project and other research seem to indicate that those ecosystems
whose start-ups generally employ a larger number of people from the beginning fare
better in the long run. Again evidence of this is best illustrated by looking at Silicon
Valley, Tel Aviv and other ecosystems in the top 10.
13
It does seem that job creation
is a major factor in the effectiveness of an ecosystem. In fact one of the prime
benefits of entrepreneurship is the amount of jobs which it creates.
14
However it
must be stressed that neither of these ideas can be applied to every situation. Some
companies are not designed to have a large number of employees and some are very
market specific. All ideas must be adapted to the specific environment.

Recommendations on Improving the Dublin Start-up Ecosystem of
Supports for Start-Ups
The following are our recommendations that our research indicates has the potential
to improve the Dublin Start-up Ecosystem for start-ups.
Finance available within the Dublin Start-up Ecosystem
The Irish government has been an active supporter of the Dublin Start-up Ecosystem
and has made significant amounts of finance available to the ecosystem. The
government has already implemented numerous schemes such as the seed capital
scheme and Three Year Corporate tax exemption. However as discussed above, it is
not simply a case of more funding being available, looking at ecosystems in the Top
20 it is the source of the money which is significant. Many Dublin start-ups are
forced to rely on government and EU funding and private (typically limited) sources
for the funding of their early development.
It would be more beneficial to the Dublin Start-up Ecosystem if there was a
gradually increasing emphasis on securing a significant amount of private sector
funding from Angels, Super Angels and Venture Capitalists. Another measure which
would be extremely beneficial would be if the government were to take additional,

13
Ibid, pg 13
14
Angel Holdings "build-the-start-up-ecosystem-and-the-entrepreneurs-will-com"
http://www.angel-holdings.com/build-the-start-up-ecosystem-and-the-entrepreneurs-will-com.asp
practical measures (in addition to the recently launched micro finance initiative) in
respect of the banks to make loans more easily available to entrepreneurs. While
private funding will often be available for high profile management teams Dublin
does have a significant gap in the amount of private sector funding available for
start-ups and it has already been shown that the most successful ecosystems in the
world rely primarily on private sector funding.
15

A number of reports also point to difficulties start-ups encounter in respect of
information ‘overload’, bureaucracy and fragmentation within the government
funded programs. Fragmentation may be somewhat inevitable in a situation where
different government agencies are providing the funding and administration. This
would be a prime testing ground for the recently announced establishment of a
strong network of Local Enterprise Offices operating under a robust Service Level
Agreement within Enterprise Ireland. It is felt that as such this Service Level
Agreement should naturally provide the reduction in bureaucracy, and make the
process of identifying the right support and appropriate programme easier for start-
ups.
16

Supports and Networking within the Dublin Start-up Ecosystem
The area of soft supports is an area where the Dublin Start-up Ecosystem seems to
be doing quite well but in some respects can be found wanting. While it is true that
there is considerable emphasis placed on the mentoring and training of start-ups in
both the privately and governmentally funded programmes, there are areas in which
Dublin could improve.
17
As previously mentioned, Silicon Valley has a culture in
which the entrepreneurs support one another and share ideas. Also, those
entrepreneurs who have been successful feel obliged to give something back and
help out those future entrepreneurs. This helps to bolster the concept of clustering
and could keep businesses located within the Dublin Start-up Ecosystem for the long
term. This of course is extremely important as one of the main aims of improving
the ecosystem is to stimulate the local economy and create jobs.
Much of the mentoring provision in Dublin’s Start-up Ecosystem currently comes
from Enterprise Ireland and the Enterprise Boards. While these are excellent and
valued supports if additional, significant levels of mentoring were to come from the
private sector and/or alumni of the programmes in a structured, coordinated manner,
this would have the potential to improve framework conditions for the start-up

15
Paula Fitzsimons Colm O’Gorman, "The Global Entrepreneurship Monitor (GEM) The Annual Report for
Ireland", pp 35 - 37
16
Barry McCall, "CPA Entrepreneurship Report II", 2012, pg 18
17
Paula Fitzsimons Colm O’Gorman, "The Global Entrepreneurship Monitor (GEM) The Annual Report for
Ireland", pp 35 - 37
ecosystem. Indeed it might also promote more of a ‘pay it forward’ attitude among
successful entrepreneurs in Dublin.
18

Such an increase in private sector and alumni mentoring could also help to improve
networking within the Dublin Start-up Ecosystem. Networking is an extremely
important enabler for entrepreneurs that create successful businesses. Eoin
Costello’s dissertation (available here - http://www.eoincostello.ie/msc_ulster.html )
found that effective networking leads to genuine collaborative activities occurring
within an effective network which in turn yields symbiotic outcomes to the
participants (thereby leading to more networking). ‘Effective networks’ are
characterised by regular and intense interaction as opposed to one off transactional
engagements.
Early stage businesses are aware that networks are key to survival but often they
don’t know how to go about getting involved in networks. It is extremely hard for
example to find a listing of technology clusters in Europe. User defined networks
(such as a Google Circles network for say travel businesses in Dublin) would be
very helpful to early stage businesses. The lack of training and lack of access to
relevant resources (including design, know how, intermediaries, networks)
undermines the enterprise’s capacity to absorb and capitalise on innovation (ICE
Innovation Benchmark Survey innovation for competitive enterprises (ICE) driving
competitiveness through Innovation a partnership approach, 2009 Dundalk, Ireland:
European Commission). Making more networking events and possibilities available
within the Dublin Start-up Ecosystem is a critical enabling condition for high levels
of successful entrepreneurship. With greater networking possibilities the
entrepreneurs are more likely to secure private investment, learn how to be effective
entrepreneurs as well as improve Dublin’s overall profile as a start-up ecosystem.
Improving the Entrepreneurial Culture in the Dublin Start-up Ecosystem
While Global Entrepreneurship Monitor figures for start-ups in Ireland are above
international levels the Dublin Start-up Ecosystem can be found somewhat lacking
when it comes to an entrepreneurial culture. People within the Dublin Start-up
Ecosystem have a very different attitude to that of entrepreneurs within Silicon
Valley, Tel Aviv or London. First of all, Irish people in general are less likely to
view being an entrepreneur as a good career choice, with the Irish average being
46%. When you consider that the OECD average is 57%, the EU average is 59% and
the BRIC average is 75 %, Irish people are more risk averse than their counterparts
throughout the world. This in part could be attributed to the current economic
climate in Ireland where most people’s major concern is having a secure job.
19


18
Genome Project, "Start-up Ecosystem Report 2012", pg 10
19
Paula Fitzsimons Colm O’Gorman, "The Global Entrepreneurship Monitor (GEM) The Annual Report for
Ireland", pg 21
The ambition which is shown by many of the entrepreneurs in Silicon Valley in
particular is extremely important. Their self-belief and confidence gives them the
drive to target businesses worth more than $1 billion. This mindset is another factor
which sets Silicon Valley so high in the tables.
Perceived capability and self belief are often related to education and socialisation.
Framework conditions in Dublin for perceived entrepreneurial capability could be
improved by increased provision of capability development programmes in respect
of entrepreneurial and innovation skills in secondary, third level educational
institutions and via public and private training programmes.
In respect of allocation of effort perhaps it is the willingness, prevalent among the
best ecosystems in the world, to work full time from the very beginning of the
establishment of the start-up which is a significant factor when it comes to ambition
for the potential scale of the business. In this light it is noteworthy that the most
successful accelerators and incubators (such as the New Frontiers programme) in
Dublin require the full time commitment of the entrepreneurs from the beginning of
the programme.
It is interesting to note that the culture of fear of failure is actually higher than
Dublin in many ecosystems which rank quite highly in the top 20. The averages for
the fear of failure being 41% in Ireland, 42% in the OECD and 45% in the EU.
20
So
although a change in people’s attitude towards failure would be extremely beneficial
to the Dublin Start-up Ecosystem; it is not one of the main reasons that it is not
included in the top 20.
Improving the Customer Base and Bridging the Gender Gap within the Dublin
Start-up Ecosystem.
Bridging the gender gap appears to be an area that would also help to diversify the
customer base in the Dublin Start-up Ecosystem. The Dublin Start-up Ecosystem
performs relatively poorly when comparing the number of male to female
entrepreneurs. For example the ratio of male to female early stage entrepreneurs is
2.5: 1. This is in stark contrast to the UK and U.S. where the ratios are 1.8: 1 and
1.4: 1 respectively. The gap in Dublin is actually increasing whereas in other
ecosystems it is shrinking.
21
Part of the reason for this could be that female

20
Paula Fitzsimons Colm O’Gorman, "The Global Entrepreneurship Monitor (GEM) The Annual Report for
Ireland", pg 28
21
Paula Fitzsimons Colm O’Gorman, "The Global Entrepreneurship Monitor (GEM) The Annual Report for
Ireland" pg 39
entrepreneurs in Dublin have traditionally focused on the consumer services.
22

However the sector with the greatest potential for growth is technology.
23

In order to increase the customer base and bridge the gender divide, women might
be encouraged to move towards the technology sector. As increasing the number of
female entrepreneurs has been highlighted as a key objective by the current
government this would seem extremely sensible. One way to achieve this shift of
focus would be to continue the educational reforms which the government have
already started. Entrepreneurs and experts alike have noted that the Irish education
system does not place sufficient emphasis on innovation and creative thinking and as
such hampers entrepreneurial thinking. A key part of this would be to move away
from the current rote learning system of the Leaving Cert and to focus more on
continuous assessment.
24
As for bridging the gender gap, continuing the current
trend of getting more women into third level IT courses can only increase the
number of female entrepreneurs in the IT sector.
An additional factor which has been noted as extremely important as to whether or
not a start-up succeeds or fails, or if it stays in business for more than 5 years, is
whether or not they target a local or international market. The companies which have
a primarily international customer base are more likely to succeed or be more
successful. Those which target the local market are far more likely to either fail or
have much less success. If the Dublin Start-up Ecosystem is to grow increasing
numbers of successful, sustainable start-ups then one of the government’s primary
goals must be to increase the amount of start-ups which target the international
market from their inception.
25
One way to do this could be to provide more financial
incentives than those such as Foreign Earnings Deductions for companies who target
an international market.
How to Increase Job Creation within the Dublin Start-up Ecosystem
A very important area in which Dublin and Ireland currently fall behind in respect of
the international Top 20 ecosystems is in the number of jobs created by
entrepreneurs here. While Silicon Valley and many of the other best ecosystems
employ relatively large numbers of employees from the very beginning, Dublin
start-ups employ relatively low numbers. One contributory factor is that a significant
number of start-up businesses arise out of necessity rather than an innate desire on

22
Ibid, pg 45
23
Marc Andreessen "Why Software is Eating The
World",http://online.wsj.com/article/SB10001424053111903480904576512250915629460.html
24
Paula Fitzsimons Colm O’Gorman, "The Global Entrepreneurship Monitor (GEM) The Annual Report for
Ireland", pg 36
25
Barry McCall, "CPA Entrepreneurship Report II", 2012, pg 4
the part of the promoter to be an entrepreneur. The current economic climate has
played a major part in this with the high rate of unemployment; many people have
seen setting up their own business as their only option. These types of entrepreneurs
do not traditionally set up multi million euro businesses as their primary goal is to
create a job for themselves and hire only those staff that are operationally essential.
26

Perhaps a way to improve the Dublin Start-up Ecosystem would be to provide
incentives for start-ups which employ 2 employees or more. Current schemes in
place include the PRSI Exemption Schemes and less directly the High Potential
Start-Up scheme from Enterprise Ireland. Again these kinds of schemes would have
to be implemented carefully as not all start-ups are suited to more than 2 employees.
It would have to be reviewed on a case by case basis in order to be effective.



26
Paula Fitzsimons Colm O’Gorman, "The Global Entrepreneurship Monitor (GEM) The Annual Report for
Ireland", pg 21