Chris Horn Urges Govt to Woo VCs

 Attracting Foreign Venture Capital is Key to Irish Growth, Horn Tells Epicentre Developer Conference

 

 

 

Iona Founder Dr Chris Horn opened the Epicentre Conference at Trinity College Dublin today by summarising some of the key recommendations of his nine months work with the Irish Government's Innovation Taskforce  and urging Ireland's leaders to make attracting foreign venture capitalists  a priority.

 

 

During his www.Irishdev.com developer conference keynote speech, Horn said that one of the most important findings of the Taskforce was in the area of venture capital: "If Ireland is going to aspire to be the centre for innovation in Europe, we need to attract more venture capitalists here. And we really do need to attract not just foreign VCs, but also the networks that support them," he said.

 

 

"If we are to make Ireland the most attractive place in Europe for foreign risk capital to be based, our whole focus needs to change," he said. Horn said that Israel had reached foreign VCs  through a US-led investor support programme which was begun in the 1970s.

 

 

Through this, the US government made it very attractive for US investors to plough money into Israeli firms. The result was that by 2008, around 850 venture capital deals were done in Israel, compared to 250 in Germany and only 75 in Ireland. Horn believes that these figures highlight why the government needs to make it more attractive for private sector investors to fund start ups in Ireland.

 

 

Dr Horn was one of 130 people from top companies, research institutions and state bodies around  Ireland that Irish Prime Minister Taoiseach Brian Cowen asked to join the  Innovation Taskforce in July 2009. Dr Horn said the body's brief was simple - to find ways to make the Irish economy the most innovative in Europe.

 

 

In Dr Horn's view, one of the most important recommendations made by the Innovation Taskforce is that once venture capital funding has increased here, the irish state body  Enterprise Ireland should very slowly step back from its role of supporting Irish start-ups, and concentrate on supporting export-led firms.

 

 

"Now young Irish companies can go to EI and it will invest money to help them grow. But if they were in Silicon Valley or Singapore or Israel, they wouldn't go to the government, they would go to venture capitalists," said Horn. "So having EI play such a strong role is wrong. EI should get out of this market and concentrate on supporting exporters."

Horn continued: "We need to do a lot more around Angel funding in this country and we see that as one of the things EI should be doing

 

 

Horn explained that the somewhat unwieldy Innovation Taskforce had produced a 150-page report in February and was disbanded after this, but that a new committee has now been formed to report on how the Taskforce's key recommendations are being put into practice.This new committee met for the first time last week.

 

 

Horn said that one result of the Irish government policy of attracting foreign investment in manufacturing throughout the 1960s and 1970s was that Ireland had become the European headquarters for many different kinds of multinational companies which operate across a  very broad range of vertical sectors.

 

 

Ireland now has a great deal more multinational companies headquartered here than either of its major  tech rivals Singapore or Israel.  While both have many technology firmsbsed there, neither has nearly as many MNCs in other key vertical markets like pharmaceuticals or new green technologies as Ireland has.

 

 

"The result is that things are happening in this country that are not happening anywhere else," said Horn. "Br inging someone in from left field can have amazing results, " he said.

 

 

Collaborations between people from different disciplines has great potential and has already led to some surprising results. He gave one example of cross pollination between people working in widely different technology sectors which had produced startling results.

 

 

He told how a meeting between engineers working on thermal control algorithms for VLSI chips and a group of telecoms engineers who were trying to define an algorithm to help them define the best place to site mobile phone masts to get the best coverage. "The thermal guys looked at the way the mobile phone masts were spread out and applied their algorithms to the Radio Frequency spectrum, with great results," he explained.

 

 

Horn believes Ireland can leverage other benefits that result from the sheer number of multinational companies which now have offices in Ireland, especially in the area of intellectual property. He explained that large companies like Microsoft, Alcatel Lucent (formerly Bell Labs), HP, IBM and Cisco usually have patents on lots of intellectual property that they are not actively using to produce products at present .

 

This might be because they might feel the market is not yet ready for such a product or they do not seea clear way of exploiting it now. However, such MNCs are often willing to licence IP in this catergory to younger, more dynamic companies, especially if they were being led by former employees on secondment, Horn said.

 

 

They might also invest in the start-up and perhaps even buy the IP back at a later stage, when the concept had been proven or the market had matured.

 

 

"Frankly, we are competing with places like Singapore and Israel and other locations, ......so a few key recommendations of the report were withheld," he said. He also said that about 20 of those organisations who made submissions to the taskforce had asked that these not be published.

 

 

Focusing on the entrepreneur is the answer, he said. "We need an entire system focused on how to make things as easy as possible for young entrepreneurs. While the IDA did a great job of sucking money in here and Science Foundation Ireland did a good job of attracting top class foreign scientists to theis country, now we need to find ways of attracting foreign equity risk capital".

 

 

Ireland also needs more world class CFOs, who can go to Wall street and explain to investors how their companies will deliver returns, and we also need more science and technology programmes on state funded TV channels like RTE. Also needed is a reform of our antiquated bankruptcy laws, which bar bankrupts from starting a business for 12 years, while in the UK, bankrupts are only banned from starting companies for 18 months.

 

 

Horn suggested that it was also not realistic to expect universities to make lots of money from royalties on their discoveries.

 

He pointed to statistics which show that TCD only makes 0.2% of its income from intellectual property royalties, while Stanford, the US University that hatched Cisco, Sun and Google only makes about 2% of its money from royalties.

 

The moral of this story, according to Horn, is that  although universities make little money  directly from their discoveries. facilitating technology transfer is a more important issue for Ireland, he said.

 

 

"We need to simplify the rules surrounding it so they are the same at Trinity as at Nova UCD and at incubators in Limerick, Sligo and Cork.

 

He also said that Irish academic institutions need to be more open to rewarding people who left to start business ventures, if they later returned to academia. Founding a company might be just as valuable as writing and publishing papers in journals, but institutions did not always recognise this, he said,  and this also needs to change.

 

 

 

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