State should focus on spotting potential giants in our start-ups
Published 06/12/2012 | 05:00
LET us shift our eyes from the Budget briefly and consider the Timoney armoured car. It is still around, being put to good use in Taiwan and Germany, and Timoney Technologies is hailed as a world leader in independent suspensions of vehicles. Forty years ago, it was also a big story.
That was partly due to the novelty of having an armoured car produced, and exported, in Ireland, but also because Prof Seamus Timoney's brainchild was a spin-off from university research – in this case University College Dublin.
Last week, the all-Ireland enterprise agency, InterTradeIreland, held its annual competition for emerging and growing companies. There were products of every kind, from a device to speed up medical test reports, to a gizmo which will help you get good Wi-Fi in crowded hotels.
These were just the finalists from 400 original entries. While Timoney seemed unique at the time, many of these companies are spin-offs from academic research.
The winners, Wattics and Catagen, are byproducts of University College Dublin and Queen's University Belfast, respectively. Interestingly, and harking back to the armoured car, both have developed technologies for use by large manufacturers.
Wattics makes a device to monitor energy consumption on production lines and has one running at Smurfit Kappa. Catagen has developed a computer-based system to test catalytic converters instead of running engines to destruction and has installed one in a Fiat factory.
This light engineering would not be seen as a traditional area for Irish enterprise, although most of the companies use information technology in one way or another.
There is no doubt that the range and quality of new Irish companies has improved immeasurably over the past 40 years. The organisers of the competition, now in its 10th year, think the standard was high from the beginning. In all probability, the real progress dates, like so much else, from the 1990s.
One key bit of progress was on display – the cross-border awards ceremony itself. It took place in Belfast's Titanic building and was addressed by Democratic Unionist Enterprise Minister Arlene Foster.
Progress indeed, and it was probably just coincidence that her only other speech that night, to the Northern Ireland Chamber of Commerce, made it onto the departmental website.
Yet the general feeling, north and south, is that not enough progress has been made in the development of local enterprise. The survival rate among such companies is lower than many would like. Of those that do survive, even fewer grow into large – or even medium-sized – Irish-owned companies.
Another set of policies to achieve better results is in train, as part of the Taoiseach's pledge to make Ireland the best small country to do business by 2016.
Yet it sometimes seems that history is merely repeating itself, rather than anything much new actually happening.
The recent consultation paper from Enterprise Ireland said it has become apparent that there are "gaps, overlaps and duplication in the provision of various services, leading to confusion and inefficiencies on the ground".
Indeed it has, and it has been apparent for a very long time. So the enterprise boards, which took over functions provided by local authorities, are being dissolved and the functions return to, guess what, local authorities.
We are assured that the local authorities can up their game. It is certainly reassuring that the 35 separate boards are being abolished. But the "one-stop shop" first advocated more than 20 years ago, and now back in fashion, remains elusive. A "first-stop shop" for small business, which is not quite the same thing, is the best that we are promised.
Even having another agency such as InterTradeIreland encouraging small business development leaves one feeling a little uneasy.
It is essential, politically and economically, to develop cross-border structures, but most seem to have been tacked on without disturbing the traditional ways of the existing agency. "Overlaps, duplication, confusion and inefficiencies," seem the likely result.
Whatever about state bodies, the competition results would suggest that technology transfer from the colleges is going well. That, however, is not the general view, here or in most of Europe.
Envious eyes turn to the United States, where nearly all the great technology companies seem to have their origin in the great universities.
There may be no substitute for the huge defence research budget of the USA – certainly not in Ireland. But demands for more technology transfer raise the question of what is in it for the colleges, or for the taxpayers who fund them.
The successful companies need lots of capital and university stakes will be diluted, giving little return on shareholdings. Tough terms on patents and royalties may be their best approach, but may also inhibit the growth of the companies.
The Cambridge engineering professor Andy Hopper, who sits on one of the Queen's University advisory boards, takes the opposite view.
He reckons it is in the national interest for tax-funded colleges to make their intellectual property more freely available to small firms, which can commercialise it.
One can see that idea raising a lot of hackles but it illustrates the difficulty of devising successful policies in an area which nearly all politicians say is vital.
Finding capital for successful emerging companies is a more practical problem, but no less difficult. There is a bewildering array of "angels," "incubators" and plain old venture capitalists but never, it seems, enough actual risk funding – especially to take companies from the small to medium bit of SME.
The hollowing-out of the Irish banks can only make things more difficult. It is galling to see American funds snapping up Irish assets at bargain prices and a reminder of what money can do when it is available.
Indeed, the founders of many Irish start-ups actually plan to sell to foreign investors once they are big enough, as a way of getting a return for their initial investors as well as for themselves.
The InterTrade competition even builds in this kind of exit strategy. Promoters say the business and technology often stay in Ireland even after such takeovers but it seems to run counter to official policy on the development of indigenous enterprise.
It may sound like heresy but perhaps government has paid too much attention to the start-up phase. It is cheaper, and probably easier, but the key moment comes when a company is ready to get big enough to become even what would be regarded as a small firm by EU definitions.
Irish capital is in short supply for such investments. Perhaps that is where the greater resources of the State should be applied. Let a thousand flowers bloom, but save the fertiliser for the ones with the finest blossoms.