It's often said that the best time to start your own business is when the economy is on its knees. On that basis, 2009 must surely herald a new golden age of entrepreneurship. But will a lack of available finance, and a more cautious venture capital industry, serve to stymie innovation just at the time when it's arguably needed most?
Some of Ireland's leading entrepreneurs firmly believe that recessionary times offer the best opportunity to create sustainable companies. The premise being, if you can hack it in this environment, you can survive just about anything.
New figures released today by the 10th annual Global Entrepreneurship Monitor -- a worldwide study by a group founded by the London Business School and US -based Babson College -- are expected to show that the number of start-ups within Ireland remained relatively constant throughout 2008, but that during the latter half of the year the number of people contemplating branching out on their own substantially decreased.
In many ways, that's understandable. The security of a full-time job that pays the mortgage during a downturn is difficult to surrender.
But Jerry Kennelly, the Kerry entrepreneur who founded the Stockbyte photo imaging firm that was sold to US-based Getty Images in 2006 for $135m (€110m at the time), maintains that the current environment should not be a deterrent for would-be business moguls.
"It's the perfect time," he says. "You have to challenge conventional thinking. If you have a disruptive technology for instance, that can do something critical for a cheaper price, then this is the time to be pursuing it."
Two of the world's biggest technology firms, Cisco and Oracle, were founded at inauspicious times: Cisco in late 1984 just weeks before the Dow Jones slumped 23pc; and Oracle in the midst of a Reagan recession.
"Starting a business in a recession is like vacationing in the off-season," said one US entrepreneur last year.
"It's a little less crowded, and everything starts going on sale."
Mr Kennelly, who's already gathered a new team to develop a new globally-focused online business to be launched later this year, also stresses that with available funding now tighter, start-ups will have to ensure they remain lean and begin generating revenue quickly. In turn, that can actually create start-ups that ultimately emerge as stronger fully-fledged companies.
"They'll need to make things happen with fewer resources," he says. "Irish start-ups have often suffered because they over-engineer a new product rather than getting it to market. But the people who truly believe in their own businesses will make it."
With the Government trying to stabilise the economy and promote activity, it has announced a new €500m venture capital fund to back small Irish and foreign-owned high-tech companies hoping to set up shop here.
But the plan, broadly welcomed by the Irish Venture Capital Association (IVCA), is so far short on detail. The Government has said the fund will include the involvement of three US venture capital companies, but it's not yet known which firms those are.
"There are no details about the initiative yet, and I'm not even sure there really is a €500m gap in funding at seed level that needs to be filled," said Regina Breheny, director general of the IVCA.
She says that one concern with flooding the market with capital directed at start-ups is the possibility that it will push up entry level prices -- that, essentially, new companies may be over-valued.
Ms Breheny acknowledges that SMEs that aren't VC-backed are going to have a more difficult time obtaining finance this year, while the venture capital companies themselves are likely to display "less tolerance of risk".
Jerry Kennelly also believes that over-valuation of start-ups has been a significant issue in the past. He says that after selling Stockbyte, he mulled a number of potential investments, but that the target companies had been vastly over-valued, partly due to receiving sometimes sizeable investments from Enterprise Ireland.
While he believes that Enterprise Ireland has done a good job overall, he says the government agency probably needs to reassess the mechanics of how funding is awarded to start-ups and the subsequent oversight of those cash injections. "Enterprise Ireland sometimes tends to over-leverage valuations and in some cases it needs to be giving firms a kick in the behind rather than a pat on the back."
Colm Lyon, the founder of online payment processing firm Realex, also agrees that start-ups are going to have to be prepared to be far more resourceful.
When he founded his company on leaving Ulster Bank in 2000, after 14 years with the institution, Mr Lyon made approaches to venture capital firms that were politely rebuffed.
It was the time of the dotcom collapse, so their attitude was somewhat understandable.
Remaining convinced of his offering, Mr Lyon used his credit card and called in favours to get his operation off the ground. Later a small amount of funding was raised via a business expansion scheme that largely involved friends and family, while venture capital firms that later approached the entrepreneur to invest in Realex were turned down.
That left Mr Lyon controlling over 75pc of the company that now processes payments for firms such as Aer Lingus, CD-Wow, Axa Insurance and Quinn Direct.
The company has just opened an office in Paris, and won a big contract in the UK. In its last financial year it recorded revenue of €5.8m and an operating profit of €635,000 -- both figures will be substantially ahead in the current fiscal period, says Mr Lyon.
"There's nothing you can do about the circumstances you find yourself operating in, and if it's not appropriate to go looking for funding, then just don't do it. You can be better off in the long-run," he adds.
"The other thing an environment like this teaches you is to diversify your revenue base. At the moment we generate about 70pc of our revenue from within Ireland and 25pc from the UK.
"I want to be less reliant on the Irish market and there are huge opportunities to do that."
Realex will soon be registered as a payments institution with the Central Bank, enabling it to pursue opportunities arising from the Single European Payments Area (SEPA) initiative. That will harmonise banking systems throughout the eurozone, enabling people to make cross-border payments as easily as they would transfer money to another account in their home country. It should also facilitate eurozone banking from a single account held in any one member country.
For start-ups operating in the internet space, Mr Lyon says that he remains "completely optimistic" regarding their outlook.
"You have online access to hundreds of millions of people. You might need to consider a different path to execution of your idea, but it's still an exciting prospect."
Businessman Brody Sweeney, who founded the O'Brien's sandwich shop chain back in 1988, dismisses any notion that the current downturn should be a disincentive to beginning a new business.
When he established O'Brien's, it was a long, hard slog to reach any sort of critical mass, and Mr Sweeney would be the first to admit that he made numerous mistakes along the way.
Never a wrong time
"There's never a wrong time to start a business and you can always find reasons not to do it." he says. "I know someone who set up a car repair business last September and it's flying because people aren't really buying new cars now.
"In terms of securing finance, you've got to be very pragmatic and cut your cloth accordingly."
He points out that just because the economy is struggling, it doesn't mean the fundamentals of business have changed.
"You've got to wear out the shoe leather. The single defining factor for a new business is the person behind it. People are also going to emerge from companies such as Dell with fantastic business education and many will be very capable of going out on their own."
For start-ups, layoffs elsewhere can also present the possibility of attracting good staff eager to get back into the workforce. Colm O'Gorman, Dublin City University's professor of entrepreneurship, also points out that there is a growing role-model effect within Ireland that has also helped to spur on new entrepreneurs.
But he adds that the appeal of entrepreneurship probably needs to be widened.
Apart from lecturing business students on the pros and cons, he is also now bringing students in other fields -- such as those studying physiotherapy -- into the fold.
"They'll have to be aware though that they will probably have to exploit new ideas without having the financial resources they might have wished for," he says.