Dublin has turned its start-up problem around
Are we fooling ourselves when we say that Dublin is a real 'start-up city'? Does it really compare to places such as Berlin, London and Stockholm? Or is it just an operations centre for tech multinationals' sales and finance departments with a little engineering and some small start-ups on the side?
There is some evidence that the latter scenario was Dublin's actual status for many years. For all our backslapping over Google, Facebook and Apple basing themselves here we have never produced a Spotify, Soundcloud or Hailo. Indeed, in the last 10 years, we have never come close.
But times may be changing.
Last week, I heard from two different tech companies that are moving to Dublin or increasing core operations here, even though it's more expensive than rival European start-up cities.
Their reasons for doing so are simple.
"This is where you need to be if you're looking for the best engineers," said Oisin Zimmerman, co-founder and chief executive of Heyyo. "It's also the best bridge in Europe to the US."
Born in Berlin, Heyyo is a clever cross between Snapchat and Skype. Calls are limited to 30 seconds, thus liberating commitment-phobes from open-ended engagements. It may turn out to be huge or it may be an also-ran. But as it is now designed and funded, it needs a home.
"We could stay in Berlin, but that's not the ambitious option," said Zimmerman. "Dublin clearly is. It may be more expensive to live here, but if you want to make it, we think this is the place to be."
It's not just aspiring hopefuls who view Dublin this way. Bigger, revenue-garnering growth-stage firms are also moving their top-tier operations here from other countries.
"The majority of our IP is now being created here," said Duncan Lennox, founder of Harvard data analytics spin-out firm Q-Stream. "Dublin has worked out way better than we thought possible. Our chief architect is based here. And the majority of our code is now being driven from Dublin. There's real engineering in Dublin. We'll double our workforce from 17 to 34 here in the next year."
So, are we seeing a fundamental shift in Ireland's core industrial landscape? Or are these isolated incidents in an environment still dominated by multinationals seeking the best tax-efficient corporate base?
International studies have very mixed views on whether Dublin is a top tier start-up centre. While an Ernst & Young analysis last year placed Dublin in the world's top 10 start-up cities, others have omitted Ireland's capital from top 20 lists. But there are many signs to suggest that Dublin is in a metamorphosis from chirpy support ecosystem to engineering design and 'proper' start-up activity.
Funding rounds is one such indicator. In the last 18 months, private venture capital in Irish start-ups - most of them Dublin technology outfits - has exceeded €500m. That's a big jump on the previous 18 months.
And it's not just the volume of start-ups that has increased: the size of the funding rounds is now routinely bigger too. Last year saw 10 rounds over €10m. That's still modest by big European standards, but it's a solid indicator that there is a core group of Irish start-ups now in 'scaling' mode. Two weeks ago, Cubic Telecom completed an €18m funding round. Two weeks before that, Dublin-based Movidius closed a €38m round. These are rounds that attract global attention. Dublin is very definitely pulling itself up onto the map.
The city isn't without its challenges. The lack of office space, for example, is turning out to be more than an irritant: it's making serious problems for companies that want to expand here.
And even when a facility does come onto the market, a lack of property stability is creating a climate of profiteering and short-term bubble creation.
"The terms of the rents here are crazy," said QStream's Lennox. "Many of the places we've looked at will only accept 10-year leases at huge prices. If I'm trying to build a company, that is very off-putting. And you don't have the same problem in other cities."
But even with all of these hurdles, Dublin is still worth it, say the founders.
"Ireland is one of the best two countries in the world in which to do a start-up," said Lennox. "The US is the best, but Ireland is next.
"We see people coming to Dublin from all over Europe to get into the tech industry here," he said. "Two out of our last three hires were in this category. We get CVs from all over the continent."
Lennox and Zimmerman cannot afford to plamas. They need their start-ups to thrive.
Sunday Indo Business