The tech tribes of Galway look for ways to venture further for VC cash
Dublin gets the lion's share of tech funding, but ambitious startups want investors to go west
Published 24/09/2015 | 02:30
Is there tech investment to be grasped outside Dublin? A glance at the most recent venture capital investment figures shows that Dublin is attracting the lion's share of VC funding for startups. It got €227m of the €307m invested in startups in the first six months of the year. By contrast, Cork startups saw a minuscule €2.9m invested while Limerick startups attracted not a cent from private venture funders.
Just one other city came close to matching Dublin, proportionately, for investment: Galway.
The city, historically known for its medical tech multinationals, is trying to break through an international assumption that tech development is largely a Dublin affair.
It's not doing too badly. Companies like Alison.com, Altocloud, OnePageCRM and Game Golf are mixing with others such as Ex Ordo, Element Wave, SpamTitan, Netfort and BuilderEngine to create a bona fide cluster of young tech companies. Much bigger companies, such as Declan Ganley's Rivada Networks, aren't too far away.
But most of these are being brought along by locals who have to hustle a little harder to get good personnel or investors on board.
All of them face a similar challenge: how do you persuade investment firms to look outside the M50? How you get senior engineers, architects or founders to experts to consider a small city hours away from what is perceived to be the centre of the action in Ireland?
Some local companies have found it a frustrating experience.
"We just raised €3m to expand our company," said Kenneth Fox, chief executive of Channel Mechanics, an NUIG-based company that makes distribution software for manufacturers.
"But raising capital was really hard in Ireland. We did try. Here in Galway there's little or no access to funds. So if you want to raise money you have to go to Dublin. But even there, we found that there was a struggle over valuation. So unfortunately, we found it much easier to raise money for what we want to do outside Ireland altogether."
The actual figures show Galway-based tech firms doing better at attracting money than any other region outside Dublin in the first half of this year.
Galway tech companies landed seven VC deals worth €59.7m according to the Irish Venture Capital Association (IVCA), resulting in the highest VC return per head of population in Ireland. However, a couple of these investments went to multinational companies such as Veryan and Perseus Telecom that only maintain regional bases in the western city. The stroke therapy startup Neuravi was the indigenous startup to attract the biggest investment in the city this year, drawing down €10.7m of the €19m VC funding it announced in June.
"Galway has done relatively well compared with other regions," said Gillian Buckley, investment manager for the Western Development Commission, which promotes economic development across the west of Ireland.
"In the west we're somewhat fortunate in that we have good actors and some good angel syndicates. On the other hand, they haven't really scaled. And so the vast majority of investors are in Dublin. We could really use some more foreign direct investment. The northwest, in particular, is in danger of becoming a complete black hole unless we do something radical soon."
Even for local firms that do get over the funding hurdle, recruitment can add an extra difficulty.
"My biggest problem is trying to get people to come down to Galway from Dublin," said James Murphy, founder and chief executive of Lifes2Good which landed €5m in investment from the BDO Development Capital Fund earlier this year.
"We have to figure out how to get them here and keep them here. If we don't get the right talent to get working with us down in Galway we're going nowhere."
Other growing local startups have found acquiring talent to be an international issue.
"I used to recruit for Google and that has helped us a lot," said Dorothy Creaven, co-founder and chief executive of Element Wave Software, a mobile analytics company based in Galway's docklands.
"But we had to go outside Ireland to Spain to get a few developers because the universities here weren't producing new graduates with the skills we needed, especially in up-and-coming areas such as node.js." Creaven said that the situation is improving and that her company is hoping to expand shortly.
But some local firms say that recruitment hasn't been as difficult as they might have expected. "In our company, we've been very successful at attracting people from all over the world," said Barry O'Sullivan, chief executive of predictive communications software firm Altocloud. "We're not Silicon Valley, we're San Francisco."
But like its rents, San Francisco salaries are high. Galway wages are a notch below other locations, even taking into account lower accommodation costs. This can be an issue, according to Channel Mechanics' Kenneth Fox.
"Most people from the west would love to work here and would probably take a little less money to stay here," he said. "Unfortunately, it's not a question of being a little bit less when you compare wages in Dublin to here. It's apples and oranges. This is a problem."
Others take a more holistic view. Quality of life is something that a lot of startups take into consideration. It's the reason why many won't work in business parks outside a metropolitan centre, but will choose to locate downtown, even when the same financial rewards aren't on offer.
"Entrepreneurs don't want to spend their whole time looking at computer screen, they want to live, " said Joe Greaney, director of WestBIC, an organisation that helps to fund local startups.
"We pay great lip service to the notion that everyone wants to live in Galway. But it's partly true. There's a creativity here that's not common."
Ex Ordo's Paul Killoran agrees. "If you look at what we have here, it's amazing," he said. "There's no point in being a copycat of Silicon Valley. We can put a Galway spin on it. We have tech, medtech, food and marine. We're very proud of the Collison brothers, who grew up down the road.
"What's the difference between us and them? I have two ambitions. The first is that we create 20,000 jobs downtown and the second is that we build Galway's first billion-dollar company."
Michael Cogley on three Galway startups bidding for glory
‘We were told that Dublin’s streets were paved with gold’
Founder: Enda Hoolmaa
What it does: customer loyalty software
After doubling its customer base in one month with one sales rep, loyalty startup Budge is looking to quadruple its customers after taking on a company with 27 sales reps.
Budge is a mobile app that aims to replace the punchin loyalty cards with a new digital service for small and medium enterprises (SMEs). Co-founder Enda Hoolmaa, says that getting SMEs to take on new technologies has proven to be a challenge for the Galwaybased startup.
“We’re gaining traction in Galway at the moment.
“One of the biggest problems would be that SMEs are slow to adopt new technology and they fear about how hard it will be to learn on all that kind of stuff,” said Hoolmaa.
“We want to prove it’s a business. There are a lot of startups out there getting funding and then they’re gone in a year. We are actually making money from it. It’s all going back into developers but we’d rather prove it’s a real business model than blow €100,000,” he said.
Hoolmaa said that setting up in his hometown had its advantages, especially given the local market.
“We met with reps that are nationwide sellers that have told us that we needed to go to Dublin where the streets are paved with gold,” he said. “But I wanted to get businesses that we know.”
Last year, Budge received a Competitive Feasibility Fund (CFF) from Enterprise Ireland that saw it awarded €20,000 if the owners invested €20,000 themselves.
Budge is now looking to attain a larger funding round from Enterprise Ireland in the form of its Competitive Startup Fund (CSF), or become part of Enterprise Ireland’s highpotential startup unit.
Once we started selling abroad, our location wasn’t an issue’
COMPANY: Titan HQ
Founders: Tim Shine, Sean Doherty
What it does: anti-spam software
Sixteen years after it introduced its first physical network security system Galway firm, TitanHQ, now has customers in nearly 130 countries as it begins to take its battle against spam to the cloud, said that the company, which employs 29 in Galway and three across the US, has done very well to establish itself in a densely populated market.
“We’re punching way above our weight for the size of the company,” said Salvatore McDonagh, marketing manager at firm.
“We’re competing against very big, well-funded American companies in the anti-spam space.”
TitanHQ was originally named Copperfasten, after its initial spam filter hardware. It has now rebranded to encompass all of the company’s products.
“We’ve rebranded as TitanHQ to try and pull the three different products that we sell under an umbrella brand that fits and makes sense,” said McDonagh.
He said that the company has overcome some of the challenges of setting up outside Dublin.
“I think at the beginning, the guys struggled being a Galway company with the size of the market share compared to Dublin,” he said. “But once we started selling outside Ireland, it became less of an issue. We’ve now got customers in at least 129 countries.”
TitanHQ is one of many firms to benefit from funding schemes from the IDA and Enterprise Ireland but the company are also funded by the Dublinbased VC firm, Oyster Capital Partners.
“We are growing,” said McDonagh.
“Some growth doesn’t require funding and some growth does. We’re always looking for funding, like any startup company.”
TitanHQ was originally set up by a team of five, two of whom are still involved in the company. Its primary markets, he said, are in the US and UK.
'This city is amazing: it's not a graveyard for ambition'
Founders: Tara Dalrymple, David Fahy
What it does: employee reward software
For over a decade Tara Dalrymple had been taking employees personal tasks and outsourcing them to service providers. Now she's taking her service online as she tries to perfect the offering with her Galway-based start-up, FeelsRight.
"I've been doing this offline for 12 years around Ireland," said Dalrymple. "My background is in IT so I saw an opportunity with the increase in interconnectivity, community, and poor work-life balance."
FeelsRight tries to help businesseses become more efficient. "The way in which we do that is to allow them to delegate all of their personal tasks. We take it away from them and we get it done by a community of trusted and verified tradespeople.
"For example if a lady has a meeting and needs a blow dry, three pairs of tights and is specific about the tights, we can get one of our errand runners to go and get the tights in a shop and drop them up to her offices. We can then get one of the hairdressers to go to her office so that she can have her hair dried for her presentation."
FeelsRight won the Irish Domain Registry (IEDR) award last year, a prize valued at €10,000. The company also has funding in the form of innovation vouchers from Enterprise Ireland. The company is currently pursuing further funding in the form of a Competitive Startup Fund (CSF) grant worth €50,000 and is also developing an investor business plan. Dalrymple said that funding can vary based on geographical location and believes that there may be more access to monetary backing in Dublin.
"You might get more access to funding in Dublin than in Galway," she said. "I've been pitching for certain competitions and people always ask why we set up in Galway. But Galway is absolutely amazing. It's not a graveyard for ambition."