After visiting Ireland last year for the first time for the F.ounders conference, Ryan Smith, founder of the survey software company Qualtrics, decided to set up the company’s international headquarters in the Irish capital. It was the first time the Salt Lake City start-up opened an office outside its own headquarters. Although the decision to “split up the family” was difficult, he says, deciding on Dublin wasn’t.
Qualtrics, which raised $70 million from Accel Partners and Sequoia Capital in May, is just one of a growing number of young U.S. tech companies that have decided to set up in Dublin. Others include Etsy, Airbnb, Groupon, TripAdvisor, MongoDB, Zendesk, HubSpot, Ancestry.com and Overstock. Chalk it up to the network effect: the city serves as the European headquarters for the world’s ten largest Internet companies, including Google, Facebook and Twitter, and a swelling number of home-grown entrepreneurs.
“Success breeds success,” Smith says. “This would be a very different conversation if we were the first company to come over here, but you’re watching Twitter with their announcement, you’re watching Google, you’re watching Airbnb, you’re watching Dropbox. We’ve had the same investors as most of these companies so you look at it and it says something about the ecosystem. People have been on the ride before. There’s nothing we can’t do here because we know people have come before and done great things.”
“The heart of tech in Europe” is how Dropbox’s vice president of business Sujay Vaswa describes Dublin. Since last year’s Web Summit the city has worked to strengthen its claim to that title. As the number of international tech HQs grew, Ireland’s economy turned a corner and is on track to exit the rescue plan set out by the troika of the European Commission, European Central Bank and the IMF by year-end. It does so as a time when confidence in the indigenous start-up scene is at an all-time high and is attracting the attention of international venture capitalists, some of whom think Dublin is ripe for its first huge success.
Irish start-ups have recently won a spate of pan-European awards. Trustev, which specializes in real-time, online identity verification using unique social fingerprinting technology, in June won the top Tech All Stars Award, an EU-wide search to find Europe’s best young start-up company organized by the European Commission in partnership with Liberty Global Ventures and Amazon Web Services. (The CEO, Pat Phelan, is pictured on Informilo’s home page, receiving the award.) The award is part of Startup Europe, an EU program to encourage tech start-ups to start and stay in Europe. (Trustev is the fourth company to be launched by Irish serial entrepreneur Pat Phelan.) In September Dublin-based telecommunications software maker Openet, which counts AT&T, Sprint, Orange, and TimeWarner Cable among its customers, won European Start-Up of the Year at the Berlin Growth Summit, a conference that focused on Europe’s best and brightest entrepreneurs. (The selection committee for the prize was headed by Silicon Valley Bank’s Alex McCracken).
While attracting money from Valley investors is still relatively rare for early-stage European start-ups, young Irish companies are proving to be particularly adept: relationship management company Datahug raised money from Silicon Valley super-angel Ron Conway; Intercom, a CRM tool for web businesses that moved its HQ to San Francisco, scored investment from Twitter’s Biz Stone, Huddle’s Andy McLoughlin, and 500 StartUps; and Logentries, which has offices in Dublin and Boston, counts Polaris Ventures and RRE among its investors.
But Dublin’s credibility as a tech hub will only be fully established after it racks up some big exits. And, as London, Berlin, Stockholm and other European capitals are working hard to develop their own ecosystems, the Irish government is conscious it has to keep the momentum going and further develop the country’s entrepreneurial talent.
Silicon Valley Spirit
The seeds of Dublin’s tech ecosystem were planted in the early 1990s when electronics multinationals like IBM, HP and Cisco set up European bases in the country. Joe Morrissey became part of the first generation of tech industry workers when he was hired for a sales job out of university by computer-maker Gateway. His story is typical of many of his generation, learning first the on-the-job skills, then how to manage. He ended up joining Oracle and eventually moved to Silicon Valley for five years, where he gained invaluable experience before returning. “I always say to folks if you want to start a tech business, you don’t have to be in Silicon Valley but a piece of Silicon Valley has to be in you,” he says.
That Silicon Valley spirit has never been more pronounced in Dublin, he adds. As head of EMEA for MongoDB, the open-source database software company started by the founders of DoubleClick, he often hosts user group nights at the company’s five-month-old Dublin office. “We get 70 to 80 people in for beer and pizzas and talks,” Morrissey says. “They’re all small start-ups building businesses on MongoDB and I see the same level of enthusiasm and energy that I would have seen when I was selling to start-ups during the dotcom boom in Silicon Valley.”
More than 1,000 companies have chosen Ireland as their European base. The tech sector accounts for about a quarter of Ireland’s economy and more than a third of its exports, according to industry association ICT Ireland.
“Over the last three years, by all counts the number in Ireland have trebled, the number of start-ups, the number of tech people in whatever form. Now it’s reaching a critical mass,” says Shay Garvey, who left Irish VC firm Delta Partners last year to set up Frontline Ventures, a new fund with Will Prendergast, a former partner at NCB Capital, and entrepreneur William McQuillan. The fund aims to become the first institutional investor in the best of the new wave of companies and provide the follow-on funding to help them scale.
The area centered around Dublin’s Silicon Docks boasts a high density of start-ups. Engineers and managers who cut their teeth in the Dublin offices of U.S. Internet giants like Google and Facebook are joining homegrown entrepreneurs of all ages in launching their own companies.
The availability of funding in Dublin is another factor that gives it an edge over London, where Frontline also invests, Garvey says. Enterprise Ireland offers €50,000 immediately to entrepreneurs seeking to start up a company.
“It’s way easier here than it is in the UK and there is all sorts of support,” Garvey says. “You’ve got seed funds here; I was running one at Delta. There were also 40 companies getting €700,000 on average from these bank-sponsored seed funds. A lot of American guys were saying, ‘Wow, you can come to Ireland and raise $1 million quicker than anywhere else on the planet.’ And that is the case.”
Funds invested $105 million into tech companies in Ireland in 17 deals during the first half of the year, according to Dow Jones VentureSource. Highland Capital Partners set up an Irish office headed by Tony Zappalà, who joined Highland from Index Ventures, and announced its first dedicated European fund, which will be run from Ireland. The €20 million fund will focus on growth-phase technology companies.
And, as VC firm Polaris scales back its Dogpatch incubators in the U.S., it is ramping up Dogpatch’s Dublin outpost, which is home to about 30 start-ups with a healthy pipeline. Polaris has invested seed money in two Dublin startups, BalconyTV and Logentries, which both plan to expand to the U.S.
IDA Ireland, the government agency that helps foreign companies set up their operations in Ireland, has also begun working with U.S VC firms, including Union Square Ventures, to identify leading edge companies with a clear plan to scale up rapidly and expand internationally.
“They see it as good, fertile ground for them to farm in,” Barry O’Dowd, senior vice president at IDA Ireland’s emerging business division, said, following meetings with VC firms in Boston and Washington last month. “Also from the point of view of their portfolio companies, what is really winning out for them is the speed to execution. SquareSpace [funded by Index Ventures and Accel Partners] is a very good example. That company came in to Ireland in the summer and they now have over 20 people here. They’re ramping up fast. They’ve announced they want to hire 100 people and they don’t see any problem getting those people here.”
Ireland offers a range of benefits to help companies cut red tape, ranging from fast-track visas to a standard low corporate tax rate of just 12.5%. But that is not the main draw.
“People ask about taxation all the time, but the reason we’re in Dublin at the end of the day is because of talent,” says Jeetu Mahtani, managing director of Hubspot International. He has hired 70 employees since opening his Dublin office in January and expects that number to more than double over the next year. Mahtani says he looked at London first, but Dublin won out not only due to costs but to the quality of the CVs landing on his desk.
“We were getting a lot of applicants from tier-one colleges like Trinity, University College Dublin, and Dublin City University and when we were talking to these guys, we were blown away. It was almost like were talking to somebody from UC Berkeley, or Stanford,” Mahtani says. “So that was actually a very compelling reason. That talent is here, it’s an opportunity to hire them early and groom them into a leadership role.”
Continuing to develop that talent base — and turning out even more graduates with the right skills — to meet the evolving needs of the global tech industry is crucial for the continued development of Dublin’s ecosystem, foreign tech company executives say.
“There’s zero percent unemployment in the tech industry in Dublin,” MongoDB’s Morrissey says. “It’s a very competitive market, you’ve got lots of other companies like Amazon, Google and Facebook recruiting here as well for people with good skills. Yet there’s 14% unemployment in the overall population. There are probably some structural things we could work on.”
Through the economic downturn, universities and colleges reassessed their program priorities, IDA’s O’Dowd says. “What you see now is analytics, business intelligence, robotics and these sort of growth areas are the ones they have prioritized. It will be incumbent on them to move forward as well along with enterprise partners. That’s one of the things that’s going to be beneficial to us over the next couple of years.”
Like many, Brian Caulfield, a partner at European VC firm DFJ Esprit is bullish about the future of Dublin’s tech ecosystem. He has done three deals in Ireland this year. Keep an eye on Irish companies like Openet, Ezetop, and, one of his portfolio companies, Datahug, he says.
“The next stage is for one of the Irish companies to go really big,” Caulfield says. “What we’ve tended to see is the exits from Irish companies in recent years have probably capped out around the $500 million mark. It would be great to see a couple of NASDAQ IPOs, a couple of billion-dollar companies. There is a crop of companies where that potential exists now.”