Tech firms on the road to success

11-04-2008

by Emmet Ryan

Despite the current economic challenges, Irish tech firms are bucking the credit crunch and continuing to attract investors.

A group Irish IT firms just came back from the US with EUR29 million worth of contracts, venture capitalists are growing increasingly interested in the sector, and the reputation of Irish businesses continues to grow.

Yes, truly there is much to be worried about. Seriously though, if there is a credit crunch out there at present the Irish technology sector doesn't appear to be feeling it.

The latest indication that the industry is prospering in the current climate was the success of the Enterprise Ireland-supported venture to Silicon Valley in March, the one that resulted in that nice EUR29 million figure.

A total of 10 Irish firms shared in the funding secured including car rental distribution systems provider Cartrawler and information management firm Bard.

For businesses like Cork-based Bard these kinds of missions present the firm with an opportunity to meet with major players in large international firms.

"Because the missions are usually well organised and high profile, they allow the businesses to meet key senior managers in the target area," said Tom Fitzgerald, managing director of Bard.

"Most meetings are arranged in advance so you know you will be meeting specific key people. Crucially, the members of the group usually get to know one another quite well and most often this leads to business between the Irish companies who are going," said Fitzgerald.

"Also, since there is usually a senior politician [in this case Micheal Martin, the Minister for Enterprise, Trade and Employment], there is a lot of coverage in the media that allows the companies to get better known in the target region."

The importance of these missions can be felt across the technology spectrum as these projects help boost the profile of the Irish tech sector as a whole. For Irish businesses it is important to make the most of opportunities in the international spotlight such as these.

"It's important to get these firms out there, into the international arena," said Shane Dempsey, director of the Irish Software Association.

Dempsey believes that the type of business Irish tech firms are engaging in is enabling them to avoid the credit crunch and continue to prosper. Software firms for example are providing the type of services that increase in demand during tough economic times.

"Software companies that do well offer increased productivity and efficiency to their clients. That's the type of results businesses are looking for," said Dempsey.

It's not just a case of being the best port in a storm during a time of crisis though. Irish businesses are also proving to be innovative, attractive propositions that foreign investors want a piece of.

In the case of Auctomatic it turned out the investors wanted the whole cake too, as the tool for managing an eBay business was sold to Canadian company Live Current Media for USD5 million. The software was developed by teenage brothers Patrick and John Collison from Limerick.

The success of this new generation of Irish business people has not gone unnoticed by the venture capital community as Irish venture capitalists have shown an increased interest in the tech sector. These investors poured EUR84.4 million into Irish tech firms in the last quarter of 2007, according to the latest Techpulse survey from the Irish Venture Capital Association (IVCA). This was up significantly from the EUR30.1 million invested in the same period in 2006. In all, 2007 was the best year for tech investment since 2002 with EUR225.94 million raised during the period; 17 percent ahead of 2006.

The reason for this improvement is largely down to a change of mindset from the IT sector with firms waiting until they are more mature before approaching venture capitalists.

"We are seeing fewer technology companies coming forward but the quality is better," said Michael Donnelly, chairman of the IVCA. "They are more venture-ready than was typical in the past. Back then a lot of companies were ill-prepared and didn't know how to pitch their business."

The experience gained by the firms that waited has stood to them and the result is an increase in interest from investors both in Ireland and internationally.

So all is well and the Irish tech sector can ride off triumphantly into the sunset? Not just yet.

In order to maintain this success, in order to continue to garner interest from investors from both home and abroad and in order to thrive, Irish tech firms need to knuckle down and continue to pound out the hard yards.

"They need to use references and word of mouth to spread the word, and they need to follow up after the mission is over," said Fitzgerald. "Some of our clients required several years of interaction and building up contacts. At a certain point, if you provide a quality product, your success begins to snowball."

By continuing to develop these relationships Irish IT firms can build the foundations to become bigger, stronger, better, more successful enterprises. They're certainly on the right track at the moment.