I watched with rapt attention the debate in the Nigerian senate on how the millions of unemployed youths roaming the street could be taken off . I was amazed at how confused our politicians are about solving a problem that has the potentials of consuming them.
One of the former governors stood up to announce that employing 500 uneducated youth without no clear qualification amounted to employment with no clear productivity schedule attached to their employment.
I have taken my time to share with you how serious countries in developed countries create employment and today we are looking at Ireland a country with a population of about four million people and at one time the fastest growing economy in the European Union………
Every year, Enterprise Ireland picks out about 70 companies that could become the next big things to come out of the country.
These companies are called High Potential Start-Ups (HPSUs).
The state business development agency puts its money where its mouth is by investing in these companies itself. It also provides a range of supports to help them get their products to international markets.
In order to qualify as a HPSU, Enterprise Ireland must deem a company as introducing a new or innovative product or service onto the international market.
The company must be less than six years old, headed up by an experienced management team and, crucially, be capable of creating at least ten Irish jobs and realising exports of €1million within four years of its foundation.
‘‘For us, the HPSU scheme has been great,” said Ivan McDonald, chief executive of Dial2Do, a company that develops voice-activated technology.
‘‘Aside from the funding, we got some great help from Enterprise Ireland’s west coast office in the US.
We got a lot of practical support and help in hiring people.”
According to Greg Treston, divisional manager for scaling and international market support at Enterprise Ireland, it would typically provide support to around 200 to
220 new companies every year.
These firms usually receive feasibility grants and receive mentoring from the state business development agency.
Of these firms, over 70 usually go on to receive HPSU designation. ‘‘We had 73 in 2009, and expect to have 75 for 2010,” said Treston.
One of the main advantages of winning HPSU status is that Enterprise Ireland begins to make equity investments in the firms involved, of typically six figure sums.
This funding is provided on the condition that the company can raise matching funding from private sector sources.
Treston said that first round funding usually came by way of private or ‘‘angel’’ investors.
By the time they come around to second round funding, VC funds usually tend to come on board.
‘‘The HPSU scheme has been very supportive for us,” said Andrew Parish, chief executive of Wavebob, a company that converts ocean waves into electricity. ‘‘Our industry is still at an early stage. We don’t think it will take off for another five years. But it’s important to be developing the technology now.”
Often, Enterprise Ireland’s decision to invest has a dual significance, since it acts as a rubber stamp for other investors. Wavebob, for example, received €600,000 as a HPSU investment.
But it has also received funding from a number of other sources, including the US government and the European Commission.
‘‘A lot of private investors would wait to see them going through our process before they would make the decision,” said Treston. ‘‘Private investors have limited resources to go out and do due diligence for themselves.”
Finance is just one aspect of the assistance provided to HPSUs.
Treston said that Enterprise Ireland attempted to get the companies in front of potential buyers as soon as possible.
‘‘Very few start-up propositions survive the first contact with real buyers,” he said. ‘‘Often, what happens is that the proposition gets changed a bit after meeting three or four potential buyers.
Getting the first reference sites is key for them getting investment.”
Companies on the programme are also given mentoring.
Mentors are not Enterprise Ireland staffers.
Instead, they are drawn from a team of experienced entrepreneurs – and companies are matched with mentors who have experience in their sector.
‘‘The mentor panel is getting a lot younger these days,” said Treston.
‘‘It’s not just people who have retired.
A lot of them have made money in their industry, and have moved on to become investors.”
The main goal behind the HPSU programme is developing export-oriented companies.
With that in mind, the firms usually avail of Enterprise Ireland’s network of overseas offices.
Treston said that, typically, the British office would be the busiest from a HPSU standpoint, since most firms would win their first international sales close to home.
The Scandinavian and Benelux offices also get a fair amount of traffic from HPSUs.
‘‘To some extent, the US offices are involved, too,” he said.
‘‘But we would discourage people from focusing on the US from day one because it’s such a big sector. It costs a huge amount of money to market yourself there – and it’s so easy to get lost.”
Treston said that Enterprise Ireland had a relatively good strike rate in terms of picking winners.
At least 20-30 per cent of those companies selected as HPSUs have failed. However, 50 per cent go on to perform strongly, with many going on to the next stage of the Enterprise Ireland programme, which is its scaling division.
The remainder tend to continue on as established Enterprise Ireland client companies. ‘‘Typically, once they get to around €5 million in revenues, we would pass them along to the scaling division,” Treston said. ‘‘They would deal with professionalising the management, moving on from the entrepreneurial model.”
Treston pointed to CarTrawler, which has revenues of €100 million, and Openet, which is now turning over €46 million a year, as examples of the kind of scale that companies which have come through the HPSU programme could achieve.
There have also been a number of successful trade sales of HPSU companies.
Mobile software firm Changing Worlds was sold in 2008 for €47 million, while Dublin software company Arantech sold last year for €60 million.
Despite the tough economic climate, Treston said that now was one of the best times to be embarking on a high tech startup.
‘‘If you look back, companies that started in recessions have done better than the ones that have started in the good times,” he said.
‘‘The typical high tech companies often take around two years from starting to full selling. If you start now, there is a good chance that you will catch the upturn.”
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