We Need To Study The Silicon Valley Playbook

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Via The Sunday Business Post: The youngbloods behind emerging startups don’t just want to be better – they want to be the best. If we want them to stay, we must do more.

Epic mission. That’s how Paul Adams, vice-president of product at Intercom, described his startup’s plan to develop a new way for businesses to talk to customers online.

Adams was so convinced of the potential of Intercom that he quit his top job in Facebook to join a company that had raised just a couple of million dollars.

Intercom has become a rocket ship, going from an idea in a Dublin coffee shop to a business backed by Silicon Valley royalty.

It is a five-year-old company led by a 32-year-old Dubliner called Eoghan McCabe worth over $500 million. Ultimately, it could be worth billions. McCabe is at the forefront of a new generation of Irish entrepreneurs who want to make it on the world stage.

It is a group that includes Patrick and John Collison, the co-founders of $5 billion-valued payments company Stripe; Paul Campbell, the founder of Tito, the McGinn sisters who co-founded fashion website OPSH and David Coallier, the 20-something tech genius behind online security company Barricade.

These are young people who think big. They hire based on merit and work in an honest and open manner. They believe in community, and support each other. Some businesses strive to put their competitors out of business. The younger generation of Irish entrepreneurs coming through is seeking to put people in business. Often, they back each other financially. They don’t want to trash their rivals, they just want to be the best.

This is not about seeking the inside track by knowing the right politician or greasing the appropriate hand. Sure, any young startup can go bust and lose their investors’ money. Failure is inevitable in the startup world. But it is a clean failure.

These are entrepreneurs who retain the values of the entrepreneurs who forged our great companies in hard times. Kerry, Glanbia, Glen Dimplex and Icon are companies that were not made overnight.

Each of these companies are considered behemoths now, but each was once a startup. What has kept them great was holding on to the passion, determination and openness to ideas that convinced their founders that they could build an Irish rocket ship.

The Sunday Business Post recently published a list of 100 Irish startups to watch – we could easily have mentioned 1,000. It is easy to suggest that we are punching above our weight and doing everything right. It would be easy, but it would be wrong. We need to do more for them.

Ireland needs to study the Silicon Valley playbook. Yes, we should encourage our young entrepreneurs to go to San Francisco, or China, or Brazil, or Africa. But we should incentivise them to maintain their links here.

When startups succeed, they should be able to bring their money back to reinvest here in the generation that is still in school or university.

Intercom again is a case in point. Yes, it went early on to San Francisco, but it kept boots on the ground back home – and invested more here when it could afford it.

There are other companies coming up like it. The state needs to listen to these startups and do what it can to help them. We can’t afford to lose them.

When startups succeed, they should be able to bring their money back to reinvest here in the generation that is still in school or university.

In January 2014, Sean O’Sullivan, the Irish American businessman who has backed a string of young Irish companies, chaired a forum on entrepreneurship. The report lists 36 recommendations and is sophisticated, practical and brimming with ideas that would assist a wide range of businesses and entrepreneurs. Many of the report’s recommendations – things around tax reform, employee stock options, immigration policy – have never been implemented.

Whoever ends up as our next enterprise minister should read the 60 pages (there are lots of pictures so it won’t take long), particularly the section around capital gains tax. If you want to encourage entrepreneurship, this is key. Ireland’s CGT rate, at 33 per cent, is one of the highest around. This means there is no incentive to take risk on your capital. As O’Sullivan pointed out in his report, a reasonable rule of thumb is that CGT should be no more than half of the regular tax rate.

This would pitch the figure at 26 per cent – higher than most countries, but within the right parameters. O’Sullivan believes the government should drop it to 20 per cent, arguing that it would increase investment and create employment. In the most recent budget, Michael Noonan reduced the rate from 33 per cent to 20 per cent – but only for the first €1 million. But this move was quickly lambasted by businesses.

At times, it seems politicians are incapable – perhaps afraid – of listening too carefully to business. They should not be. Companies like Intercom are in Ireland because they want to be, because they believe in Ireland. We should support them, and companies that aspire to be like them.

That is what we try and do in this paper every weekend, highlighting the successes and championing the industry. We are 26 years old, but we aspire to be like a startup.

Originally published in The Sunday Business Post.

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