Published On: Mon, Jan 6th, 2014

Ireland Stirs Homegrown Flavor Into Tech Scene

The Grand Canal Docks, an upscale business district here in the center of town, is a kind of home away from home for the big Silicon Valley companies like Google and Facebook. These international behemoths, in large part attracted by the low Irish corporate tax rates, have big presences here. And with their thousands of workers and bustling offices, they have long overshadowed the local start-up scene.Ireland Stirs Homegrown

But Ireland last month became the first debt-ridden European country to exit an international rescue package, and now, through a combination of both longstanding and new grants and tax breaks, government officials are pushing to invigorate smaller, homegrown Irish companies. The hope is that a more robust tech sector can cement the country’s economic recovery.

Ireland’s start-up scene is still relatively small compared with other European hubs like London and Stockholm. In the first nine months of 2013, the latest figures available, the country’s fledgling companies received around a combined $65 million of venture capital investment, a 28 percent drop compared with the same period a year earlier. The figure also is less than a tenth of what rivals in Britain secured in the first three quarters of 2013, according to the data provider DJX VentureSource.

And in the race to attract top engineering talent, the lifeblood of a start-up, it is hard to compete with the likes of Google and other global companies, which can offer tantalizing salaries and perks, as well as prestige.

Still, there are signs of hope. The domestic tech industry generates around 70 billion euros, or 40 percent, of Ireland’s annual exports and employs more than 100,000 people, according to government statistics.

This activity can be seen in the Grand Canal Docks, where young multilingual programmers and developers swap office gossip over expensive coffees in fashionable riverside bistros, while construction workers scramble to build high-rise office blocks to house international and local companies that have flocked to the area.

“This place has an interesting combination of young people and inventive scrappiness,” said Stefan Weitz, a senior director of search at Microsoft who has regularly visited the company’s operations in Ireland over the last 15 years.

For many of Ireland’s fledging companies, the key is to look for growth beyond their home market, which has a population smaller than that of Massachusetts. To succeed, many rely on government grants and tax breaks, like a 25 percent tax credit on research and development conducted in the country. The support is available to big and small tech companies alike.

The tactic, which also has been successfully used by Israel to help its domestic tech industry, allows companies to hire more engineers and developers as they can write off some of the cost against their corporate taxes.

To maximize the benefits, many Irish tech companies retain their development centers in the country, but move senior managers overseas, often to the United States, to be closer to their clients and investors.

For example, Movidius, an Irish semiconductor firm that has raised almost $50 million in venture funds, has a 12-person team in Dublin although its chief executive is in California. Datahug, an online business networking start-up, also has a sales office in New York, though it expects to keep its engineers and developers in Ireland.

“It’s cheaper here, but we need to be close to our customers,” said Ray Smith, 33, a co-founder of Datahug, who spends half of his time in the United States. “To succeed, you have to be in America.”

One aspect of Silicon Valley culture can certainly be found here: the struggle to hire and retain top talent.

Local entrepreneurs often complain that it remains difficult to hire well-qualified Irish engineers and developers, despite the country’s youth unemployment rate of almost 30 percent.

“There’s not enough local talent,” said Petter Made, a Swedish co-founder of the payments start-up SumUp, who oversees a 35-person team in Dublin that includes few Irish developers.