Chris Horn Talks About Innovation And Ireland: “How Can We Create A Desirable Environment For Entrepreneurs?”

Dr. Chris Horn, co-founder of Iona, president of Engineers Ireland, and member of the Irish Innovation Taskforce, gave a keynote at the Dublin Web Summit a few weeks ago.

He began by giving us some history. 30 years ago, he was a PhD student in TCD’s computer science department. In 1981, he had his first visit to Silicon Valley because at that time TCD computer science had some links with Stanford computer science. When he went to the computer science department he met two young guys working on graphics hardware, Andy Bechtolsheim and Bill Joy, who later went on to co-found Sun Microsystems. Chris thought “we’re as good as these guys, why can’t we set up a company like this from Dublin, Ireland”. He talked to other people at home doing interest things with software and hardware (“geeks like me”) and they decided that they were going to start a company.

In 1991, Sean Baker, Annrai O’Toole and Chris set up Iona in Pearse Street. They had one metal desk, one phone and no chair. Each put in 1000 punts (Irish pounds) into the company, and they set out to build a global software company. They realized that there was an opportunity in the worldwide software industry to tie applications together. Oracle, IBM, Microsoft and HP were all playing in this space. They decided to see who would give them some money: they tried the BES (business expansion scheme), didn’t get anywhere, and tried the banks. However, at this time, Guinness Peat Aviation’s IPO had just been pulled, and Memorex Ireland had just collapsed, so they didn’t get far. They talked to VCs in the UK and folks in US, but got nowhere. Everyone said they just couldn’t invest in them.

For a while, they did anything legitimate: running training courses for the Met Office in Glasnevin, carrying out backups for banks, writing device drivers, doing programming courses for the Department of Excise in Southampton. Chris was an electronic engineer: he never did an MBA, but his strategy was that he had to have at least three months of cash in the bank, and they always tried to have that money available as a throttle.

They started their first product in 1992 with John Moreau and Bridget Walsh, but they couldn’t sell their product in Ireland or Europe and realized that they had to do it in the US. Iona went to a trade show in the summer of 1993, and Chris recalls getting that first cheque from their first customer (SAIC, a systems integrator) as being the most thrilling moment of his life. He wishes he still had that cheque or even a photocopy of it. Their application integrated the new version of Windows with Sun’s latest OS, and was demonstrated on their stand. The Sun guys got very excited, and were delighted to see what they had, so they wanted to check them out in Ireland.

At this stage, Iona was just 11 people in a small Pearse Street office so they tried to keep them out of the office and arranged to meet in a conference room in the O’Reilly Building in Trinity. They signed a deal in December 1993, and sold 25% of the company for $600k. Iona was profitable, and being in profit every month meant that people would give them money. Sun endorsed them, and they met Scott McNealy a few times. At that time, Motorola was building a global cellular network, and they wanted to use Iona technology for the management of the constellation. There was no way that they could bet a multi-million product on the 11 guys in Dublin, but Sun backed the endorsement story, and they got the Motorola deal and other deals on the back of it. It was the glue that got them into Boeing, and led to their IPO in 1997 on the NASDAQ. The IPO got $60 million, the fifth largest at the time. Iona grew from there, becoming one of the top 10 software-only companies worldwide, growing to employ 1200 people at one stage. It ended with the sale of Iona two years ago, not on the same high note, but luckily on a positive one: Lehman Brothers were the bankers, and the Iona sale deal was completed two days before Lehman went bust.

Chris went on to talk about the Innovation Taskforce. He was approached last June with 27 other people to join the Innovation Taskforce, including the head of the IDA, SFI, Enterprise Ireland, and the Enterprise, Trade and Employment secretary general. The goal of the group is to examine how we can make an innovation economy. Chris has been blogging regularly about each of the meetings, talking about what would it take to make Ireland an innovation centre for the planet, how we can enable successful growth and create jobs. We have a number of things going for us: natural resources, green technologies, wind power. But we also have huge potential due to our electromagnetic spectrum and the free capacity on the radio waves. This means that companies can do experimentation of new transmission technologies and algorithms here in Ireland. Chris says that ComReg are doing fantastic stuff around trial licensing in this area.

We also have had recent successes in digital animation and nominations for the Oscars, demonstrating our great creativity. We have a huge diaspora; he cited David Williams as being highly influential in the Farmleigh diaspora forum. Chris says that there are more Irish worldwide than Indian and Israelis combined. It’s an incredible resource and there is so much good will towards Ireland. We have had our problems with the death of the Celtic Tiger, but we can create a framework in which these guys in our international diaspora can help us. There are various angel investors coming through aiding with the formation of startups, but the big thing that Ireland has that Singapore does not have, which Israel doesn’t have, and even Silicon Valley, is the presence of not just ICT multinationals but huge biomedical companies as well (others would kill for that).

What’s great with many of the companies who are here is that they are not the headquarters, so they can do things here that the mothership would not consider. This can create an opportunity for a multinational like Google to sit down with the pharmaceuticals, to enable cross-disciplinary discussions between traditionally-stovepiped industries, enabling collaboration that can’t happen with the motherships. Worldwide head of Bell Labs, Jeong Kim, was in Ireland recently looking for more that Bell Labs can do using Ireland as their hub. Bell Labs has a lot of dormant IP that could be licensed to an Irish startup. IBM and Microsoft have already done that. These multinationals are an additional resource that other jurisdictions don’t have.

On the negative side, broadband in Ireland is a big issue. One of the biggest, stupidest issues in Ireland is the legislation around bankruptcy. It takes twelve years to clear your name, and you have to go the high court. Only one person in Ireland did that last year. There were 13000 registered bankruptcies in the UK, but over there you can clear your name in just one year. We have to clean up our bankruptcy laws. Another point that Chris made is that an entrepreneur in an Irish context isn’t always perceived in a positive way. (They are seen more as “chancers”.) We need to change public attitude towards risk, failing, learning from failure, and trying again. The second or fourth time around, you’ll get it right. Another issue is in relation to intellectual property, particularly through state funding from the likes of SFI. How can research work get out and become commercialized? How can IP be managed since they are state assets? There should be a fair return to the taxpayer, encouraging spinouts and startups. The taskforce is struggling with this, because inconsistency is an issue: you don’t get the same answer from each University. There are different rules, but they need to be made entrepreneur friendly.

For the requirements of grants from most funding agencies, importance is placed on entrepreneurs filling out forms and having meetings. Rather, we need to streamline accounting, employment legislation, health and safety issues, allowing entrepreneurs to focus on business and make things easier for them. We need to look at immigration policy. For non-EU nationals, or exciting entrepreneurs from Asia, how can we make things easier for them? Chris says that it’s wrong for Ireland to do a me-too policy just because other countries are. Don’t copy infrastructural investments: create a new platform in Ireland that’s globally unique and that can be the leg up for companies in Ireland to use that structure.

TSMC said they could break the Intel model and have manufacturing separated from the design of ICs: give us a design and we can make it for you. That led to a large number of VLSI design shops in Taiwan, disrupting the industry. There are good ideas that could change a whole industry based on insightful government investment in Ireland. The IDA has been great in attracting companies to Ireland, and SFI have been pretty good too in investing to attract international scientists to work alongside our own. But which agency focuses on bringing risk capital and overseas entrepreneurs to Ireland? Not the IDA, Enterprise Ireland or SFI. If we could get risk capital and overseas entrepreneurs interested, what would it take to get them to think “I’ve got to come to Ireland because…” How can we create an environment that would encourage that? It’s a big challenge, but we strongly need to do this.

Chris referenced Michael Henning ideas in this space, referring to his own blog post “Transforming Irish Industry“. He looked at the IDA annual reports from 2000 to 2009. He also went to the Enterprise Ireland website: they only had the last two online, so he used the Wayback Machine and pick up the older reports. Chris set up a spreadsheet, graphing money in, out, imports, exports, jobs created, etc. He wanted to draw a graph of employment figures, to see how many jobs were created by client companies of Enterprise Ireland and the IDA in the last ten years. But what he found was a flat line. You would have thought we’d have more jobs in 2009 than in 2000 created by Enterprise Ireland and the IDA. They’ve been working so hard in these agencies to create employment and create jobs, so what’s wrong?

We have 430,000 unemployed, so how do we create jobs, and create a positive feedback loop in the economy? We can hope that existing companies will spin out others. Iona spun out something like 30 companies in their lifetime. For every tax euro we put into companies, we need to look at how we can get these companies to in turn get more excited and involved, trying new things to create more jobs and spinouts, thereby forming this positive feedback loop. We need Enterprise, Trade and Employment to go viral, leading to a multiplicative effect, not an additive effect. Chris finished his talk by telling us that there would be a report from the Innovation Taskforce going to cabinet in a few weeks and it will be published in March 2010.

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