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Irish Venture Capitalists Talk Local Challenges, Think Global

Some of the best stuff I learned in Dublin, I learned from venture capitalists. That’s not always the case, depending on the city.

A simple lunch with Brian Caulfield, a local partner with DFJ Esprit, taught me the following:

—Talent is flowing between multinational corporations and Irish startups, in both directions. The big tech companies are interacting with entrepreneurs in many ways. Google, Facebook, IBM, and Microsoft are among the “most engaged in the startup community,” Caulfield says.

—Personal tax laws are “worse for entrepreneurs than [big] company jobs,” he says. This sort of policy issue comes up often in the Dublin startup community.

—A software engineer making $175,000 in Silicon Valley might expect to earn about $100,000 (U.S. dollars) in Dublin. Labor costs are relatively low for companies looking to set up or expand in town.

—One of the biggest (and most underrated) exits for an Irish tech company was Hostelworld, an accommodations-booking site for backpackers. Its parent company Web Reservations International, led by Ray Nolan, was acquired by private equity firm Hellman and Friedman in 2009 for a reported $340 million. That exit led to other projects and investments from Nolan and others.

There’s more where that came from. On the Irish exits front, some recent acquisitions include Aepona (bought by Intel for $125 million), The Now Factory (acquired by IBM for an undisclosed sum), and FeedHenry (bought by Red Hat for $82 million).

Such exits drive the venture capital industry, of course. Yet the modern VC landscape is just starting to take shape in Ireland. The Irish government is still the most prolific investor in the country’s startups; it does that through the organization Enterprise Ireland, which is one of the most active seed-stage investors in all of Europe, making some 180 to 200 investments a year.

The goal, according to people I talked with at Enterprise Ireland, is to drive the local startup-investment industry until the private sector can do more on its own. The big motivator is global competitiveness.

To that end, in 2010 the federal government announced an “Innovation Fund” program to, among other things, invest in outside VC funds and get them to set up shop in Ireland (and invest locally). That helped bring U.S. venture funds like DFJ, Polaris Partners, and Highland Capital Partners into the local picture.

Dublin-based VC Brian Caulfield (image: DFJ Esprit)

Dublin-based VC Brian Caulfield (image: DFJ Esprit)

For his part, Caulfield joined DFJ Esprit in 2010. Before that, he was a partner at Trinity Venture Capital and did some angel investing after co-founding a couple of tech companies in the 1990s and early 2000s.

Government support has also helped homegrown firms such as Frontline Ventures, which recently raised a $50 million software-focused fund, get established.

Will Prendergast, a partner with Frontline Ventures, says the local tech scene is “efficient because it’s small and dense, but its issue is scale. It works well, but we need more of everything.”

That’s a common sentiment—along with the feeling that the Irish startup ecosystem, long quiet on the world stage, is on the cusp of something interesting. “We’re seeing much, much broader types of entrepreneurship,” Caulfield says.

He and other investors find it encouraging that they’re now meeting founders and entrepreneurs from increasingly diverse talent pools—other startups, mid-sized companies, multinational corporations, local universities—and a sizable fraction have come from places outside Ireland.

“We’re part of a global war for talent, and we need to keep working on that,” Caulfield says.

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