Innovation
Imbalance in focus on tech and non-tech entrepreneurship in Ireland & elsewhere - Part 1
By Michael Hennigan, Finfacts founder and editor
May 12, 2014 - 8:05 AM

"Robert Wessman took over Actavis in 1999 when it was a failing 90-person domestic generic pharmaceutical maker in Iceland. Within 7 years he had brought Actavis to number 5 worldwide, with 11,000 people, active in 40 countries, global manufacturing, and $1.6bn" -- Harvard Business School -- Robert Wessman became the executive chairman of Alvogen in July 2009.

It's striking how the tech industry has made the terms 'startup,' 'entrepreneurship' and 'innovation' synonymous with itself in public and policy settings in Ireland and elsewhere, with the help of fawning politicians and technology journalists.

Last week Dublin City Council and Enterprise Ireland in cooperation with the DCU Ryan Academy announced a recruitment drive to fill the soon to be established position of Dublin’s Commissioner for tech and innovative startups who "will contribute to making Dublin the best place in Europe to start and grow a tech business. The goal is to have Dublin recognised as the innovation hub where companies will start up, scale faster, create long term sustainable jobs and value-add to the economy."

Good luck to the successful candidate with this impossible task that evokes memories of the 2010 goal to become a European Silicon Valley with up to 215,000 net tech jobs added in a decade; the 2006 goal that Ireland be recognised as a "world-class knowledge economy" by 2013 and the 2012 goal "in which Ireland in 2020 is the best country in the world for scientific research excellence and impact," ['Ireland's doomed goal to become a world-class knowledge economy' (pdf)]

The Central Statistics Office has reported that at end of 2013, there were 82,000 employed in ICT (information and communications technologies) in Ireland and research done for the Irish Government showed that only about 50% of that number were tech personnel.

The simple reality is that a venture capital-backed young Irish tech firm that gains international attention is inevitably going to be sold before it has the opportunity to scale up.

Startups, entrepreneurship, technology and innovation are very important in a modern economy but in Ireland, should most of the focus of enterprise policy be on a VC-backed sector that employs about 10,000 people?

Report on Irish Entrepreneurship: Misguided over-focus on tech sector

We reported in February that there has been a big drop in recent decades in the rate of US startup business creation (firms with at least one employee) while the number of young (up to five years old) firms in the high tech sector has fallen from a 60% ratio in 1982 to 38% in 2011.

In 2011, the number of new US startup businesses was 131 per 100,000 individuals, down 29% from 186 in 1991, according to the Kauffman Foundation, a leading entrepreneurship think-tank and Census Bureau.

High tech firms represented just 4.1% of total US private-sector firms in 2011 while Apple, Amazon, Facebook and Google with a combined 190,000 employees in the United States, compared with General Motors' US payroll of 618,000 in 1979.

Irish tech journalists are not alone in being starry-eyed about the tech sector and last January The Economist began a cover story called 'A Cambrian moment - Cheap and ubiquitous building blocks for digital products and services have caused an explosion in startups':

ABOUT 540M YEARS ago something amazing happened on planet Earth: life forms began to multiply, leading to what is known as the “Cambrian explosion”. Until then sponges and other simple creatures had the planet largely to themselves, but within a few million years the animal kingdom became much more varied.

This special report will argue that something similar is now happening in the virtual realm: an entrepreneurial explosion. Digital startups are bubbling up in an astonishing variety of services and products, penetrating every nook and cranny of the economy. They are reshaping entire industries and even changing the very notion of the firm. “Software is eating the world,” says Marc Andreessen, a Silicon Valley venture capitalist.]

Daniel Isenberg, a former entrepreneur who created the entrepreneurship ecosystem project at Babson Executive Education and previously taught at Harvard Business School, replied in The Economist:

THE distinction between tech and non-tech entrepreneurship is false. Today, every business venture, entrepreneurial or otherwise, requires technology to be competitive, whether it is diamond trading, transportation, construction, or energy. There is nothing intrinsically more technological about Twitter and Facebook, say, than about Harley-Davidson or American Express. In fact, medical devices and alternative energy are arguably more technology-intensive, generically, than any of the report’s wide-eyed examples. Furthermore, for any business, anywhere, ignoring the opportunities and necessities presented by technology is backing light speed into oblivion, and no different than ignoring the existence of electricity or cars. And research is showing that as many, if not more, social and economic benefits of entrepreneurship accrue from non-tech entrepreneurship and that the new public policy focus on startups may be badly misplaced."

Prof Isenberg said that many startups are not entrepreneurial and much entrepreneurship is not about startups and he cited Icelander Robert Wessman who came home from Germany in 1999 to save a small failing generic drugs company named Actavis and in a decade it was transformed from a firm with a payroll of less than 100 to 11,000 while doing little core scientific innovation.

Isenberg says that while there has been a jump in tech startups, it is not clear that the actual speed on the highway to scaling-up has been impacted at all. "In fact, the entire highway just may move more slowly as a result of the startup glut - - that is, firms that have the wherewithal to scale into socially and economically valuable ventures, may just be slowed down by the on-ramp traffic build up, the hype, and the valuable resources startups tie up."

Prof Isenberg added:

Scaling up is vastly harder than starting up. What is much more certain is that, as anyone who has tried, as I have, can tell you, starting up a venture is just the first baby step on a long hard trudge to scale up. But without the ability to scale way beyond start, all the blood, sweat and tears (and money) will be flushed right down the drain."

Finfacts: Up to 90% of US high tech startups fail; System of failure by design? - Part 2

Last year we highlighted that high growth firms are not typically in high tech:

Irish Innovation: Startup fever and Ireland's dumb enterprise policy - Part 1

Global Tech Clusters: Dublin's Silicon Docks - - marketing label or cluster? - Part 2

Europe's top ICT Hubs: Munich, London, Paris in lead; Dublin with rank of 16