Today is the first in a new series by Alan Gleeson, managing director of the Palo Alto Software UK offices. The series will focus on business issues and commentary from the EU perspective.
John Dennehy is a serial entrepreneur based in Cork, Ireland. His latest venture Zartis.com is an impressive software-as-a-service application that makes it easier to manage the recruitment of employees. The software integrates with applications such as Facebook and LinkedIn and pulls data into a dashboard so employers can save time and money managing the entire hiring process.
Despite the difficult economic conditions in Ireland, entrepreneurship is buoyant. There are a number of reasons for this; a supportive government, a highly educated workforce, a falling cost base and a favourable tax regime. It is also a function of both attitude (Irish people are generally very entrepreneurial in outlook) and culture, i.e. the geographic context of being a small island with limited resources has meant that Ireland has always relied on overseas trade. For others, a career in entrepreneurship is a matter of necessity when compared with the less palatable alternatives of emigration or a stint on social welfare. The unemployment rate currently stands at 14.5 % (September 16, 2011) with a high portion of this being amongst young graduates.
Like many of his peers John’s outlook is global, with a strong focus on the US. The market opportunity in Ireland is simply too limited for Internet ventures like Zartis.com to succeed without looking overseas. An island population of 6.4 million is a far cry from the US with over 300 million. Europe can also be a difficult place to do business with different currencies, languages, legal systems and heterogeneous cultures. As an Irish Government Minister once said;
“As Irish people our relationships with the United States and the European Union are complex. Geographically we are closer to Berlin than Boston. Spiritually we are probably a lot closer to Boston than Berlin.”
The view across ‘the pond’, as the Atlantic is known, is very different depending on which side you are standing on though. For many US entrepreneurs the path is pretty straight forward; gain traction domestically and then look to expand overseas using Ireland or the UK as the first overseas outpost. The benefits of locating in the UK or Ireland are compelling as there are no language barriers, a well educated populace and well developed communication infrastructures. In Ireland’s case a compelling corporation tax rate and a strong Irish American diaspora has made Ireland the more popular of the two in many instances. As a result American behemoths such as Intel, Apple, EMC, Microsoft, Facebook and Google all have extensive European bases there.
From Europe, breaking into the US is a much tougher proposition. Establishing a US base is expensive and can be tricky given additional red tape with everything from securing work visa’s through to establishing legal corporations.
The popularity of the American search engine, Google can also serve to inhibit the growth of European Internet firms. The search results we get here in Europe typically contain numerous results from US sites displacing local sites that may have more relevance. Given that search engine results are hugely important in gaining market awareness, this factor makes it more difficult for many European Internet companies to compete favourably with their American counterparts. Of course there is more to the story than just that, in my view, Americans are also less risk averse compared to Europeans and more likely to embrace new technologies so customer adaption rates can be much higher in the US.
Despite some of these structural limitations, entrepreneurs like John do succeed. If you build a great application with a strong customer proposition and back it up with an effective marketing budget, the importance of location diminishes. Eventually you may end up with a call from a US Venture Capitalist or competitor looking to acquire you as Autonomy and Tweetdeck did.