Start-ups surge

Sunday Business Post - New to the Market supplement - Cover Feature - June 17 2007

More than 5,000 companies were established in the first quarter of 2007, thanks to economic development and an increase in entrepreneurial confidence, writes Dermot Corrigan.

According to the latest research from Bank of Ireland (BoI), Irish entrepreneurs continue to set up new businesses in large numbers.

"According to the latest Business Start-Up Barometer, over 5,000 companies established in the first quarter of 2007," said Damien Young, head of small business with Bank of Ireland.

"The latest results show a slight drop in Q1 company formations from 5,311 in 2006 to 5,276 in 2007. While the figures may have slowed, they are still well ahead of registrations in the same period during the first three months of 2005."

Young said that the these figures were historically very strong, and showed that the 21st century Irish economy was now offering opportunities to new businesses which may not have been there in the past.

"In the last twenty years, the number of new Irish start up companies has more than doubled from under 10,000 in 1986 to 20,000 in 2006," said Young. "This growth can be attributed to both Irish economic development and an increase in the confidence of entrepreneurs when considering self employment."

Avine McNally, assistant director with the Small Firms Association (SFA), said that new and smaller businesses would continue to be of vital importance to the Irish economy in the coming years, regardless of levels of inward investment from larger multinational organisations.

"Small businesses provide employment and create and develop an economy in their local area,” she said. “It is essential that they are encouraged to develop and expand because these are the firms that are going to be staying here, they are not going to move to lower cost economies or where grants are more attractive."


McNally said that there was now a very solid appreciation and understanding of entrepreneurship running through Irish society.

"I think now is a very good time to start up a business in Ireland," said McNally. "There have been huge changes over the last couple of years in a number of different areas, and therefore there is now a positive attitude towards entrepreneurship in Ireland.”

McNally said that institutional support had enabled this entrepreneurial atmosphere to flourish.

“We now have a lot of good government policy which is encouraging entrepreneurship,” she said. “There is good support from County Enterprise Boards in relation to helping micro businesses and small businesses get established. Also it has become a lot easier for companies to access finance."

McNally said that given this supportive environment gave would-be entrepreneurs the confidence to strike out on their own.

"We are also seeing a lot of people setting up as one man band, sole trader type environments," said McNally. "You have people working from a very low cost base, maybe from an office within their home. People keep start up costs low at first, and then maybe invest more as the business expands."

Young said that construction continued to be the most popular sector for new businesses.

"Construction and civil engineering still remains the dominant industry for start-ups, despite predictions of a soft landing in the sector," he said. "The real estate sector also continues as a popular choice for entrepreneurs with 296 real estate management companies and 217 real estate development and sales companies established in Q1."

McNally said that entrepreneurs were also seeing many opportunities for new businesses in the services area.

"Over a third of businesses are looking at the area of consumer services," she said. "The reasons are that it can be slightly easier to establish in the services area, it may not be as highly regulated, and it can be quite easy to obtain a premises and set up a service business compared to manufacturing or something like that."

Young said that approximately ten per cent of the Irish working public was considering setting up their own business.

"According to recent research, almost one in ten of the adult population living in Ireland is actively planning or has recently set up a new business," said Young. "This level of entrepreneurship is high compared to our European neighbours and a significant contributor is Irish culture and social norms."

Tom McCarthy, chief executive of the Irish Management Institute (IMI), said that the large numbers of start-ups in Ireland, particularly in high technology areas, was not translating into a sufficient number of highly successful companies.

"I think the yearning for start-ups is very strong," said McCarthy. "The change in mindset through the 1990s when people saw start-ups as something they should get into has not gone away. The question is about turning desire into practical outcomes."

"Where I think there has been a shortage is in the management capability to actually grow right through from the idea to a viable business,” he said. “We have not seen enough start-up companies recently demonstrating the capacity to grow to a critical mass scale."

McCarthy said that entrepreneurs may have to be willing to share ownership of their start-up companies if they want to bring in sufficient management skills and knowledge to grow their idea into a formidable business.

"It is not that easy to bring in high level management expertise because that type of expertise is scarce and it can cost a lot," he said. "I think you are going to see a model whereby technology entrepreneurs are willing at an early stage to give up equity in their organisation to get that kind of management expertise in."

Continued government support is necessary to ensure Ireland Inc maintains its current rate of start-up businesses, said Young.

"The Government recently announced a new €21 million fund for Community Enterprise Centres, focusing on areas around the country that have recently experienced job losses," he said. "Community Enterprise Centres provide business space in a supportive environment for entrepreneurs and help the development of entrepreneurship locally."