Irish tech firms foster start-up culture

Half of all home-grown software start-up companies in the Republic are spun out of indigenous technology companies, a new report reveals in a sign that the Republic is developing its own entrepreneurial culture.

Only one-quarter of all Irish software start-ups are set up by former employees of multinational technology companies. In addition, one in six originates in an academic environment - either a university or research institution - with the number increasing to one in four in the past five years.

The findings are drawn from Ireland's Software Cluster 2002, the second annual study on the topic, which was produced by Dublin investment and consultancy firm Hot Origin.

The surprise findings contrast with a widespread belief that technology multinationals have been the principal training ground for Irish entrepreneurs.

The findings also indicate the urgent need for further research and development support by the State, according to Ms Caroline Wardle, director of software ventures for Hot Origin.

"The report highlights not only the importance of the \ sector to Ireland. Our focus on university research emphasises its significant impact on the continued success of the indigenous software sector on the global stage."

The State should give a consistent percentage of GDP to research and development, the report states.

The Republic also needs a national legal framework to structure how intellectual property issues are arranged between research institutions and campus companies.

The report offers a generally positive portrait of indigenous software firms. However, on the negative side, the downturn in the global economy in the past two years has led to a decline in the number of initial public offerings by Irish software companies, and this is not expected to recover until 2004.

Company formations halved in 2001 compared to the previous year, notes the study.

However, the report indicates that Irish software firms are increasingly upbeat about the future. Most of the 500 companies in the sector, including some 50 in Northern Ireland, believe they will see 50 per cent growth this year. Companies claimed an average 37 per cent growth in the past year.

In a related development, companies are focusing on generating sales, with funding falling from a leading concern for firms in last year's report to fourth place this year.

The report suggests that, while the information and communications technology sector employs less than 2 per cent of the State's total workforce, it generates revenues equivalent to more than a 10th of GDP.

Multinational companies generate most ICT revenues and exports, but close to 800 indigenous ICT companies, employing 14,000 people, produced €1.4 billion in revenues in the Republic during 2001.