Jerry Kennelly: There is a natural limit to what an Irish start-up can achieve

A widely held perception is that entrepreneurs start businesses to make money. I not entirely convinced. We like to think we’ve found a new way to revolutionise an old industry or create a new one. Our burning passion and self-belief makes many of us royal pains.

The old chestnut about entrepreneurs never giving up is actually true in most cases. But it couldn’t happen without those who believe in us. Not just customers, but our teams. And, most importantly, our families and loved ones. They carry a torch for us at our worst, and celebrate with us on the good days.

The term “a successful entrepreneur” has always puzzled me. In my own case I have spent most of the time failing, and have had occasional flashes of success and good luck. But, like most entrepreneurs, I never stop believing. In fact, I’ve been told at home in Kerry that I’m too thick to stop.

While government ministers love to make jobs announcements, any entrepreneur worth his or her salt wants the smartest people they can afford in jobs but as few of them as possible. And jobs mean overhead.

Business is not about jobs. Sustainable, well-paid jobs are an output of innovative well-run businesses. And so is wealth-creation for the entrepreneur. Contrary to popular opinion, that usually takes years to happen.

Entrepreneurship is sexy now. When I started it used to be called working for yourself. However, most of the entrepreneurs I know have lived close to the edge for many years. Financially, I mean.

Overdraft

I’ll never forget my bank manager

Rupert Swann

telling me in the 1980s that he would cut my overdraft unless I started paying myself properly. I wasn’t alone. Even though it didn’t look that way in their original business plans, many of the entrepreneurs I know have had to mortgage themselves to the hilt and sign away their lives with personal guarantees to turn their concept into reality.

Which brings me to the matter of exits, something I learned a little about. I auctioned my company in 2006, and sold it for a considerable amount of money. Everything I had earned in 25 years of running businesses was in those companies. I had it all on red, not another investment. This is not unusual for entrepreneurs.

I truly had never envisioned selling Stockbyte and Stockdisc. They were never built to be sold. I just managed to get enough distance from my business to understand that there was a very significant chance that their value could reduce dramatically because of matters outside my control.

Having bought out my venture capital investors, I realised that I wasn’t just a founder but a shareholder too. When I studied broker reports of our largest customer who was trading on the stock market at 38 times earnings, I became alarmed.

Bubble

Clearly they were over-valued and so were we . So regardless how successful we continued to be as the largest creator of premium stock photography in the world, we were going to be beaten by a bubble unless I moved fast.

I knew little about mergers and acquisitions, and was offered some advice by a senior manager who worked for Bill Gates at Corbis. "I represent the biggest cheque book in the world,'' he told me boldly. I told him that my late mother Joan would have been disgusted at that sort of boastful talk.

What would she say, he asked. “Deep pockets, short hands” I answered. As it happened Bill Gates was the underbidder by many millions.

There has been plenty of talk by commentators who never put their own neck on the block that these sort of trade sales are bad for Ireland. That we should wait and build billion euro companies, floating them on the stock exchange.

I don’t believe I have to make excuses for my decisions or those of many others, but it’s important to try to understand the logic of why someone would decide to exit their business.

I’ve explained my reasons but the primary reason that most people sell is that they’ve never had any personal security. All of their wealth is tied up in their business.

Stress levels

Often the entrepreneurs are in their 50s or 60s and realise that 20 or 30 years of serious stress levels and running around the world like you’re in your 20s takes its toll on health.

There’s also a natural limit to what a company or a team can achieve. Sometimes a dominant competitor, lack of pioneering customers or bad timing means that a business runs out of runway for traction or growth.

From a personal point of view, we realise we’re not machines, and as we get older can’t jump on airplanes every day as we did when we were younger. This is most certainly a game for the young, not just the young at heart.

We should try to get a little perspective as we look at the issue of how big Irish companies can get.

In 1953 my father Padraig was shooting passport photographs for those who were emigrating in their droves to England and America. He photographed schoolchidren in Kerry who went to school without shoes. That’s just 63 years ago. In that time we’ve come from a third world country to first world one.

In the past 20 years trade sales of Irish companies have gone from valuations of tens of millions to a stage where nobody blinks an eye to hear of a sale for hundreds of millions of euro.

There is a huge instance of reinvestment in Irish-owned businesses by those who exit. Many employees benefit financially and go on to become entrepreneurs themselves, as is the case with some of my former colleagues.

Technology entrepreneur Jerry Kennelly is chief executive of Tweak. com, a company that provides design services to online printers in seven languages. He was also founder and chief executive of Stockbyte and Stockdisc, two pioneering companies in royalty-free stock photography which were acquired by Getty Images in 2006