Joanna Roberts - Silicon Docks: The Rise of Dublin as a Global Tech Hub

Barry OSullivan

On a grey, misty morning in December 2010, I landed at Dublin airport after a long flight from San Francisco via Heathrow. I was feeling great the division I was running at Cisco was booming, and I was looking forward to seeing my family just a few meetings in Dublin, then on to Galway for Christmas.

The chat with the taxi driver on the way into town changed my mood. This was just months after the national humiliation of the EU/IMF bailout, and it was clear that people were reeling from the shock and scale of the economic contraction. He talked about the fall-off in his business and the struggles with a huge mortgage. Ill never forget his sad summary: No Christmas in our house this year.

My first meeting was at the IFSC with a fund manager, regarding a small investment fund I was putting together with some California-based technology investors. It was clear from the start that they would not be participating. Look, the fund manager said, its hopeless. Were not doing anything in Ireland. Nothing good is happening here.

I was disappointed but not discouraged, because I knew he was wrong. As a founder of the Irish Technology Leadership Group, I had met some incredible Irish technology companies over the previous few years, as we hosted them at various events in Silicon Valley. People like Connor Murphy of Datahug and Pat Phelan of Trustev had an infectious enthusiasm and fearlessness that made me believe the future for Ireland was far from hopeless.

So, with the IFSC behind me, I walked across Samuel Beckett Bridge to my meeting with a small start-up on Barrow Street, and it struck me that I was leaving behind the tired old order that had failed Ireland. Across the bridge in front of me was the future, full of hope and possibility the shiny new collection of buildings housing global technology companies, start-ups and venture capitalists, now known as Silicon Docks.

This book, by some of Irelands leading business and technology journalists, comes at an important moment because, in many ways, the technology industry in Ireland is at a crossroads. The authors chart the history of Silicon Docks, from the establishment of the Dublin Docklands Development Authority in 1997, to the arrival of Google in 2004, the subsequent addition of social media giants Facebook and Twitter, and the beginnings of a start-up revolution that is promising but still in its early stages.

The success of Silicon Docks is a combination of visionary public policy and the blind luck of good timing. The early years of the project coincided with a global shift for technology companies from being located in suburban technology parks (think IBM in Blanchardstown or Microsoft in Sandyford) to cool new innovation districts in city centres. Such innovation districts have sprung up in major cities such as New York, London and Barcelona. The new generation of young tech workers want to live and work in cities and bike, walk or take public transport to work. The most striking example is San Francisco, where start-ups are forsaking the suburbs of Sunnyvale and San Jose for the cool lofts and warehouses south of Market Street in the city.

Bruce Katz and Julie Wagner of The Brookings Institution have led research on the new global geographical phenomenon of innovation districts, which they define as:

geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators physically compact, transit-accessible, and technically-wired and offer mixed-use housing, office, and retail.

This definition could have been written to describe Silicon Docks. On the doorstep of Trinity College, the area includes not only global tech companies and local start-ups, but also venture capitalists and the accelerators Dogpatch and Wayra.

What does long term success look like for Silicon Docks? I believe we will have achieved it when the biggest employers are indigenous Irish tech companies that have achieved global success. We have most of the ingredients to make this happen, but there are three issues that need to be addressed first and they are related to the ingredients that fuel successful start-ups: talent and money.

1. Low R&D investment by some multinationals. In the technology industry, the most important talent is engineering; people who can write software and build products. Co-locating big companies with start-ups sounds great, but the idea that there is a fungible engineering talent pool across the multinationals and start-ups in Silicon Docks doesnt stand up to scrutiny. This is for the simple reason that Facebook, Google, Twitter and LinkedIn do not build their core software products in Dublin. These are designed and coded in Menlo Park, Mountain View, San Francisco and, to some extent, London. There is no pool of software-engineering talent coming out of their Dublin offices. Whats more, the lack of R&D in these operations means that they are not firmly anchored in Dublin. We should set a strategic goal to secure significant R&D investment by these companies in Dublin over the next couple of years.
2. Irish venture funds need to be replenished. Venture funds usually invest in five-year cycles, and the Irish funds are coming to an end. Put more simply, they are running out of money. A structural change to the Irish pension industry (the move to defined-contribution plans) has made pension funds more conservative and reluctant to make higher-risk, higher-return venture-class investments. Two-thirds of all new jobs are now created by start-ups. This job-creating machine will grind to a halt unless Irish funds can raise money. Given this strategic imperative, one possible solution is the allocate some of the Ireland Strategic Investment Fund (formerly the National Pensions Reserve Fund) to venture capital for Irish start-ups.
3. Ireland has an uncompetitive tax regime. This sounds counter-intuitive given that we have one of the most attractive corporation tax rates globally. The problem is that we also have amongst the most uncompetitive income tax and capital gains tax (CGT) regimes globally. I know from personal experience in my company that its virtually impossible to attract highly paid technical talent to Ireland when they hear our top rate of tax is 52 percent. Its a deal killer and it needs to change.

Similarly, the value-creation model for technology start-ups is focused on capital appreciation. Profits in most cases are reinvested in the company to drive higher shareholder value. So a competitive capital gains tax rate is critical. It is not sustainable for Irish founders to have a CGT rate of 33 percent while entrepreneurs in Northern Ireland can access a 10-percent rate.

In this book, the authors lay out the history, achievements and opportunities of Silicon Docks. The success of the Silicon Docks project is testament to a unique Irish combination of forward thinking public policy, risk-taking and hard work. There is now an opportunity for us to lead the world from a small enclave on the banks of the River Liffey. I believe this new, young generation of entrepreneurs has the one quality required to get us there determination.

As I think back to my walk over the Samuel Beckett Bridge on that rainy day in 2010, I am reminded of his famous quote, which should be an encouragement to anyone who wants to overcome setbacks and succeed: Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better.