the digital startup journey and experience · profiling of entrepreneurs is key to deciphering...

Prepared by: Anita Mullan and Luke Reaper

THE DIGITAL STARTUPJOURNEY AND EXPERIENCE

Sponsored by

The startup psycheWith countless drivers and myriad obstacles, do we really know what makes our entrepreneurs tick? Who are they? What motivates them? What is their background?

NDRC believes what without understanding your entrepreneurs you cannot build a successful ecosystem. So, with the support of Bank of Ireland, we recently commissioned research into the startup ecosystem and the digital entrepreneurs who inhabit it.

Behaviour & Attitudes was engaged to undertake this research, investigating – using a mixed qualitative and quantitative approach – the constraints to starting a business, and the barriers to growth.

Among the many interesting findings, this research suggests that:

• One-in-three startups are eyeing UK expansion in the next five years despite Brexit• Both the UK and US are cited as important markets for Irish digital entrepreneurs looking to scale, with

current operations in the US very significant• Challenges are plentiful when in the earliest stages of building a business, but education is no such

obstacle, with nine-in-ten (91 per cent) founders having achieved third-level education• Interestingly, almost one-third of entrepreneurs have no formal education in business or technology

areas, with just 39 per cent having a background in computing, according to the research• On average, it takes our startups two years to reach Seed funding, and four to reach Series A

We hope you enjoy the results

Research Background, Objectives and Methodology

Research Background & Objectives

● NDRC provides a range of services to digital startups in Ireland, in order to foster and embed the growth of suchcompanies within the Irish economy

● Just part of NDRC’s responsibility is to provide people, time, space and the investment which many startups need inthe early stages, in order to make themselves worthy of commercial investment

● In order to fully benefit startup digital companies, NDRC wished to conduct research on two core elements of runninga digital company in Ireland. These were as follows:

1. The constraints to starting a digital business 2. The barriers to scaling up and growing

● Understanding these issues in more detail is critically important for Ireland’s competitive advantage into the future

●

1.

●

11

8

15

27

17

14

On average, NDRC companies employ 6 employees (4 full time and 2 part time) Base: All digital entrepreneurs

Q.5a How many full time employees are there in your business? Q.5b How many part time employees are there in your business??

937

29

12

41

Average number of full time employees

4 employees

Average number of full time employees abroad

1 employee

Average number of part time employees

2 employees

Average number of part time employees abroad

0 employees

No. full time employees

%

No. part time employees

%

Founder only

1 employee

2 employees

3 employees

4 employees

5+ employees

None

1 employee

2 employees

3 employees

4 employees

5+ employees

Key Themes

Digital startup key themes Profiling of entrepreneurs is key to deciphering their startup challenges

Successful entrepreneurs have some similar personality traits; always on and risk takers

The attraction of starting a digital business is not always the reality

Timing and circumstances are key instigating factors to starting a digital business

Seed companies are the squeezed middle

Brexit is not entirely negative from an entrepreneurs perspective

Starting a business can be a lonely experience

Entrepreneurs receive support from a range of sources

Personal networks are highly significant to help companies develop and enhance

Ireland – a great place for startups, but not always for post Series A

Established Irish businesses shy away from doing business with star

Profiling of entrepreneurs and personality traits

Profiling of entrepreneurs is key to deciphering their start-up challenges

● Digital entrepreneurs come from a range of backgrounds:

v Some have a high level of business experience but limited technical abilityv Others have a high level of technical ability but limited business experience

● Profiling entrepreneurs backgrounds and identifying their skill set is key to identifying where their key challengeswill lie and the type of support which they will require

● This profiling of entrepreneurs should be then used to tailor the support which they receive in NDRC programme.

v i.e. those from corporate backgrounds may need more assistance with the technical side of the business,while those from technical backgrounds may require more assistance with business skills

53

47

Profiling of entrepreneurs

Q.3 At which stage did you finish your education?Q.6 Is this the first company you have established??

he entrepreneurs we spoke to are highly educated, come from a spread of ages and over half have previous experience of setting up a company - we need to know who is who!

66

34

23

46

30

Gender Age Education First company established

% % % %

Female

Male

Under 34

35-44

45+

Secondary level

Third level – degree

Post Graduate / Masters / PHD

Yes

No

entrepreneurs previously set up a company (

of which are still operating).

Those no longer operating

mainly due to lack of market interest.

Understanding digital e

Q.7 To what extent would you agree or disagree with the following statements? - I am more comfortable with the people side of the business than the tech side.- I am more comfortable with the tech side of the business than the sales side.

?

25

34

2

12

32

27

20

8

I am more comfortable with the people side of the business than the tech side.

I am more comfortable with the tech side of the business than the sales side.

In order to cater to digital entrepreneurs’ needs, it is important that NDRC identifies the one third of founders who are uncomfortable with the people side of the business and provides them with added assistance in this area. Similarly, the 46% of founders who are less comfortable with the tech side versus the

business side should be provided with additional technological assistance.

Disagree strongly

Tend to disagree

Tend to agree

Agree Strongly

% % % %Any

Disagree

27%

46%

Any Agree

52%

35%

Neither/nor

Mean Score

20% 3.44

19% 2.86

Successful entrepreneurs have some similar personality traits; always on and risk takers

Q.4 Do you have any formal training in any of the following areas? ?

12

20

53

56

73

76

% agree on the following statements

%

I am always on i.e. checking emails, making phone calls, struggle to rest

I am a risk taker

I get bored sticking to the same thing

I am more extrovert in my behaviour

I am a very cautious person

I hate being put in a situation where I have to meet lots of new people

Entrepreneur personalities are quite diverse and range from extraverts to introverts. Nevertheless, some key personality traits are evident among successful entrepreneurs:

• Continuously working on/or thinking about their business.

• Find it difficult to relax.• Constantly making and receiving phone calls and emails.

• Want to have more than the ‘average’ employee - a ‘need’ tobe working on the next big thing.

• In some cases entrepreneurs will have had experience ofpreviously establishing a business which failed, but still havethe confidence and resilience to try again and take the requiredrisks.

• Entrepreneurs can also identify which skills they are lackingand quickly learn or hire the relevant skills to improve theirbusiness.

• If in doubt will not be afraid to ask questions and get the skillsrequired.

• Entrepreneurs also have strong belief in themselves asentrepreneurs and are passionate about their businessconcept/service.

Instigators to starting a digital business

75

73

66

58

54

37

22

14

7

7

5

2

Had a business idea and thought it would sell

Saw a gap in the market

Wanted a challenge/do something different

Wanted to do something meaningful/contribute to society

Wanted to work for myself

To make more money / be more stable / provide for family

Wanted better work / life balance

Wanted to follow a family tradition of entrepreneurs

Was approached by other company founder

Ambition

Was made redundant/let go from previous position

Excitement

A number of factors contribute to entrepreneurs establishing a digital business – it’s not all about the money!

Q.6 Thinking back, why did you initially want to establish your own company??

%

Having a business idea and seeing a gap in the market were rated as the top two factors for wanting to establish a business- Just 2 in 5 cited financial reasons.

The attraction of starting a digital business however is not always the reality

A number of aspects were cited as attractions to starting a business. The reality in some cases was different to what was expected:

Sense of improved financial stability:For many the initial startup phase puts major strains on their finances as they invest borrowings and savings in their product/service in the hope that it will pay off as the company becomes successful.

Financial Stability

Achieving a better work/life balance and flexible working hours:In reality establishing a company becomes a 24 hour/7 days a week commitment, especially at pre-seed stage. Hours do become more flexible but any time away from the business gets made up in the evenings and weekends.

Work/life balance

The pretence of being own boss and not having to answer to anyone else:As the company grows the realities of answering to a Board and other founding members becomes apparent. Albeit, they do have a better sense of authority.

Own boss

The excitement and buzz of starting a company: More apparent amongst those who have established companies previously. These founders get a great sense of excitement and job satisfaction from establishing and growing a business before selling it off at a profit. However, some have also experienced the realities of having a business fail.

The buzz and excitement

Timing and circumstances are key drivers to starting a digital business

● Many entrepreneurs previously worked within similar areas and identified a gap in the market during previousemployment

v In many cases this business idea was not acted upon until their circumstanced changed

v Timing and circumstances appear to have been the actual instigating factors when branching out to starttheir own business. Some of the factors mentioned were:

v Sold previous business (‘looking for next big thing’)v Previous business failedv Was made redundant/contract came to an endv Met co-founders and invited on board

● Some however come from a family tradition of entrepreneurs and felt a ‘need’ to start their own company

v Many of these respondents had a history of establishing businesses, some of which had been successful andhad since been sold, while others had failed (mainly due to lack of market interest)

● Limited mention of entrepreneurs leaving steady employment to establish their own business – but those whodid had a safety net (i.e. strong financial backing / resources)

From the time when their circumstances changed the majority of researched their company concept for less than 12 months before establishing the company

Q.8aQ.8b

How long did you spend thinking about/researching your current company concept before taking steps to establish the company? How long did you spend thinking about/researching your current company concept before taking part in NDRC’s programme? ?

310

10

8 12

19 20

2529

34 29

Time spent thinking about / researching

business before establishing the

company

Time spent thinking about / researching business

before taking part in NDRCprogramme

% %

Less than 6 months

7-12 months

1 year

2 years

3+ years

Been thinking about concept/product for as long as I can remember

Series A companies were more likely to

spend a longer period of time

researching their business idea before

establishing the company.

The challenges of starting a digital business

As companies develop, the main challenges that they face also develop

Q.9a What was your main challenge when initially setting out to establish your company -before taking part in NDRC’s programme?Q.12a Now thinking about the various challenges which entrepreneurs face as they scale up and grow their business what do you consider to be the main challenges for a Seed company?Q.13a And what do you consider to be the main challenges for a Series A company?

?

Pre-seed main challenges

%25

24

19

7

7

5

3

3

3

3

2

2

2

2

Attractinginvestors

Keepsales/businesscomingin

Maintainingsufficientworkingcapital

Lackofmoney/unabletoprovideforfamily

Employingtherightstaff/attractingstaff

Gettingprototypemade

Gettingintroductionstoinvestors

Buildingabusiness/financialplanformyconcept

Availabilityoftechnical/programmingskills

StayingFocused

Conductingmarketresearch

Validationofinitalcustomers

AttractingCustomers

Other(specify)

29

20

13

7

7

4

4

2

2

2

2

2

2

2

2

2




Attractinginvestors


Maintainingthebusinessculture

Expandingtonewmarkets


Keepcoststoaminimum


Keepingstaff

Businessaccountancy/finance


Competition

Turningabusinessideaintoaprovenbusinessidea

Scaling

Seed Main Challenges

%

Series A Main challenges

%15

14

14

14

12

10

9

7

3

3

2

2

2

2

2

Availability of technical / programming skills

Maintaining sufficient working capital

Building a business/financial plan for my concept

Finding out about the different supports available (e.g. NDRC)

Attracting investors

Lack of money/unable to provide for family

Getting prototype made

Employing the right staff/attracting staff

Finding like minded people

Idea validation

Keep sales/business coming in

Getting introductions to investors

Finding Co-Founder

Marketing

Time

Pre-SeedMainchallenges:

Technicalskills

Maintainingworkingcapital

DevelopingabusinessPlan

Finding outaboutavailablesupport


SeedMainChallenges:

Attractinginvestors

Sales


SeriesAMainChallenges

Sales

StaffingandHR


Base: All digital entrepreneurs

At Pre Seed stage companies main challenges centre on technical skills, finance, attracting investors and prototypes

Q.9a What was your main challenge when initially setting out to establish your company – before taking part in NDRC’s programme?

15141414

12109

722

00000000

16

4644

3734

4139

4125

3119

2420

1917

1077

234











Business accountancy / finance

Legal aspects of running a business

Conducting market research

Keep costs to a minimum

Accessing staff skills training

Getting paid by clients on time

Keeping staff

Paying back loans / borrowings

Other (specify)

Main Challenges%

Total Challenges%

Technical ability of getting the prototype made are also significant challenges at this stage.

?


At Seed level companies main challenges relate to sales, finance and investors

Q.12a Now thinking about the various challenges which entrepreneurs face as they scale up and grow their businesswhat do you consider to be the main challenges for a Seed company?

Main Challenges%

Total Challenges%

Staff also starts to become an issue at this stage – but is less of a main challenge.

2524

1977

5333

200000000

9

5151

5434

5636

3434

4419

342525

191717

1210

34

Attractinginvestors





Gettingprototypemade




Conductingmarketresearch

Keepcoststoaminimum

Legalaspectsofrunningabusiness

Businessaccountancy/finance

Gettingpaidbyclientsontime

Keepingstaff

Findingoutaboutthedifferentsupportsavailable(e.g.NDRC)

Accessingstaffskillstraining

Payingbackloans/borrowings

Other

?


At Series A level companies main challenges relate to sales and staff/HR.

Q.13a And what do you consider to be the main challenges for a Series A company?

2920

137

27

22222

0000000

16

5851

4115

412727

201919

2524

141212

103

246







Keep costs to a minimum



Business accountancy / finance

Keeping staff

Legal aspects of running a business

Getting paid by clients on time

Conducting market research


Paying back loans / borrowings

Accessing staff skills training


Other (specify)

Main Challenges%

Total Challenges%

?


On average it takes companies 2 yrs to reach Seed level and 4 yrs to reach Series A

Q.2b How long was our company established before achieving Seed or Series A stage? ?

Length to reach Seed level (Base: Seed and Series A companies)

%

Series A(Base: Series A companies )

%

Less than 12 months

1 year

2 years

3 years

4 years5+ years

28

19

25

41

13

6

13

6

25

0

25

Less than 12 months

1 year

2 years

3 years

4 years

5+ years

*Caution small base

Average 2 yrs 4 yrs


Staffing and HR issues become more significant for companies as they reach Series A

3

810

Average number of employees

• By the time companies have reached Series A the financial risks havereduced but staffing /HR issues and customer retention become moreevident. Nevertheless, companies are better equipped to deal withthese issues in terms of finance and resources.

• Finding appropriate staff and attracting them to join a start-upcompany is quite a challenge for Series A companies as they are incompetition with global organisations such as Google and Facebookwith regards to staff acquisition and retention

Ø But cannot compete in terms of salary or package expectation.

Pre-Seed

%

Seed

%

Series A

%

“It’s difficult when you’re competing with the likes of Facebook and Google. They can offer much bigger salaries –

you have to sell the dream.”

“You have to really sell the company and get potential employees to buy into what

you’re trying to do”.

No. of Employees

No. of Employees

No. of Employees


The loneliness of starting a business is also a key challenge

● Starting a business is a lonely and highly stressfulexperience when emotions are often intensified

● Entrepreneurs can often go through a series ofemotions within any given day – especially at theearly stages of the start up journey

● This mix of emotions can have a significant impacton entrepreneurs psychological condition,especially if they do not have a good supportsystem

● There was also some mention that startups are‘afraid’ to let mentors know how stressed they areas it may reflect badly on them

● Some mention of startups turning to their peersfor emotional support during NDRC programmeand a more formal form of counselling within theprogramme would be beneficial

“You go from extreme highs, to extreme lows, and back to

extreme highs again.”

“It can be a very lonely place. You

need to have someone to talk to.”

“You’re trying to show the mentors how you have everything together so they’ll back you, but

you might be completely stressed out under it all.”

17%

68%

15%

Q.16a Do you expect Brexit to cause any difficulties to your business?Q.16b How do you plan to combat these challenges?

Brexit comes with challenges but is not entirely negative from an entrepreneurs perspectiveDo you expect Brexit to cause any difficulties for your business?

As pre-seed companies are predominately focused on getting initial investment, activities in other markets are not yet of relevance to them. Thus, the impact of Brexit is mainly relevant to post seed stage companies and mainly only to those who have / are interested in entering the UK market.

“Brexit isn’t really something that concerns us at the moment. We’re completely fixated on getting initial

investment at this stage.”

Base : How they plan to combat these challenges 10

Base a dedicated team in the UK 40%

Pull out/stay out of UK market 10%

Base more staff within the UK 10%

Currently working on a strategy 10%Delay entry 10%Shift focus but maintain a presence 10%

Other 10%

Yes

No

Don’t know

Just 1 in 5 NDRC companies expect Brexit to cause difficulties for their business. Basing a dedicated team in the UK is thought to be the main defence to any upset that Brexit may cause.

?


Skill Requirements & Financial Support

49

34

32

29

25

25

22

20

14

8

3

Sales skills

PR/Marketing

Investment knowledge

Leadership skills

Technical skills

Financial

HR/People management

Communication skills

Market Research

Others

None

Pre-seed businesses require training across a range of areas, however sales training is required by all Base: All digital entrepreneurs

Q.14 In what skills do you feel you would require more training in to help you scale up and grow your business?

%

Stage

Pre Seed Seed Series A

% % %

52 46 50

26 46 25

48 17 25

26 29 38

37 17 13

30 21 25

19 21 38

30 13 13

19 13 -

15 - 13

- 8 -

• Sales• Investment• Technical • Communication

• Sales• PR/ Marketing

• Sales• Leadership• HR/People Management

?

Financial support comes from a variety of resources, including friends and family

Q.10a From which sources did you receive initial funding from, before NDRC invested in your business?Q.10b And since receiving initial investment from NDRC what other sources have you received funding from?Q.10c Thinking about the time between receiving initial funding from NDRC and first receiving outside investment

what other sources did you receive funding from?

6132

2015

755333222222

Own savings

Enterprise Ireland / EI Pre investment

Local Enterprise Office / LEO pre investment

Friends/family loans

Friends/family investors

Bank / credit union loans / borrowings

Angel investors

Private investment

VC / Venture Capital investments

Government Grants

EU Funding

Kerry innovation centre

New Frontiers

Ignite (Cork UNI)

SFI

Sold idea to NDRC

Pre NDRC Investment

%

Pre Outside Investment

%

Post Outside Investment

%

44

30

15

11

7

7

7

4

4

4

4

4

4


Own savings

Angel investors




Private investment

VC / Venture Capital investments

DCU Ryan Academy

Currently seeking follow on funding

Wayra Accelerator programme

Innovation Voucher

SEIS Scheme (UK Based)

47

41

19

13

13

13

9

6

3

3

3

3

Own savings




Bank / credit union loans / borrowings

Private investment


Angel investors

Government Grants

Social Entrepreneurs Ireland

Arthur Guinness Fund

NDRC

*Anypersonalnetwork= 19% *Any

personalnetwork= 15%

*Anypersonalnetwork= 28%

?

Financial support is one of the main areas of support required by start-ups, especially as they work towards achieving initial investment. Many invest their own savings and borrowings into their company and also reach out to friends and family members for financial support,

even after receiving outside investment.

Market Growth & Importance of Personal Networks

The UK is the second biggest market for digital entrepreneurs, followed by the USBase: All digital entrepreneurs

Q.4a In what markets does your company currently operate in? Q.4b Markets company hopes to expand into within the next five years?

3

36

10

27

27

32

20

22

22

12

20

2

2

12

2

26

83

49

42

29

25

19

12

12

10

5

5

3

3

3

3

16

Republic of Ireland

UK (excluding NI)

USA

Northern Ireland

Canada

Australian/New Zealand

South America

Asia

Germany

Spain

France

Switzerland

Luxembourg

Europe (Non Specific)

Middle East

Others

*Caution small base** All others 2% or less

Currently operates in Hopes to expand into within next 5 years

% %

**All Others: 2% or lessSwedenNetherlandsFinlandItalyPortugalScandinaviaCzech RepublicKenyaDenmark

UK, NI, Canada and Australia/New Zealand are

key target markets for entrepreneurs.

?

Market fit and size of market are the top two reasons cited for operating in particular markets, followed by English speakingBase: All companies who operate in specific markets

Q.4c Why does your company currently operate in/plan to operate in these markets? Republic of Ireland ?

60

54

45

35

29

20

4

18

The product/service is suited to this market

Bigger market/more customers for my product

English speaking

Have contacts located in country

Most progressive markets/quickest to adapt to new technology

More open to dealing with start ups

Tax incentives

Other (specify)

Total

%

Republic of Ireland

UK (excluding NI) USA Northern Ireland

Canada Australian/New

Zealand

Asia South America

Other European country

51 50 47 33* 31* 29* 19* 18* 35*% % % % % % % % %

25 68 68 55 68 76 63 78 63

10 64 81 27 68 66 63 56 74

69 60 51 52 58 55 - 6 11

61 48 28 45 16 17 26 6 31

14 30 51 9 39 41 32 11 29

35 10 26 15 19 10 21 11 20

8 8 - 6 - - - - 3

39 12 13 27 10 7 11 17 11

*Caution small base

Having contacts located within the country is also highly important.

*English speaking*Contacts

*Market fit and size*English speaking*Contacts

*Market fit & size*English Speaking*Progressive*Open to dealing with start-ups

Ireland as a place to do business

Ireland – a great place for start-ups but not always for post Series ABase: All digital entrepreneurs

● Generally Ireland is viewed quite positively as a location to do business:

v With convenient access to mainland Europe and the USA

v Important to note that the cost and availability of office space, especially inDublin, is becoming an issue – particularly when companies reach the scalingup and growing stage

● The supportive structure for start up companies in Ireland is also viewed quitepositively:

v Strong financial and skill set assistance from NDRC, Enterprise Ireland andother business groups

● In this main it is felt that this supportive structure for companies falls away aftercompanies become more mature

v Government assistance in terms of tax incentives to hire employees would bean advantage

● This lack of support for companies as they scale up leaves them open to “poaching”by IDA equivalents in other markets – especially if main investors are located abroad

“It’s like coaching a football team, you don’t just invest heavily in the underage teams and forget about the senior team.

If you did that the other teams would poach all your best players. You invest and support them the whole way up, until you have a great senior team.”

71

71

Ireland is a great place to start a digital company

Ireland is a great base for digital companies to be located in

%Any Agree

“We’re an Irish company and we’ll stay in Ireland but with rising accommodation

cost and other overheads it can get difficult when VC backers want you to

move to the U.S.”

2 in 5 NDRC entrepreneurs agree that established Irish business shy away from doing business with startups

● There is some sense that established Irish companies shy away from doing business with start ups, while someinternational markets are more supportive of start-up companies

“Being a start up in the U.S. is like a badge of honour, while in Ireland you need to

hide the fact that you’re a start up. If you want to do business with Irish companies

you need to prove how well established you are.”

v It is felt that this exclusion by Irish companiesmay be due to an expectation that a startupcompany is likely to fail and thus moreestablished companies do not want to beassociated with a failing company

v U.S. businesses are considered to bemore open to doing business withstartups – mainly considered to be dueto an entrepreneurial ‘DNA’ in theAmerican psyche

2910 25 8

Irish businesses are always open to dealing with start upsBase: All digital entrepreneurs n - 59

(Any agree 33%)

Disagree strongly

Tend to disagree

Tend to agree

Agree strongly

(Any disagree 39%)

Ireland – a great place for start ups but not always for post Series ABase: All digital entrepreneurs

Q.17 To what extent would you agree or disagree with the following statements?

14

12

29

2

10

47

42

25

24

29

8

Ireland is a great place to start a digital company

Ireland is a great base for digital companies to be located in

Irish businesses are always open to dealing with start ups

Disagree strongly

(1)

Tend to disagree

(2)

Tend to Agree

(4)

Agree Strongly

(5)

% % % %

Any Disagree

14%

14%

39%

Any Agree

71%

71%

33%

Neither/nor (3)

Mean Score

15% 3.81

15% 3.85

27% 2.93

?

About NDRCFunded by the Department of Communications, Climate Action and Environment (DCCAE) and established in 2007, NDRC finds, builds and invests in digital companies and startupteams with the potential to grow internationally.

With ten years’ experience, NDRC’s key skill lies in finding companies and teams with the potential to grow internationally.

Once a company joins NDRC, the team works intensively with each, over a short time frame, to help them understand what value their company can offer customers, their strategy for growth and getting them ready to meet the demands of both investors and customers.

The short time span and the intensity of this commercialisation work is the acceleration process. It is this offering of capital investment and development support that makes NDRC effective.

the digital startup journey and experience · profiling of entrepreneurs is key to deciphering...

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