Thoughts on startups & software in Ireland

Calom was very fortunate recently in being selected by Enterprise Ireland to secure a €50k for 10% investment as part of their Internet & Games Competition Fund. The  investment itself closed last week and this blog entry is here to tell you about the process and to encourage start ups to enter the replacement competition, the Competitive Start Fund.

The Application

This was simplicity itself. If you have been maintaining some form of business plan, the information that is required is very straight forward to put in. The whole thing is done on line. The only thing I’ll say regarding the site is make sure to save your work frequently, I lost some of my application when internet connection went a bit funny. You’ll be given guidance on how many words to use in each section and you should try to stick to that. Remember that the panel who are judging your entry will have a whole bunch of other plans to read, so make sure you can get your points across quickly so you make it to the top of the pile. Our application was in on Dec 16th, and they announced the 10 winners on the 21st of Jan, not bad given Christmas got in the way. That was fast, but I wasn’t quite prepared for the speed of the next phase!

Make sure your house is in order

Should you be offered investment (it looks like you have another step with this competition having to do an investment pitch) you face the same requirements as any other company taking on investment. You’ll get a draft Ordinary Shareholder agreement from EI which is non-negotiable. Before you can do anything with this, make sure you’ll be able to:

• Furnish a Tax Clearance Certificate
• Have your most recent management accounts completed
• Have copies of your Memorandum and Articles of Association ready
• Have some idea of who will be your solicitor (we’ll talk about that in a bit)
• And of course €5k ready for investment into your company.

Even if you don’t win anything, it’s always good to have the first 4 items in order. If you are successful, EI will invest €25k immediately upon you investing your €5k for 5% equity, and the subsequent 5% is invested after you hit the objectives and milestones you identified in your application. You need to furnish a report to EI to release the second round.

At this point in the process the speed at which you move is down to you, but EI were exceptionally well organised here. If our own startups were as efficient as this we’d be laughing!

Getting a solicitor

You need to get a legal firm to do basic due diligence on your business and to certify this to EI. This includes CRO lookups, judgement look ups etc. Quotes varied for this work from €3k downwards. The 10 companies who were selected clubbed together to see if it was possible to do a good price on this. We went with a firm based in Naas, Breda Cullivan & Co, who did a great job for us. As it’s a legal thing, you should make up your own mind on who to use to represent you. You should be able to drive a good deal and not pay any where near the top figure I gave earlier.

Your solicitor will guide you on what needs to be done, so obviously, the more organised you are, the better for this one.

Closing the deal

The main points to this are:

• Lodge €5k to your company bank account for the purpose of buying shares
• When you go to execute the documents, you’ll issue yourself these shares first, then EI will be issued a number of shares which will bring their ownership in the company to 5% of the issued shared capital. Make sure you have enough authorised share capital to be able to do this ortherwise there will be some additional paper work to do.
• Send in your management accounts & tax clearance cert (this can take up to 5 days to issue, more if there’s anything out of date with Revenue) to EI.
• EI will also review your Memo’s and Art’s so you will need to send them in as well.

Once you execute the paper work, the first cheque is issued. The whole process took about 2 weeks to do for Calom

Should you apply?

Yes! You will learn alot about the investment process from this. Some of the questions to ask yourself include:

• Is a €500k valuation on your business reasonable?
• Are you demonstrating some traction in your market and  would investment this size  help that further?
• Could you benefit from the extra credibility from having EI take an actual investment in your company versus grant aid can be beneficial.

I’m sure there’s more reasons, but it’s getting late. You will have to part with up to 10% of your company in ordinary shares so does need some considering.

Well done to EI for this competition, and for the speed and efficiency that whole process was executed.  Further information on the process is available from the Enterprise Ireland Best Connected Blog.

Questions on anything welcome in the comments section.

This entry was posted on Monday, February 28th, 2011 at 11:28 pm and is filed under Hothouse. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.