Sunday Times Business Section Article
On the up through the downturn
It was a painful 2011 for many small firms, but some bucked the trend
Healy secured financial support for Fantom last year (Bryan Meade)
Many small business owners will be happy to see the back of 2011 — a fourth annus horribilis in a row for the economy — yet, for a few entrepreneurs, it was a year of opportunity.
This time 12 months ago, Paul Healy was struggling to get Fantom, a digital trading card game for children, off the ground.
“There were days when I didn’t even have the bus fare to get into town,” said Healy.
The 49-year-old former technology journalist took part in Dublin City University’s business start-up accelerator programme.
Last month, Fantom got €490,000 in funding from the AIB Seed Capital Fund and a syndicate of private investors, enabling him to launch the game in time for Christmas.
He didn’t just secure financial support. “Enormous goodwill exists for people who are out there trying to do something entrepreneurial right now,” said Healy, who is from Derry. “The Irish business community was astonishingly helpful.”
“I heard the phrase ‘the person you need to talk to is’ more than 100 times during the year, followed by people picking up the phone and making the introductions I needed for me.”
It was a year of progress for Eoghan O’Sullivan. Last June he established Von Bismark, a company that designs virtual changing rooms for online shoppers.
By Christmas, he was trialling the technology in Liffey Valley shopping centre.
An “augmented reality” mirror was erected, in front of which shoppers could try out various handbags.
Based at the National Digital Research Centre, the company received Launchpad funding of €20,000, which it is using to develop a product that will allow online shoppers to try on clothing virtually.
“Our aim is to deliver the dressing room of stores such as Topshop into your living room,” he said.
Given that 60% of people won’t buy clothing online for fear it won’t suit, he believes there’s a huge market for such a service.
“At the moment 30% of online clothing purchases are returned,” said O’Sullivan, 30. “It is a massive problem for retailers.” He was undaunted by the doom and gloom in 2011 and the company now employs six people.
“If this works, it will be a global play,” he said. “I’m saving clothing brands money and offering them new channels to market.”
Recession has taken a toll on start-ups. Activity in Ireland generally has fallen by 45% between 2005 and 2010, according to the Global Entrepreneurship Monitor.
“We have seen a marked increase in the number of ‘necessity entrepreneurs’,” said Paula Fitzsimons, a co-author of the GEM report for Ireland. Necessity entrepreneurs are those people who set up businesses not because they have spotted an opportunity but because they feel they have no choice but to strike out on their own.
Necessity entrepreneurs are now estimated to account for one in three of all new business start-ups.
The sense of desperation does not put them at an automatic disadvantage, said Fitzsimons. “There are very often good opportunities to be discovered in times of discontinuity,” she added. “Start-ups can adapt more quickly to changing circumstances.”
Fitzsimons cites the mushrooming number of pop-up shops. “These are entrepreneurs engaging in active market research, checking out what works and what doesn’t, using short-term lettings for peppercorn rents, often in high street locations that simply wouldn’t have been possible in the boom,” she said.
Ciara O’Hagan is something of a necessity entrepreneur. She launched Dine Easy, a website that allows consumers to order a delivery of ingredients for five meals, for two people, plus a recipe sheet, for €65.
Her husband, Peter, is a carpenter who saw his work dry up in 2011 as a result of the building downturn.
“I have always been interested in food and had been making a curry paste and selling it through a local butcher shop,” said O’Hagan. “When Peter’s work slowed, we decided that, rather than hanging on and hoping things would pick up, we would take action and set up a business of our own.”
She secured a €12,000 loan from First-Step, the micro-finance agency, which was spent on website and packaging design.
To generate publicity she contacted food writers.
“People like the idea of a business setting up in the current climate, so we got good coverage which led to our first customers,” she said. “These were mostly working couples attracted by the idea of not having to shop for the week, knowing what their budget will be and the fact that they’ll be able to cook healthy meals with no waste.”
Each time she wins a customer, O’Hagan does a mail drop to their neighbours, “to build up manageable clusters for deliveries, which we do ourselves on Sunday nights”.
Three months on, the couple supply 60 customers a week, generating a weekly turnover of €3,900.
Having started the year concerned about their future, her biggest worry for 2012 is how best to grow the business, possibly through a franchise model.
Last year could easily have been a disaster for Alice Burns. The 31-year-old architect returned to Ireland having taken time out to travel the world as a yacht’s chef.
Having left in 2008, she returned to a very different environment.
“There was just no architecture work,” said Burns. “I really had to start thinking creatively about what I was going to do.”
She decided to use her catering skills, developed while travelling, to open White Tea, a tearoom, in Dun Laoghaire.
“It has gone incredibly well,” she said. “We are making a profit, the business is supporting four employees and we are hoping to double our premises’ size this year.”
Like Healy and O’Hagan, she reckons there is invaluable goodwill towards new business ventures.
“I know we filled a void in the town but I also think that people want to support a start-up; they are pleased to see a new business get up and running in the current environment and as a result are very supportive.”
For John McKiernan, in 2011, necessity was the mother of reinvention. He was an importer of designer sunglasses for two decades.
At its peak, in 2007, Merchamp, his company, had annual sales of €500,000. By 2011, that figure had fallen by 70% and it was time for a radical rethink.
“I was scouting for a replacement product in the US early last year when I came across MouthWatchers, an antibacterial toothbrush with a flossing action that was causing a buzz there,” he said.
He pitched for, and won, exclusive Ireland and UK rights to the product. Since launching it in Ireland in September, he has imported 65,000 brushes which are “selling through really well” at just under a fiver each. He is currently in negotiations with distribution partners for a UK launch this year.
It is, he said, a real departure for him and one he is lucky to have made. It helps that the product is perfectly suited to the downturn. “Launching in the depths of recession is not a problem if you have something that is well priced, could not be considered a luxury, and, crucially, works,” he said.