IRELAND’S BIG TECH INVESTORS
The funders behind the next wave of Irish startups,
DESPITE worries that venture capital funding would slip into a Covid-induced coma, substantial Irish tech deals have continued with little fall-off. In all, at least €250m in venture funding for indigenous tech firms has been announced in the first half of the year.
This doesn’t even count some of the megadeals involving Irish founders such as Eric Mosley, whose Workhuman HR software firm tipped into unicorn status with a €108m investment from a London-based firm last week.
The nature of the business is becoming more international. Irish VC firms are hooking up with US or European counterparts to co-fund deals here. Simultaneously, home-grown tech companies are going straight to US or UK funds themselves.
And the amounts that ‘ordinary’ tech firms are raising is rising quickly too, with more and more VCs prepared to hand over cheques of over €10m, a step change from a few years ago.
For younger tech founders in particular, there are multiple factors to consider when starting out on the VC funding process.
Few know this better than one of Ireland’s most successful young startup founders, Shane Curran. The 21-year-old recently scored something of a coup, landing a €14.7m funding round for his Dublin-based privacy tech firm Evervault from the cream of Silicon Valley’s venture firms: Index Ventures, Sequoia and Kleiner Perkins (with Dublin-based Frontline also involved).
“When I was raising for Evervault, I spent a lot of time with European investors and US investors, before focusing exclusively on US investors. I talked to a lot of people. The biggest difference I noticed between European and US investors was the time horizons. European investors tend to focus on returns that might be within a fiveyear cycle. But with a US investor like Sequoia or Kleiner Perkins, if you told them that it might take 20 years, they’re okay with that. If you said something like that to an Irish fund, they’d think you were mad.”
This time element, Curran says, feeds into the underlying ambition for the startup itself. Because European and Irish investors still favour a relatively quick cashout date, it’s harder to focus on being something truly global.
“At scale, if you want to build a $10bn or $100bn company, five to seven years just isn’t long enough,” he says. “A trade sale can be a great
result, but you may not have any choice. Your hand might be forced.”
There were other things he learned along the way, too.
“You also want conviction investors. If an investor is continuing to talk about your traction and your metrics at a seed or pre-seed stage, you probably want to run a million miles from them. It’s often just an excuse not to invest. I wasted a year of my life on that. I don’t want other people my age, or anyone else raising money in general, to fall into that trap.”
And on who to listen to, Curran says that those who are part of something far outweigh self-appointed hurlers from the ditch.
“I met loads of people that were giving me advice,” he says. “What I later realised was they were all the wrong people. And so I got the wrong advice. I tried to take shortcuts but it wasn’t really until I was exposed to a better way of doing it through trips to San Francisco that I understood all that.
“The simplest advice I have is to only take advice from people who are working for a company that’s operating on the scale that you want to get to. You shouldn’t take advice from people who haven’t gotten to the point that you want to get to.”
Some of this is echoed by other recently endowed Irish tech founders who spoke to the Sunday Independent about the process.
“Looking back, any investor who was on the fence or who we had to work to convince, ultimately didn’t follow through and sign a cheque,” says Patricia Scanlon, founder and CEO of Dublin-based SoapBox Labs, which landed a €5.8m round earlier this year on the strength of being one of the top kids’ language technology firms around. “With full hindsight, I am delighted they didn’t. The investor-founder relation is hard. Mutual respect is everything. It takes work from both sides to make it a good, long-term, productive relationship. Not being aligned on vision on day one does not bode well for the future.”
The Cork-based duo of John Goulding and Joe Lennon, co-founders of work communication software startup Workvivo, are another example of looking outside Ireland for funding. A few weeks ago, they announced a €14.7m round led by New York-based Tiger Global.
“The most important thing for us was the cultural fit and chemistry,” says CEO John Goulding. “This meant asking whether we would enjoy working with this investor and whether we would
share the same vision of where we can take the company, and how we were going to do it.
“Second was what value they could add without feeling the need to try and run the business. The third was the experience, track record and credibility of the investor.”
Some of Ireland’s most active Irish venture capitalists tentatively agree with these guidelines for young founders thinking of setting out on a finding route.
Frontline Ventures’ founding partner Will Prendergast thinks that founders should also pay attention to the category of investor, as well as the different options within each financial tier.
“The most common mistake founders make is talking to the wrong category of investors,” he says.“Whether it’s angel, government agency, accelerator, bank, venture fund or whatever, each category of investor has a different type of success outcome that they are looking for. A government agency is likely to care more about job creation and exports. A venture capital fund is looking for high revenue growth and is willing to risk a lot in return for the possibility of that growth.
“So you need to target investors who are aligned with your view of what success looks like for the business.”
Others in some of Ireland’s most active venture funding firms say that there’s little excuse not to know a bit before you pick up the phone or send a mail. “In the Irish ecosystem it is extremely easy to do some research about potential investors you are talking to,” says Isabelle O’Keeffe, a principal in Sure Valley Ventures.
“You can look at the companies they have invested in to date and get introduced to the CEOs. You can also get to understand their views, speak to other investors who have co-invested in deals with them before and so on. Other stakeholders in the system such as Enterprise Ireland or the accelerator programmes will have worked with the investors before and can probably give you a steer.”
Tech founders starting out at a very early stage say that although the coronavirus pandemic made it trickier to meet potential investors, it wasn’t an insurmountable barrier.
“We had kicked off our investor meetings pre-Covid-19,” says Brian Kearney of Rove, a travel tech company that announced a €450,000 round last week. “While things slowed down to phone calls and Zoom calls, we were lucky that we had a few very supportive investors that had bought into the company during those early investor presentations. But it is a difficult funding environment. Investors are slower with new investments and, understandably, are looking to support their existing portfolio.”
Evervault’s Shane Curran says that picking the right investor is an irreplaceable asset. “If you pick your investors correctly, it means you now effectively have a new team on your side,” he says.
“It should help with the blind spots you might be having in terms of getting introductions to potential customers or new players or even just getting insight into the proper direction.”
If you tell an investor from the US that it might take 20 years, they’re ok with it