INVESTED IN VENTURE EQUITY
Entrepreneur focuses on companies’ growth over debt, profitability
Ed Byrne misses friends and family back in his native Dublin, but not the weather or the commute. It takes him about 10 minutes to get to Scaleworks, a so-called venture equity firm Byrne co-founded in San Antonio.
“It’s great over here,” he said. “Now and then, I send a snap of Broadway Street to my buddies at home. I’m like, ‘Look, how’s your traffic today?’ There’s rain and cars everywhere (in Dublin).”
Byrne, 38, moved to the U.S. four years ago and has a background in managing and launching tech businesses. He ran Hosting 365, a hosting and cloud-computing company that was acquired by SunGard. He also founded software company CloudVertical, which suffered as competition in the cloud-computing market intensified and “Amazon won everything,” Byrne said.
It’s the only business for which he raised venture capital, and the experience contributed to his skepticism about VC firms. Byrne later bought CloudVertical back from investors through Copper Cloud, a venture he co-founded that purchased a bunch of small developer tools. Copper Cloud was eventually acquired.
Byrne said he saw a business opportunity in buying companies strongly focused on their products and making them more customer-centric. He joined private equity firm Xenon Ventures to do just that. That’s how he met Lew Moorman, a former Rackspace executive and co-founder of Scaleworks who was also an investor and partner at Xenon. The pair spent a year working together before deciding they wanted to raise a fund to focus on larger businesses. They launched Scaleworks in 2015, with a focus on business-to-business software companies.
Last year, they moved into the Savoy Building on East Houston. Two of the companies Scaleworks has bought have been acquired, including Assembla, a platform that developers use to store code securely, earlier this year. The firm currently has six companies in its portfolio.
Byrne sat down with the San Antonio Express-News at Scaleworks earlier this year to discuss its approach, why he’s leery of venture capital, what he looks for in a new CEO and what growth opportunities there are for San Antonio’s tech community. Here is an edited transcript of the interview.
Q: What does “venture equity” mean? A: Private equity typically buys companies and leverages debt, loads them for cash flow, extracts the cash flow to pay off the debt and runs it very lean. Private equity firms are known for leaning businesses down, as opposed to growing. Venture capital typically builds and says, “Grow, grow, grow. Shoot for the stars, and if you miss, well, we’ve got lots of other portfolio