Peter Conlon (pictured) has a long track record in creating fast-growing and successful companies. Xsil is the latest, with over 17,300pc growth in five years to 2006.
In November last year, Dublin-based manufacturer of sophisticated silicon micro-machining equipment Xsil emerged in No 1 position in the Deloitte Fast 50 of Ireland’s high-growth companies. With a staggering aggregate growth in revenue of 17,333pc in the previous five years, it was the second time that Xsil had peaked in the Fast 50, the first being 2003, just three years into its existence.
Those who have followed Peter Conlon’s career to date will not have been surprised to see another victory from this successful serial entrepreneur and his long-time collaborator Pat Rainsford, who runs digital television technology company, Emuse, also set up by the pair. In March 2001 Conlon and Rainsford sold optical manufacturing systems company MV Technologies (MVT) to Hewlett-Packard spin-off Agilent Technologies for more than €100m.
In a former life, Conlon worked as an investment adviser for the IDA and with Ernst & Young in corporate and international tax and accounting. The entrepreneurial successes of Conlon are no accident, but rather the result of shrewd strategy and sheer hard work. When we meet among the crates at the old offices on Pearse Street – they are in the process of moving to state-of-the-art offices in Sandyford – Conlon is about to leave for Asia for two weeks, then to the US, and from there to Italy, then back to Dublin. He tells me he has 22 customer meetings during his fortnight in Asia.
“We have sales people on the ground, and there’s a lot of liaison with our process development group here so you do build up a good rapport, but to close the deals and get sign off, I like to meet directly with the clients, particularly in Asia where they keep wanting to renegotiate the price,” says Conlon.
It’s all in a day’s work for the busy chairman and CEO of Xsil. “Even though you’re CEO, you don’t really have control – your customers control your agenda for most of the year,” says the focused Conlon. “I can’t really say I’ll go to a wedding in two months because if I have to go and do a negotiation in Korea or Japan, then that’s where I’m going. There’s no question but that as CEO – or a member of the management team – the business just has to become part of your life.”
In the six years since it was founded Xsil has become a world leader in the supply of laser machining tools for the semiconductor industry. Headquartered in Dublin, Xsil has operating subsidiaries in the US, Singapore and Japan, and business development centres in Taiwan and Korea.
Conlon has a variety of other investment interests and directorships, but his first big winner was probably self-funded MVT, one of the leading suppliers of in-line automated optical inspection tools and solutions for the electronic assembly industry.
Already here, one can see the strategy employed that would make Xsil such a success. “By the time we sold we had 47 competitors, and we were probably the only ones making money,” says Conlon. “That’s because we took a global approach from the start – rather than chase all the small customers, we went after the big ones and presented ourselves as being able to deal with them on a global basis.
“When we started Motorola was our only customer almost for the first two years, and by the time we ended Motorola had gone from 100pc down to about 12pc and we had about 28 customers, including all the big names such as Selectron, SEI, Celestica, Nokia, Siemens, Ericsson, Yamaha, OKI and Fujitsu.”
It’s this think big and global approach that has worked so well for Xsil too. “The key is to go for the top-tier customers from the outset, and to take a global approach. I use the term ‘born global’, but we do it from day one. If we decide to go after a market, we go after it simultaneously in all the regions so within a year, we’d always open an office in Tokyo, and one in the US, or wherever the most appropriate location is and typically we would handle Europe from here [Dublin].
“You need your presence in the target market. In Japan, you’ll never get business for the first two, maybe three, years in any case. But if you’re not there you’ll never, ever do business there. When you crack it, it’s a great reference. At MVT, we had about eight Japanese customers and that was a tough thing to achieve, because we had local competitors in Japan.”
Conlon has a fearless attitude to chasing the biggest and best customers in the market. He points out that it takes comparable efforts to sign a tier 1 or a tier 3 customer, and so argues that it makes business sense to go after only tier 1 customers initially, and to make a conscious effort to go after market leaders. “If you succeed, this has a self-referencing effect too – having the market leader as a user stamps the solution as the de facto safe choice,” he says.
It’s what Xsil has done so successfully. Conlon says 60pc of worldwide capital expenditure in its target industry is spent by 10 companies alone. “In this list, 10 out of 10 are in active technical assessment phase with Xsil. In most of these accounts, multiple opportunities are under evaluation, and three have already become customers.”
And Conlon doesn’t underestimate the importance of good people. “The key is effective recruitment and development. It’s essential that everyone in the organisation is cognisant of the positioning and message of the company. Of our 130 staff worldwide, we have 130 sales people.”
Xsil was founded during the dotcom boom, about a year before MVT was sold. “When I sold MVT I managed to get myself out completely. That was great as it was just at the time that Xsil was starting to need full-time attention,” says Conlon – and full-time attention it clearly gets.
However, Conlon remembers the lapover year as one of the toughest ever. “I don’t know if I could do it again. I sold MVT myself, rather than use an investment bank. We were selling to a billion-dollar corporation Agilent, and we were very much a multinational ourselves, so it was an extremely complex deal.”
Xsil, like MVT, was also self-funded, but Conlon has great sympathy for Irish start-ups looking for investors. “There’s a good reason that we don’t have 10 or 20 Xsils in Ireland,” he says. “Unless you have the access to capital it just won’t work and the likes of Enterprise Ireland really will not take a big risk on any single project. I’ve heard some critics describe its policy as ‘spray and pray’, in other words, spray lots of small stuff and pray that one of them will be successful. That’s really not what it should do, in my opinion.
“I’ve seen so many companies where the CEO for a period of three or four years spends most of his time raising the money instead of dealing with the customers, and they can’t raise enough,” he continues. “In Ireland a venture capitalist or even Enterprise Ireland will typically give you the minimum amount of funding to get to some arbitrary milestone, and in start-ups and early-stage companies, these milestones are very arbitrary. If you go to the good venture capitalists in the US, they will look and see what do you need to dominate this market segment. It’s a completely different mindset.
“I just don’t see any evidence of people willing to take large risks in Ireland. If you’re in Palo Alto you’ll meet start-ups and their intention is to be at US$50m or US$100m in three or four years. There is absolutely no reason why that shouldn’t be the same here. I think it comes down to the fact that there is still a big fear of failure in this country.”
And the future for Xsil? “We’ll look at an exit at some stage,” concedes Conlon. “But Xsil’s market is set, and the strategy is defined for the next three to five years, for which we have product road maps. After that it could go in any direction.” One would guess that direction is up.
By Ann O’Dea
This article appeared in the Summer 2007 edition of Irish Director, the official magazine of the Institute of Directors in Ireland, which is in shops now. For more information visit http://www.irishdirector.ie