InishTech, a company led by ex-Baltimore and Similarity executives, took over Microsoft’s software licensing protection business and last week raised €1.8m in funding. Aidan Gallagher is InishTech’s CEO.
How did it come about that a group of Irish people took over a former Microsoft division and ended up spinning out a new company?
We approached Microsoft independently. I was head of sales and marketing at Similarity, and before that head of sales at Baltimore Technologies. My colleague John O’Sullivan was the former CTO of Baltimore. We had been looking for a good company to work on and we had been in discussions with various company founders. While we were doing that, Microsoft approached Enterprise Ireland and we were introduced.
Because the two of us had experience in licensing protection we immediately saw an opportunity and so InishTech was born.
Originally they were looking at a licensing deal but we convinced them to do a full spin-out of the company.
Why would Microsoft want to spin out a licensing operation at a time when software licensing has never been more important?
They had acquired this business in Israel on the strength of patents and code. They developed the business within Microsoft and had to decide that if it were to work across a company of Microsoft’s scale, to fit in it would have to reach $350m in revenues a year within three years.
We see Microsoft as a strategic partner. How we engage with Microsoft is better than how its own internal people would have engaged. We know how to approach them and work with them. The start-up approach actually works best for the division.
How hard was it raising venture funding in the current environment?
It was tough to get the funds in. Having said that, I found Kernel (Capital) very professional to deal with. It took longer to get the private investors on board. We knew we had on our road map that we needed to get funding in. I have to say that it is as tough to raise €1m today as it was to raise €5m five years ago.
It was strategically important to have venture capital available, but unfortunately it is a tough environment. My advice to companies trying to raise finance is allow twice as long and factor in that it will be twice as hard as it used to be.
How does InishTech’s technology work?
For anyone who develops services for the .NET platform, we protect their software and code – reverse engineering on .NET can reveal vulnerabilities. We have a patented, secure virtual machine environment which is impossible to breach. The other major part of the business is we provide a service to independent software vendors, enabling them to license software in flexible ways that matches up the way people do business today.
How big is the available market for InishTech?
The way I categorise our market, there are several hundred thousand software development companies worldwide. Our customer base is in the thousands. Our sweet spot is the guys developing apps on the .NET platform. The bulk would build on-premises technology, client or server apps, but they are increasingly looking at moving onto the cloud on Windows Azure.
With the cloud and online, there is a lot of paranoia about IP protection and also a greater realisation they need to be more flexible with their licensing to support a more dynamic selling model.
