Irish Diaspora Innovation Fund

6 Mar 2012

John Ryan (left), founder of Macrovision Corporation and general partner with the Irish Technology Capital, and John Stanton, general partner, Irish Technology Capital

One of the unexpected outcomes of the creation of the Irish Technology Leadership Group has been the formation of Irish Technology Capital, a venture capital firm focused on investing in young firms. John Kennedy talks to John Ryan and John Stanton.

One of the reasons why there is no where else on earth quite like Silicon Valley is the sheer concentration and volume of venture capital within a very small area. Access to investment capital is a decisive factor for young technology companies, which is why Silicon Valley is a natural breeding ground for innovation.

However, for Irish technology firms, indeed European technology companies, access to capital is very limited. While at home in Ireland Enterprise Ireland does great work in seeding and supporting young firms and an impressive angel investor community is emerging, there is a gap between seeding companies and the point where a second or third-round investment is crucial.

Five years ago when the ITLG came into being, nobody quite foresaw back then the emergence of the Irish Innovation Center in San Jose or more recently the creation of Irish Technology Capital (ITC), which could yet play a crucial role in connecting young technology companies with capital but also expertise, experience, knowledge and access to potential customers.

Irish Technology Capital

ITC consists of experienced entrepreneurs, CEOs and investors willing to invest in young technology companies and for many of its limited partners, its purpose goes far beyond investment or philanthropy.

John Stanton, general partner for the fund who has held various leadership positions with several top technology companies in Silicon Valley, including Apple, Intuit, Hewlett Packard, Handspring and Palm, explains it was a natural evolution.

“After the ITLG network grew in size and impact, the next step was to provide Irish companies with a soft landing pad to Silicon Valley – which was the Irish Innovation Center – and from there we focused on the funding challenges Irish start-ups face.”

“To complete the ecosystem, it was clear that a fund was necessary whereby diaspora investors could contribute to investing in Irish companies. Many venture capital companies in the Valley can’t or won’t easily invest in European start-ups, so it was essential really.”

One of the most successful Irish entrepreneurs to arrive in Silicon Valley is John Ryan, founder of Macrovision Corporation and inventor of video copy protection technology and who happens to be a general partner with ITC.

“It is very difficult for Irish entrepreneurs living in Ireland to get the investment there,” Ryan explains. “There just isn’t the culture of taking these kind of risks. This is changing in the right direction but probably not fast enough for any of the young entrepreneurs with ideas.

“And so we’ve stepped in and we have made quite a few investments in really promising Irish companies that would have otherwise had difficulties getting funds.”

Stanton explained that at present there are 15 limited partners involved who are either Irish nationals or members of the diaspora.

“Our traditional venture capital fund invests in seed and early stage companies primarily in mobile, social and cloud, but we are always looking for the best opportunities out there. Connected to the fund is a diaspora investor group that allows for high net worth LPs to invest further in companies and get more directly involved supporting their success.”

‘They are not just people with money’

Ryan explained that many of the partners are company founders or people who held substantial positions in Bay-area companies. “Not only do they bring their money to the table but also the ability to offer considerable advice to entrepreneurs but they also have proven ability to spot winning business plans, as well. They are not just people with money looking to invest it, they are people looking to do well while doing good at the same time offering their expertise and money to young companies while helping them grow.”

Among the companies ITC has invested in so far are Dundalk-based Mcor Technologies which has developed a breakthrough 3D printing technology and Belfast-based life sciences and nanotechnology player SISAF.

Stanton adds that what the ITC brings to the table isn’t just cash but experience and connections.

“The secret sauce to what we’re doing is the network, because when an organization comes to the US we can get them in front of almost any high-tech company in Silicon Valley and that can often be the difference between success or failure for a company.”

John Ryan, who came to the States more than 30 years ago, says the companies he sees emerge from Ireland today are of a different caliber to what he would have expected in the past.

“The quality of young people coming out of Ireland with business ideas is extremely high in terms of their ability to formulate a solid business plan, to sell that plan, make a case for that plan, put together a budding organization to execute on the plan.

“They have the aggressiveness, the technical talent, the managerial talent. It’s very impressive and in my view I would easily put them up against anyone in Silicon Valley – they are lacking for nothing in terms of their ability to compete and I am very, very proud of what I see.

From starting up to Silicon Valley

Ryan’s own journey of starting up in the States and the success of John and Patrick Collison’s Stripe, which has attracted investment from Peter Thiel, Elon Musk and Sequoia Capital, suggest that start-ups should consider moving straight to Silicon Valley.

“Yes, that is an option all right. Quite simply, the venture capital industry in Ireland is nowhere as developed as it is over here. Having said that Enterprise Ireland is doing a seriously good job of helping young companies to get going, putting in significant capital and offering excellent advice.

“But there is nothing to compete with the talent and money on the ground over here in terms of the venture capitalists, the universities and the network that exists here in Silicon Valley and there is nothing like that in Ireland and won’t be for some time.

“But if someone has the guts to come over here and try and make it on their own, they have a huge advantage over companies staying in Ireland. That’s just a reality,” Ryan said.

In terms of the advice they would offer Irish firms that are looking at raising capital or forging alliances in Silicon Valley, Stanton says the one thing he thinks Irish start-ups need to do a better job of is telling their story.

“There’s so much great innovation coming out of Ireland but some of the young companies have a tendency when pitching to be conservative or understate the opportunity. I think it’s a cultural thing.”

John Ryan agrees. “There is a reticence on the part of the Irish and it took me personally 20 or 30 years to get over that. We tend to hold back and understate – it’s a kind of modesty – but it does you absolutely no good, you need to be aggressive and overstate your position a little bit in this world, trying to raise venture capital or sell your company – you need to be more aggressive than reticent.”

In conclusion, Ryan says the ITC is open to working more closely with organizations like Enterprise Ireland and the Irish Government to make it possible for innovative Irish companies to make a breakthrough in Silicon Valley.

“One of the things that would be nice to happen would be for the Irish government to take a closer look at the ITC and I think they will come to the realization that we offer value on top of what Enterprise Ireland offers.

“Enterprise Ireland offers great seed capital and help in accessing markets, but we can bring young companies to the next stage and provide them with access to investors and customers over here and I would hope the Irish government might see that and make a significant investment in our diaspora fund.”

Silicon Republic has joined forces with the Irish Technology Leadership Group to bring you The Silicon Valley 50 most influential Irish-American people in the tech world ahead of the ITLG Innovation Summit in California on 12-13 March.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years