Irish Technology Leaders’ ITC group to raise US$100 million venture capital fund

22 Oct 2009

A consortium of Irish executives who hold senior roles in some of Silicon Valley’s most prestigious technology firms are building an all-island US$100-million venture capital fund to ensure Ireland achieves breakthrough success stories.

The Irish Technology Leaders Group (ITLG) is a group of Irish and American senior executives in Silicon Valley who are committed to ensuring that Ireland remains not only attractive for mobile investment by US technology giants but also that Irish entrepreneurs can grow global businesses.

The 600-strong network consists of seasoned Silicon Valley executives such as: John Hartnett, CEO of G24 Innovations and formerly of Palm; Rory McInerney, vice-president of Intel; John Gilmore, CEO of Sling Media; Barry O’Sullivan, senior vice-president of Cisco; and Conrad Burke, president and CEO of Innovalight.

Belfast conference

The ITLG held a conference in Belfast attended by more than 80 start-up technology companies.

A survey by the ITLG of 140 companies (70pc of whom were founders) pointed to serious anomalies in the funding of businesses across Ireland. Some 44pc of the companies were in software, 17pc in hardware and 7pc in clean tech.

The major challenges were funding, managing cash to extend and getting access to strategic customers. Many were raising cash to access new customers, scale the firm and invest in R&D.

It found that in terms of State funding nearly 70pc have received less than €1 million to date and only 6pc raised between €1 million and €5 million.

In terms of target funding requirements, 41pc sought less than €1 million, 33pc sought between €1 million and €5 million and 14pc sought between €5 million and €10 million.

The overall majority (68pc) described their experience with venture capitalists as average to poor, while 33pc said their experiences were good to excellent. In terms of State agencies, 56pc said their experiences were good to excellent, and 44pc said average to poor. Just more than 51pc found their experiences of dealing with universities to be average to poor while the remainder described them as good to excellent.

“What we need to do is get out there,
get connected and be global –
not inward focused. We need to stop
our whinging about every little issue
and ringing Joe Duffy about it.”

– Barry O’Sullivan, senior vice-president of Cisco

Speaking with, O’Sullivan said it was clear that the main hurdle preventing Irish start-ups from achieving the elusive breakthrough success in becoming global businesses is funding.

“The problem in Ireland is that people don’t think big enough when going for funding, they don’t seek enough funding. And when entrepreneurs go to a venture capitalist or State agency they may ask for €5 million and the answer they tend to get is ‘what could you do with €1 million’ or ‘what’s your next milestone and we’ll help you get there.’”

O’Sullivan said that such piecemeal approaches are failing companies at a particularly sensitive stage in their development and illustrate a lack of understanding of the industry verticals these companies are targeting.

“If you are a company designing or manufacturing chips, it typically costs €20 million to create a new chip product.”

Irish Technology Innovation Centre in the works

Among the actions being taken by the ITLG are the creation of an Irish Technology Innovation Centre in San Jose, where Irish companies targeting Silicon Valley can base themselves, hold meetings and network. Another action is the creation of an innovation ecosystem that will link ITLG closely with the Innovation Alliance between UCD and Trinity College, as well as universities in Northern Ireland, like Queen’s University and the University of Ulster.

But one of the most fundamental steps being taken to ensure that Irish start-ups are given the level playing field they have been denied is the creation of a US$100-million venture capital fund called Irish Technology Capital that will be headed by Hartnett and seasoned US venture capitalists Brendan Richardson and Richard Moran.

O’Sullivan explained the plan is to raise the US$100 million between now and March to support 12-13 Irish technology companies ripe for global success.

He noted while much investment takes place at the seeding stage and the latter second and third-funding rounds, in-between investment activity that would propel companies to global success is lacking in this country at the most sensitive time in high-tech firms’ development.

Fund raising

“That’s exactly the phase of the investment pipeline we want to be involved in. What we can do is help with the raising of follow-on funding. Seed gets firms to one level but when they want to scale beyond that there are serious deficiencies when it comes to enabling the sales and marketing teams to go beyond and expand. That’s where we will come in, we will provide the follow-on funding and then use our connections into Tier 1 venture capital companies in the US to bring them to the next stage.

“Ireland sorely needs some lighthouse wins in the technology start-up race if it is to grow companies to scale and boost employment. Ireland needs to find who will be the Chris Horn of this decade?”

I pointed out to O’Sullivan that Ireland is clearly continuing to win in the inward investment stakes; earlier this week Google chief executive Eric Schmidt revealed the company plans to expand its EMEA operations here; Microsoft’s Irish operations were integral to bringing Windows 7 to 42 nations and Facebook’s COO Sheryl Sandberg would not locate EMEA HQ anyplace else.

And then I asked him why if we’re so successful as an “innovation island”, winning foreign direct investment – more so than all of the combined Brazil, Russia, India and China (BRIC) countries – why is it so hard to support young start-ups in going global?

Think BIG!

O’Sullivan returned to the point about needing to think big. “We spend a lot of time in this country looking inwards. We spent a lot of time and resources on the property market, building houses, politics and what not. What we need to do is get out there, get connected and be global – not inward focused. We need to stop our whinging about every little issue and ringing Joe Duffy about it.”

By John Kennedy

Photo: Barry O’Sullivan, senior vice-president of Cisco, is part of the The Irish Technology Leaders Group.

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