Silicon Valley’s Irish banker champions entrepreneurs (video)

12 Nov 2013

Barry O'Brien, managing director, Silicon Valley Bank's Entrepreneur Services Group

Dubliner Barry O’Brien, managing director of Silicon Valley Bank’s Entrepreneur Services Group, describes the route to his role as circuitous. Indeed, he occupies one of the pivotal roles in facilitating entrepreneurs in one of the world’s most entrepreneurial regions – Silicon Valley.

Silicon Valley Bank has helped fund more than 30,000 start-ups and has about US$20bn on deposit.

In June 2012, the bank announced plans to lend US$100m to support Ireland’s technology innovation sector in collaboration with the National Pensions Reserve Fund over the next five years.

Some US$22m of this fund has already been issued to Irish technology start-ups.

O’Brien, a graduate of University College Dublin, began his career in the management consulting world, working for both BearingPoint and PricewaterhouseCoopers before taking a role with the Department of Foreign Affairs. His diplomatic career began at the Anglo-Irish Division of the Department of Foreign Affairs, where he was attached to the International Fund for Ireland.

After stints in Belfast and Dublin, O’Brien received his first overseas posting as vice-consul for the entire US west coast area, working out of San Francisco, California.

“It’s a pretty big area to cover and 42pc of all foreign direct investment to Ireland comes from there so it was a very strategically important part of the world for Ireland,” O’Brien said.

The then-diplomat came to the attention of Silicon Valley Bank while liaising with the bank on behalf of the Irish Government, organising internships at the bank for Irish students.

Silicon Valley Bank career

After four years in the role of career diplomat, O’Brien made the jump to Silicon Valley Bank.

He said the firm banks about 50pc of all VC-backed tech and life science companies in the US and through SVB Capital has investments in approximately 175 funds.. The bank looks after US$23bn in assets and about US$1.7bn under management, both through direct funds and through funds of venture-capital funds.

In total, Silicon Valley Bank banks about 600 venture-capital funds, which would represent two thirds of of venture capital firms in the US.

The bank also covers 50pc of all tech and life-science venture capital-backed companies in the US, and 80pc of the Wall Street Journal’s top venture-backed companies, O’Brien said.

“By their very nature, the majority of start-ups are not profitable, yet our default rate is less than 1pc. This does not mean that we back every company. Instead, we look for the best companies who are going to make a huge difference and work with them to help them become huge success stories,” said O’Brien.

Silicon Valley Bank’s decision to focus on Ireland came after two years of lending activity in the UK.

“We were looking at other places in Europe to grow and there’s nowhere better to do that than Ireland,” O’Brien said.

So Silicon Valley Bank came to Ireland last year and set up a lending book. It is also looking mainly at mid-stage technology and life-sciences companies in terms of things such as venture debt and term debt.

O’Brien said Silicon Valley Bank has deployed US$22m of US$100m, and has other deals it hopes to announce at the end of the year.

Irish start-ups in Silicon Valley

Back in Silicon Valley, Irish tech start-ups stand out because of their attitude, O’Brien said.

“There’s definitely the attitude of giving things a go. They are also willing to listen and learn. They are willing to do what it takes, so commitment is very high up,” he said.

Yet there is a gap after seed and A-round investments regarding helping these companies’ growth. Someone is needed to look at the B-stage funding, O’Brien said.

He added that filling this gap is two-fold. “Firstly, there is an abundance of seed funding in the Irish market and Enterprise Ireland has a lot of great programmes to cover that. However, perhaps they could look at curtailing some of the seed funding programmes and holding capital over for later follow-on rounds in their successful investments,” O’Brien said. “You can’t back every horse!”

Also, he said that while Ireland has a great corporate tax rate (12.5pc), which helps attract world leaders in technology to the country, such as Intel and Google, these rates aren’t any good for start-ups.

“If a start-up is not making money then there is nothing to tax, anyway,” said O’Brien. “So perhaps we look more tactically at the kind of programmes David Scanlon at Enterprise Ireland is running, and how we make Ireland more fiscally enticing for these early stage companies, not just those at the foreign direct investment level.”

Offering small amounts of seed investment alone will not be enough, O’Brien said.

He added there is also a naivety among the CEOs and founders of Irish tech companies when it comes to realising what venture capital is all about.

“I think there’s an education process required around venture capitalists and venture-capital funding. I’ve heard guys proclaim that they just raised US$5m – that’s just the start of it and you’ve got to learn that if you’ve got US$5m of someone else’s money, they are expecting you to turn that into US$50m to give back to them,” O’Brien said.

“Getting a round of financing is not a validation. It’s the start of hopefully something much bigger for you.”

Dublin to San Francisco

O’Brien has been in the vanguard of efforts to restore a direct flight to San Francisco from Dublin, a necessity when considering many born-on-the-internet companies have chosen Dublin as their international headquarters.

From April next year, Aer Lingus is to resume its direct service to San Francisco with five weekly Airbus A330-200 aircraft to and from the city.

The re-introduction of these direct flights will be of huge help to Irish entrepreneurs who are trying to build links in Silicon Valley, O’Brien said.

“Like anywhere else, to truly understand and make connections in the valley you need to be there,” he said.

Having observed the increased number of Irish executives active in Silicon Valley, O’Brien said he believes efforts by Enterprise Ireland to better prepare founders and CEOs for the Silicon Valley culture are bearing fruit.

He cited Enterprise Ireland programmes to help entrepreneurs learn as an example, such as the Leadership For Growth Programme at Stanford University.

The Irish Government and its various bodies also punch above their weight in providing support to Irish exporters around the world and this support should not be overlooked, according to O’Brien.

“Regarding Irish companies striving internationally, Enterprise Ireland, the IDA and our embassies and consulates are tasked with promoting their commercial interests overseas,” O’Brien said.

“Ireland is one of a number of small open economies out there doing this. Like many other pursuits, it is highly competitive and should never be taken for granted how hard these wins are to come by.”

Ensuring these agencies are given the proper resources to achieve these goals is key to Ireland’s continued success, O’Brien said. “And getting everyone’s support behind them never hurts, either.”

Tech trends for 2014

Technology trends O’Brien sees looming as 2014 approaches include drones, life sciences, and new hardware products.

“I’m seeing a lot of stuff happening around digital health that interests me and I think with things like Obama Care happening in the US, digital health and healthcare IT will become not just nice things to have but a requisite part of the health infrastructure in the US, that’s what’s hot,” he said.

In terms of drones, a couple of ex-Google engineers from Google in Dublin have set up a company in the US called DroneDeploy, which O’Brien said he thinks is going to be very cool.

There’s also Liam Casey, CEO of PCH International, who is focusing on hardware entrepreneurs and has put his money into accelerators and incubators, like Highway 1 in the Bay Area of San Francisco, O’Brien added.

Irish tech companies have had a weakness, generally speaking, O’Brien said, and that is their propensity to flip their companies and cash out.

“Just look at the Israeli entrepreneurs, they are truly serial entrepreneurs and they don’t look to cash out,” he said.

The propensity to cash out is changing among Irish entrepreneurs, said O’Brien, who cited John and Patrick Collison, co-founders of online payment services business Stripe.

“Stripe is an amazing success story,” O’Brien said. “They are building the company, they are staying with the company, growing it and realising that venture-capital funding is just funding, it’s not an exit.”

A version of this article appeared in The Sunday Times on 10 November

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