Tips from a top investor in Ireland’s ‘vibrant early-stage VC ecosystem’

10 Nov 2022

Barry Downes. Image: Sure Valley Ventures

As Sure Valley Ventures gets set to launch a new fund for Irish software start-ups, Barry Downes tells us what he’s looking for and what makes a great founder.

Barry Downes is an experienced software industry executive, technologist, entrepreneur and technology investor.

He was a co-founder of FeedHenry, which was acquired by Red Hat in 2014, as well as Pluto Digital. He was also previously CEO of the Walton Institute, working with many Silicon Valley and European software companies on advanced technology research and futurist projects.

Now, Downes runs Sure Valley Ventures, which invests in early-stage software start-ups across the UK and Ireland. As managing partner at the venture capital firm, he leads investments and works with founders who are hoping to shake up the software market.

‘Entrepreneurship is all about identifying a critical opportunity or problem that can be solved for a customer’

In your opinion, which areas of science and technology hold the greatest scope for opportunities?

At Sure Valley Ventures, we invest in disruptive innovations in the following sectors:

  • Artificial intelligence
  • Immersive technologies (AR/VR and metaverse)
  • Security software
  • Internet of things

Each of these areas has ongoing frontier-based scientific research and also substantial commercial opportunities.

We see AI as underpinning all these sectors and the majority of our portfolio has some element of AI. We recently announced an investment in an exciting Dublin-based company in this field, Everyangle, that uses computer vision and machine learning to help customers optimise operations.

We also see significant opportunities in the immersive technology sector, which we expect to evolve rapidly over the next few years as we move towards the widespread adoption of AR and VR technologies for enterprise and consumer use – including, ultimately, the metaverse.

There are other scientific areas on the horizon we are tracking that we believe will be important in the future, such as quantum computing.

What are the qualities of a good founder? Are good entrepreneurs born or can they be made?

Entrepreneurship is all about identifying a critical opportunity or problem that can be solved for a customer, building a product that solves the problem, bringing it to market successfully and then growing and scaling it.

Great founders also focus on problems that are painful enough for the customer to overcome any inertia they may have to change their existing way of doing things and adopt a product from a start-up company. The best founders also select products that will ultimately have large numbers of customers, ie a large market opportunity with high potential growth rates.

Developing a positive culture in the business is also important and founders should be able to not just hire good talent but also motivate them and manage growth. Financial management, managing cash flow, is a critical skill to have from day one.

This is a large set of skills and whilst a founder will have to take on many different roles, particularly at the start of their journey, it is unlikely that any one person will be expert at all of them. Thus the entrepreneurial leadership team becomes very important and at Sure Valley we invest in founding teams.

What does a successful entrepreneur need to do every day? What tools and resources are a must?

A successful entrepreneur’s day is typically long and very varied, working with team members across all functions and externally working with customers and partners. On an average day, a lot of unplanned calls, texts, meetings and activities can arise that need to be dealt with.

Thus, we believe a successful entrepreneur needs a game plan going into the year, quarter, month and week that helps them focus on what matters most to move the business forward. We help entrepreneurs put together such a plan when we invest in their business and join their board. It starts with key milestones over typically a 16 to 18-month period, quarter by quarter, that serve as a signpost of what success looks like in the business and then these milestones have action plans behind them.

In terms of tools, we love the objectives and key results (OKR) system popularised by Google and other key tech companies and we use it ourselves internally. We find increasingly that WhatsApp, Telegram and Slack are replacing a lot of email. Discord is key for community building and Notion is used for internal knowledge sharing.

Other tools that we see the companies we invest in use include HubSpot, Trello, Atlassian, Miro, MindMup, Lucidchart, Todoist, Evernote, Airtable, Superhuman, Substack and Affinity.

What is the critical ingredient to start-up success?

At the centre of a start-up’s success is a strong team that has a shared mission, vision and aspiration about how they are going to change the world in a positive way by solving a painful problem for their customer.

Software start-ups also operate in hyper-competitive environments, so having a differentiated product that solves this customer problem is very important.

At the core of a successful software start-up is a vision, a customer with a need, a large and rapidly growing market, differentiated and protected IP, and a team that can deliver on selling and retaining customers.

How can founders assemble a good team?

One of the biggest lessons I have learnt is how important it is to have a balanced team. One person can’t do it all.

One of the challenges I think for software founders that come from a programming background, which I have experienced myself, is to bring in people around them that have expertise on different aspects of the commercials of the business.

In the early days, founders generally focus on a small team to get the business going and get to MVP. But as the business starts to grow it’s important to build the skill base and competencies of the company. This normally includes bringing in additional team members who have expertise in marketing, sales, product management and finance.

In general, I have found that great people want to work for founders and a company that have a vision as to how they can have a positive and often outsized impact on the world by building and launching amazing software products. So vision is critical, but culture is also very important, and our experience is that great people are attracted to performance-driven, diverse and meritocratic cultures.

What advice do you have for founders who are starting to look for investment?

I would advise founders to focus on how their business solves a problem for a clearly defined customer and how they will take the product to market.

It is important to be able to clearly present the opportunity for the company and there are many resources that we recommend to founders to help with this – one example being Guy Kawasaki’s The Only 10 Slides You Need in Your Pitch.

We are currently seeing a vibrant early-stage VC ecosystem in Ireland with a significant international network of investors. Sure Valley Ventures, for example, launched a £95m fund to invest across the UK early this year and we plan to launch a new fund to back innovative early-stage Irish software companies before the end of the year.

What are the biggest mistakes that founders make?

The biggest mistake a founder can make is running out of cash. Now this may sound obvious, but cash is king, and we work closely with the founders and companies we invest in to track and manage cash flow and key metrics.

Focusing on cash week in and week out can help a company take action early to create flexibility in the business and extend runway to help hit key metrics to get to a key funding round or profitability as required.

What are your views on mentorship and the qualities one should look for in a mentor?

It is useful to have experienced mentors around you that have been there before, made mistakes along the way and can help you address issues early on.

Our view is that the best mentors provide the balance of bringing experience to the table but also being able to provide coaching – that is to sit back, listen and ask questions to help founders come up with their own solutions to their problems, which can then be road-tested, often based on the experience of the mentor.

But ideally, the role of a mentor is to help a founder find their own solutions, not to offer war stories, as business moves on rapidly and each founder and business has their own context.

What’s the number-one piece of advice you have for entrepreneurs?

My number-one piece of advice is to never run out of cash. My number-two piece of advice is to bring on board a VC that will be supportive, founder friendly and help bring in international investors at the next round to scale up the business.

We hope Sure Valley can help in such a way. We are an international team, founded initially in Waterford and London, that subsequently expanded to Dublin, Cambridge, Leeds and Manchester, and we invest in seed-stage software companies across the UK and Ireland.

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