Wednesday 26 October 2016

Dotcom winner Berber is giving away over €100m of his fortune

Dubliner Philip Berber sold his online trading firm CyberCorp for $488m and is giving much of it away to help improve lives in Ethiopia, he tells John Reynolds

John Reynolds

Published 05/04/2015 | 02:30

Philip Berber
Philip Berber

'Virtual teams and meetings via Skype: it's not how we did it in the old days, but this old dog can adapt," says Philip Berber, with a laugh.

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The 56-year-old Dubliner and founder of online share trading firm CyberCorp -which he sold to online share trading giant and competitor Charles Schwab after just five years for €488m in 2000 - is on his fifth start-up.

That is, if you count the charity and microfinance lender A Glimmer of Hope - which his wife now runs after he stepped back from it in 2008, and which has helped several million of Ethiopia's poorest people - as well as the first two businesses he founded. You'd also need to include his role in helping to bring Formula One motor racing back to the US, investing in and working with a small team in 2010 to design and raise money for a track.

Speaking via Skype video call from Austin, Texas, where he lives, he sounds uncannily like Newstalk radio presenter Ivan Yates, and enthuses about his new venture, Enable Impact, for which he had the idea "in a Eureka moment" 18 months ago.

"It's or AngelList for connecting impact investors with social entrepreneurs and their ventures," he says. It's an online platform where prospective backers can search, match and connect with start-up businesses "that have products or services that create sustainable cashflows, but with a social mission, solving the same problems and challenges that charities try to address."

He's spent €500,000 getting it off the ground, it's free to use, and he claims no one else is doing this for the impact investing and social enterprise sector. Microfinance and crowdfunding organisations that seek to connect ordinary punters with such ventures have existed for some time - but this is targeted at serious impact investors, 1,000 of whom, mostly in the US so far, are registered on the platform. Since its launch six months ago, 2,000 start-ups have signed up, across numerous sectors from healthcare and education to farming, renewable energy and crafts.

"The momentum that we can see, of searching, connecting and messaging shows we're doing this in the right way," says Berber. One "smallish deal" has been done, while four others are "in discussions. The site will evolve into a regulated crowdfunding platform, with all the funding formally tracked, he reveals.

"There's a small, virtual team of seven of us, running this, dotted around the US. It's a long time since I started a software venture, but I'm amazed at how quickly, easily and inexpensively we can now develop, using tools that we didn't have 15 or 20 years ago. It's exciting," the UCD commerce graduate adds.

The keen runner is also helping to develop the wider eco-system for this sector in the city that is his adopted home. He's helping to set up an incubator and co-working space for start-ups; there will also be an impact investment fund, business plan competitions and a conference later this year. "Myself and a number of others are drawing on the creativity, entrepreneurial spirit and capital that exists here."

Austin has become something of an up-and-coming hub for start-ups, something that's emphasised at its annual South by Southwest festival for everything from tech start-ups and other geekery to music and other arts.

When he's not busy with these projects, spending time with the family or running, Berber is mad about cars and Formula One. He had to build a second garage for his car collection, which includes a Ferrari and a British-built track car "with big wings for lots of downforce" called a Radical. He races it on an F1 track more or less in his back yard, where he recently spent two days driving them. In fact, he invested several million in Austin's Circuit of Americas, and helped to set it up.

After taking "some personal time" after stepping back from A Glimmer of Hope in 2008, two years later his friend, businessman Robert Epstein, asked him to join a small group that included radio advertising billionaire Red McCombs and former driver Tavo Hellmund to figure out how they might develop a track and complex on a 1,000 acre plot of land near Austin's airport. "I worked with them at the start-up stage, the looking at the track design, how we'd raise money and trying to figure out the project costs."

It ended up costing more than the $250m originally estimated - some reports suggest $300m - by the time it was ready for the first race in November 2012. The Texas state government also backed it.

"I've been repaid in joy multiple times over, although it was full of challenges: being involved gave me an insight into the business of F1, and that has a lot less appeal to me than the actual racing, you might say," Berber affirms.

Meanwhile, A Glimmer of Hope continues to go from strength to strength. Supported in its early years by Dell founder Michael Dell's charity foundation, others from the Austin tech community, and two private but "tremendously" successful Irish families, it now partners with USAid - the €20bn-a-year overseas aid arm of the US which spent €450m in Ethiopia in 2012 alone - and is in exploratory talks about partnering with other big aid organisations.

A core team of 30 people run the organisation, with half of them based in Austin and the other half hard at work in Ethiopia. It has provided more than 1.5 million people with clean water in its poorest rural northern region. Hundreds of modern schools, health and vet clinics, and the refurbishment of a major hospital have been funded. Some 40,000 microloans, for everything from women's craft businesses to farm irrigation equipment, have been given to date, averaging $300 each, bringing the total to about $12m.

Berber and his wife, Donna, have spent about $42m on this work so far out of the $100m (€100m) they endowed to their charity in 2000, with the same amount having been spent by partner organisations they've worked with over the past 15 years. Among these was former New York photo- journalist Scott Harrison's Charity: Water, which provided "multiple millions" for water projects in Ethiopia and, like A Glimmer of Hope, still works there. Its supporters include Virgin billionaire Richard Branson and Entourage TV star Adrian Grenier.

"Ethiopia might be the 10th fastest growing economy in the world, but outside the capital and a few other cities, 85 million of its 90 million people are still very poor. While charity will always have a place in helping those in abject poverty, giving money away isn't sustainable in the long term," the Dubliner argues.

"Impact investing is a better way in which wealthy families and foundations can help to redress inequality by empowering and enabling people. Bob Geldof is doing this with his 8 Miles fund, and other Irish businesspeople like Declan Ryan also support this approach. Britain's government is one of the leading players in this too. Impact investing gives you a good chance of getting your money back, with a return, both a social impact one and a financial one. Africa needs investment capital right now, and there are some tremendous business opportunities there."

If now might be the right time to invest in Africa, then timing was also crucial to how Berber got to the extremely fortunate position he's in today. He sold CyberCorp at the peak of the 2000 dotcom boom - two weeks before the crash that made famous companies like worthless.

Does he think we're due another bursting of an expanding tech bubble or, if not, perhaps a broader correction in the US stock market?

"There are plenty of indicators that we're in a frothy market. I don't anticipate it in the short-term, but I'm certain there will be a correction. There are excessive valuations in a handful of tech companies, and the stock markets' growth rates aren't sustainable."

As the manager of two investment portfolios - totalling hundreds of millions as far as we can tell - it's something he's keenly aware of. One is for the endowment to his charity - which helps to generate an income to cover its overheads. "It's a broad portfolio of equities, fixed income bonds and managed futures that should secure high returns," he said in 2007.

The other portfolio is his family wealth, which he declines to elaborate on, although adding: "My sister sends me my Rich List profile every year, but I don't pay any attention to it." His children are being educated in how to deal with "some money at the moment. What they don't get will end up in charitable foundations in their names."

While he made his fortune from CyberCorp - "the most exciting, successful and creative of my commercial career," - which was an online trading platform for thousands of day traders, he advises small investors against "playing" in the markets. "If you think you can beat the market, you need to be aware of the losses you're risking."

Although Berber's career began in 1979, in London with Ford, then Avon Cosmetics and sunglasses maker Bausch and Lomb, the advantages of using software to disrupt the stuffy world of investing ended up becoming a theme through his career.

Before forming his first start-up, Financia in 1988, which used intelligent software and chaos theory to help traders and investment managers to manage their portfolios, he got an idea of how artificial intelligence (AI) could be the key to huge success when the AI software firm he'd previously worked for, FD-Icon was sold to oil giant BP, who then sold it to a US firm for $200m.

His business partner at Financia had been Dr Ed Bosarge, who also began to realise its potential. He later became a multimillionaire founding the secretive Texas high frequency computer share trading firm Quantlab in 1998, a leading "quant" or "black box" trading firm - although not one of those that featured in US writer Michael Lewis's bestseller Flash Boys last year.

"We were struggling at the bleeding edge of the early days of this, building predictive technologies, adaptive algorithms and the like, but I stepped away from Financia in the mid-Nineties and went on to set up CyberCorp. Ed persevered with the evolution of the technology and it became a game of speed, shaving thousandths of a second off the time to make a trade. It's a fascinating area and I'm still interested in it," says Berber.

Had he remained working with Bosarge, whose firm spent a staggering $100m developing its technology according to a 2012 court case, and which makes up to 3pc of all trades on the London, New York and Tokyo stock exchanges according to one estimate, perhaps he would have made a fortune anyway, even had he not founded CyberCorp.

Whatever about AI and its potential, what does he make of the fears of Microsoft founder Bill Gates and investor Elon Musk, that it could be a threat to our existence, if harnessed in the wrong way?

"I'd defer to their views. I'm not intelligent enough to comment on artificial intelligence," he concludes with deadpan humour.

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