Thursday 20 October 2016

€63m a-growing: Red Hat hatches renewed plan for Waterford

One of Ireland's biggest indigenous startup sales looks set to spur on the technology community in Waterford. Six months after overseeing a €63.5m cash exit, former Feedhenry chief executive Cathal McGloin talks about plans to grow Waterford's base and his life as a newly-crowned vice president in a US multinational firm

Published 09/04/2015 | 02:30

FeedHenry CEO, Cathal McGloin and Red Hat vice president, Craig Muzilla pictured after last year's buyout
FeedHenry CEO, Cathal McGloin and Red Hat vice president, Craig Muzilla pictured after last year's buyout

What happens when the company you lead is bought for a whopping sum of money by a global player? Do you retire to the Bahamas? Do you go off and think of your next big project? Or do you stay on and continue to run things as a key player in the bigger company?

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Cathal McGloin, one of Ireland's longest-running technology entrepreneurs, has chosen the third option.

Last September, the Waterford-based mobile technology company he ran, Feedhenry, was bought for €63.5m in cash by the US global software firm Red Hat. It was a huge result for everyone involved with the startup, which came out of Waterford's Institute of Technology.

Instead of riding off into the sunset, McGloin chose a position as a vice president in the open source multinational firm.

Opting for the corporate role was not borne of a desire to play more golf or stay in five star hotels. McGloin has a strong track record in creating and running telecom companies, with Performix (sold in 2005 for $13m) and Aran Technologies under his belt.

He opted to stay, he says, because of the nature of Red Hat. "Red Hat is an open source company where engineers rule," he says. "That's great for me and it's great for the guys in Feedhenry. Engineers are given free reign to contribute, there's a strong engineer culture and the company encourages community projects. Because of this technical focus as opposed to one on sales and marketing, our guys are happy as Larry."

FeedHenry makes 'cloud mobile application platforms' for big companies. This serves organisations that can't make do with general apps available for the general public, who turn to Feedhenry for high-end, specialised tools to let companies develop their own solutions.

Enterprise mobile apps are a hot category at present, as the technology industry tries to figure out ways of making mobile devices useful in business, beyond calendar, email and conference calling apps. Recent moves, such as deals between Apple and IBM to jointly work on new business app ideas, has only bolstered the market. Feedhenry has been there long enough to be regarded as an authority in the area, with several blue-chip clients and a growing reputation for expertise at the cutting edge of the sector.

As the parent company's new 'vice president for mobile platforms', McGloin - and Feedhenry's Waterford base - has now stepped up a notch in importance.

"I have a couple of thousand sales people around the world," he says. "My team is taking over all responsibility for mobility and that means that we're rolling in projects It's exciting stuff. I have a lot of autonomy. Sure, I have a business plan that I have to hit, but all the original team in Waterford are still working for me. They're working alongside bigger offices like the Czech Republic. So they're really happy. "

Waterford will continue to grow, he says.

"We're hiring right now in Waterford. We look at Waterford as a potential base to grow the company. We're looking to take on some additional engineers and have a business plan over the next 12 months. Our job is to make Waterford as attractive as possible, but only by growing it will that be possible."

Feedhenry's rise from Waterford's academic community to eventual megabucks sale is a model for any city outside Dublin to look at. The company's origins were born in the disciplined halls of Waterford Institute of Technology's specialist Telecoms Software and Systems Group (TSSG) unit. A group of academics and entrepreneurs looked around and saw an opportunity to specialise in a coming wave of telecoms infrastructure.

"I had sold Arantech in 2009 and was looking for something to do," said McGloin previously. "I went all around the country, including to some of the biggest universities. But when I looked at what TSSG was doing, I was amazed. It was immediately obvious that it was really nimble and developing leading-edge technology."

Feedhenry, which was founded by TSSG chief executive and serial entrepreneur Barry Downes, quickly recruited a division of TSSG's graduates. Its deep research and industrial nous started to pay off quickly, with a succession of multi-million euro contracts landed all over the world for its platform-as-a-service mobile technology. It ended up doing deals with huge companies such as VMWare, Rackspace, HP and others.

Feedhenry's intelligent bet on business-grade app platforms soon saw it grow to almost 70 people across Ireland, the US and Europe.

It pricked the interest of investors, too, with players such as Dublin's ACT and Intel Capital placing cash in the firm, including a €7m round in 2013.

So while last year's €63m cash sale still ranks as one of the largest Irish tech acquisitions in recent times, it was well signposted.

Now, McGloin says that the company is looking at bigger things.

"Red Hat is thinking that this is a big play," he says. "And not just in mobile, either. How do we grow from 7,000 to 10,000 employees? If you're going to be a major software company you have to have a footprint in the big markets. It's much easier to grow international companies by having people in different places."

Red Hat, he says, is fundamentally different to other big software enterprises.

"The big advantage of Red Hat is that it's a community and it's open source," he says. "It doesn't invest in technologies. Red Hat's not betting on trends, it's betting on where the community is going. And then it makes it available for enterprise use. That's why open source is on a huge growth phase. Because for big enterprises, if they bet on something, how do they know it's going to be around in two years?"

At the centre of all of this is a switch to mobile computing.

"It's all about mobile now," says McGloin. "There's a huge transition from desktop to mobile under way and a lot of enterprises are not really equipped to deal with it. There are tons of new devices and services that company staff are asking to use."

Red Hat's decision to double down on Waterford as a base is likely to enhance the city's reputation for the area of expertise it has established. Waterford has built up one of the world's most advanced clusters of knowledge in the emerging area of mobile cloud technology and, specifically, Node.js.

As a result of this expertise, hundreds of node.js engineers and experts descend on Waterford every year for one of the world's biggest node.js conferences, run by another mobile platform specialist firm, Nearform.

"There are lots of innovative enterprise-tech companies outside Dublin, like us, that have grown hugely with little or no investment over the last three years," said Nearform co-founder Cian Ó Máidín.

Nearform has grown to 35 employees from being founded just three years ago. Last week, it announced a plan to hire an additional 65 people over the next 18 months.

"We were urged by many parties to relocate to the US," said Richard Rodger, another co-founder. "We chose to stay here and build our company in a place where we wanted to raise our families. Our growth to 35 staff over the last three years has vindicated this decision."

Regional outliers such as Feedhenry and Nearform are all the more crucial given how much activity Dublin is currently cornering in Ireland's technology development ecosystem.

Last year, a 41pc surge in Irish venture capital funding was sucked up almost entirely by Dublin-based tech companies, with Waterford missing out completely.

In all, Dublin-based companies hoovered up €253m of disclosed venture-backed tech investments last year, twice the amount of the rest of the country combined. By comparison, tech firms based in Limerick and Galway gained small chunks of the rest of the venture pot, with €31m and €30m respectively. Waterford didn't score a single disclosed VC investment. The figures come from the Irish Venture Capital Association.

Dublin also dominated the country in terms of individual funding rounds. Backers invested in 69 different tech and tech-related firms in the capital last year, with 40 throughout the rest of the country. Next best was Galway, with 12 separate investments, while Limerick saw eight tech funding rounds. Cork is the biggest underperformer in Ireland, with just six individual investments logged in 2014.

The figures mean that venture capitalists are spending €200 per head of population in Dublin, compared to €161 in Limerick, €120 in Galway and just €15 in Cork.

Feedhenry's success must raise hopes that this trend can be reveresed. Business software, which Feedhenry and Nearform could class their products in, remains the most common tech activity for venture-backed Irish startups and companies, making up almost half of all Irish venture investments last year.

As for Red Hat, Waterford will remain near the centre of plans, says McGloin.

"I hope we'll do the same in Waterford with computer scientists and engineers as we've done elsewhere," he says. "I think we're in the right company to do it. This isn't a big bureaucratic entity with centralised control.

"It's a small company by international software conglomerate standards compared to the likes of Oracle or IBM. That lends itself to a small company culture where you get on with stuff. It's gone really well so far. We're delighted we chose Red Hat."

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