Sunday 4 December 2016

Tech firm 'hype' may lead to bubble valuations warns Movidius founder

Paul O'Donoghue

Published 25/10/2015 | 02:30

David Moloney, Movidius CTO and co-founder
David Moloney, Movidius CTO and co-founder

Too much hype around software companies may lead to inflated valuations, according to the chief technology officer of one of Ireland's leading technology firms.

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David Moloney, Movidius CTO and co-founder, also said his company is looking to break even within the next 12 months after accumulating losses of $15m (€13.6m) last year.

Movidius is one of Ireland's most promising indigenous technology companies, completing a $40m funding round in April. The firm is focusing on scaling the production of its multimedia chip Myriad, which improves imaging and camera processes.

Due to its fundraising success - the company has raised a total of $88m to date - Movidius has been touted as one of Ireland's first potential 'unicorns'. The firm has been conservatively valued at €200m-plus. A unicorn is a start-up that makes it to a $1bn valuation, sale or flotation, although Moloney was quick to disassociate himself from that goal.

There is speculation that there could be a bubble inflating in the tech sector. Revered Silicon Valley venture capitalist Michael Moritz, an early investor in Google, YouTube and PayPal, said last week that many start-ups recently valued at $1bn "seem the flimsiest of edifices".

Speaking to the Sunday Independent in the run-in to his appearance at the Drones, Data X Conference in Mayo at the start of November, Moloney said he agrees that many technology companies, particularly those focused exclusively on software, could be overvalued.

"A lot of companies, especially on the software side, can be based on hype," he said. "It is easy to build a software prototype, it is harder to turn that into a product.

"It is easier to build software at a low cost, whereas it is almost impossible to copy hardware at a low cost, that's why the type of business we're engaged in is completely different from software, we're in the business of making sure our products get shipped."

Newly published accounts for Movidius show that it made a loss of just over $15m in 2014, bringing its accumulated losses to more than $63m by the end of the year. Moloney said the high losses were due to the capital-intensive nature of hardware development, as the company has been focused on the development of its Myriad chip. The firm will soon start producing significant revenue, he added.

"Next year is the big year for us," he said. "We will be selling millions of chips and we would expect to break even very quickly.

"If you are talking about selling chips for a phone or a tablet you could be talking about half a million units per month. You could go from zero to €50m in revenue very quickly when you have mass production ready."

Movidius is currently looking for staff for its Dublin office, which is focused on research and development activities, and expects to take on 15-20 people next year.

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