Tuesday 12 December 2017

A golden opportunity for start-ups as €500m up for grabs

Roisin Burke takes a close look at the Irish VC scene – the funds, the people behind them and the companies they're putting money into

Taoiseach Enda Kenny and Kealan Lennon of Cleverbug.
Taoiseach Enda Kenny and Kealan Lennon of Cleverbug.

Roisin Burke

SIX Irish venture capital players will be vying to raise chunky funds next year to invest in promising companies – making our piece below on pitching to VCs particularly timely.

Following a big summer funding call, Enterprise Ireland (EI) has picked Atlantic Bridge, Delta Capital Partners, and ACT Venture Capital along with life science specialists Fountain Healthcare Partners, Seroba and one other fund to receive around €15m each from its coffers if they match that with multiples of cash they raise themselves – at least €55m each. Several plan to raise much more than that.

Creating a potential investment pot of close to €500m, it's a golden opportunity for hungry start-ups and established companies with ambitious plans to get capital.

There's other EI money on the way, and funds backed by the National Pension Reserve Fund are kicking off investments, too.

With so much happening, it's high time we took a closer squint at the wider Irish VC scene – the funds, the people behind them and the companies they're putting money into. And we'll follow up with a look at the international players at large here soon.

A later-stage investor with major US connections, Atlantic Bridge may raise as much as €100m next year.

Its founders have three successful IPOs under their belts, and backers include media tycoon Denis O'Brien, financier Dermot Desmond and tech funder Bill McCabe.

It was started by experienced company scaler-upper Elaine Coughlan, savvy tech investor Brian Long and ex-Microsoft executive Kevin Dillon, with Iona founder Chris Horn also involved.

Stars in its portfolio include Swrve, set up by Hugh Reynolds and Steve Collins of global gaming technology success Havok. It has over €7m funding and close to 100 customers all over the world, including game giant EA.

There is also particular buzz around Atlantic-backed Fieldaware, which develops mobile apps for staff working offsite, where hockey stick revenues are predicted.

Fieldaware is tipped by some to be a potential next Fleetmatics – the €1.3bn market cap Irish success story that floated a year ago.

Some of the same investors behind Fleetmatics are involved in Fieldaware, such as Bill McCabe's Oyster Capital, and it is growing rapidly.

Coughlan names mobile imaging company Movidius as another to watch, which "has really, really tier one customers" including Toshiba, and €11m in recent funding.

"There's a generation now in Ireland that are serial entrepreneurs, like the guys involved with Swrve – it's their third successful company," says Coughlan. "They've been through successes and built companies.

"I think this generation see what's possible and aren't afraid to go for it."

Coughlan was involved in three iconic Irish IPOs and has seen the legacy they brought. "Iona, Parthus, Smartforce – there have been 147 spinouts from that."

Atlantic Bridge takes on companies ready to scale into that big time.

"For successful IPOs and long-term successful businesses employing 200-plus people, you need scale and international expansion. Scale creates value," she says.

"In Ireland we're very good at building the technology. We have to continue to get better at scaling faster."

At an earlier stage in the cycle there are VCs like Delta Capital, headed by Maurice Roche. It's a backer of some of the most exciting companies out there.

It's embarking on a fresh fundraising cycle likely to be in the region of €100m while still investing in an existing fund, Delta 3.

Delta led a €3m investment in Homestays.com – a new venture by Tom Kennedy, who co-founded then sold Hostelworld.com for over €200m. Then there's Kealan Lennon's €6m funded online card and gifting company Cleverbug, which is taking the US by storm, and developer Digit Games Studio.

So nurturing of its earliest stage hopefuls is Delta that it regularly takes in newbies in need of a temporary home and gives them the use of an office and facilities at its HQ in Leopardstown.

"Yes they do nick all the coffee and biscuits," laughs Maurice Roche. Delta has just had Blickbooks, a young up-and- coming education start up that relocated from Britain to Dublin, operating from its Leopardstown facilities.

"It's a particularly vibrant seed funds market here at the moment, with a number of interesting deals in the last 12 months and the numbers graduating from seed into next stage punching above its weight in seed in my view," Roche says.

Even as Christmas approaches, Delta is working on closing deals, and by the end of the year will have completed between 12 and 15 new investments.

John Flynn is the boss of early-to-mid-stage investment leader ACT Venture Capital, which is drumming up capital for its expansion fund and also thinks seed stage is particularly vibrant right now.

"There is an incubator wave around the city; support systems are so much better than they were," he says.

ACT led a €1m seed investment in Soundwave, a music app sensation melding social media and music beloved of celebrities like Stephen Fry, and backed by American sports and TV investor Mark Cuban.

"There's great evidence in the promise of music-related apps, with music undergoing total transformation and new monetisation models emerging," says Flynn.

"The proposition for selling in music has changed totally.

"There's huge appetite for cherrypicking the best seed companies as they start looking for funds from €100k to €2m, which as they move up the food chain will present a €2m to €5m-sized opportunity for us," he explains.

Early-stage plays ACT is backing include VideoElephant – a kind of stockbyte for video concept. It's also backing Irish game developer Six Minute and tablet game maker Supercell.

Like Delta, ACT led funding into Digit Game Studios, and game development is another space where Flynn sees good prospects. It has a particular focus on financial transaction-related investments too and sealed €2.20m funding for retail software firm Trustev in October along with Skype investor Mangrove.

It's not the first time ACT has teamed with big international VCs, having worked before with Facebook, Linked-In and AirBnB backer Greylock, and Spotify, Dropbox and Facebook investor Accel.

It has also backed financial transactions-related businesses Corvil and banking software solutions provider CR2 where Shane Rehill's TVC is an investor.

ACT is in the process of selling two companies, and will make three investments before Christmas.

A recent arrival rapidly making a name for itself is Frontline Ventures, led by former Delta partner Shay Garvey. It put together a €20m fund, almost half of which is from Enterprise Ireland and including backing from aviation heir Declan Ryan, for investment in early-stage tech companies.

Frontline has backed six deals this year, including campus spinouts Logentries and QStream and peer-to-peer foreign exchange company Currencyfair.

It typically puts between €800,000 and €1.5m of its own money behind an investment and then adds US money, typically in the region of €5m. It's considered particularly well connected with big VCs on both the East and West coast of the states and an 'on ramp' for US money.

Sunday Independent

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