Sending out an SOS: €70m for 150 startups to help save the world
Sean O'Sullivan has built up one of the world's most active venture capital accelerator funds. He spoke to Adrian Weckler about his latest big deals
Sean O'Sullivan has a limited amount of sympathy for Elon Musk. The Irish-American tech investor, who sits atop one of the most active venture capital firms in the world in terms of startups covered, is talking to me a day after Musk drove the financial world nuts with a tweet about "taking Tesla private".
"I think he's worried about all these market players that are trying to demean and attack the company for their own purposes," says the 54-year-old who divides his time between Cork, London and New Jersey.
"He seems a bit arrogant in the way he's going about it, but I have a tremendous amount of admiration for what he's doing in terms of effecting change in global warming."
O'Sullivan, a 'Dragons' Den' TV judge who made his first real chunk of money 20 years ago by growing the street-mapping company Mapinfo into a €200m publicly-listed firm, has been on a decent run himself in recent months.
His €300m SOSV fund just made a killing on a US-based bike-sharing startup called Jump Bikes.
In April, Uber bought Jump for a reported €200m. SOSV owned 20pc of the startup, having participated in an angel funding round of €1m four years ago and a subsequent Series A round of €8m in January of this year (where it was one of nine investors).
"We got a huge return on it," says O'Sullivan. "Jump was purchased by Uber for a couple hundred million dollars. That's an example of where we put a lot money in and got even more money out."
He has also done well out of crypto-currency, even though it's not a core investment area for his fund. SOSV is a backer of Bitmex, the biggest Bitcoin trading exchange in the world.
"We haven't made that many bets in the area but that one is doing extraordinarily well," he says.
"I think all three founders [Arthur Hayes, Ben Dolo and Samuel Reed] are now billionaires. Bitmex is the number one crypto trading platform, regularly trades five to 10 times as much as its competitors."
Indeed, Bitmex surpassed a trading volume of one million Bitcoin within 24 hours earlier this month, valued at some €6bn. The value of the company itself is estimated at just under €4bn.
"On some lists, we're the fourth most active investor in blockchain so we're relatively active in that. But it's a small fraction of our investments, maybe 3pc," he says.
Pinning a cash number on O'Sullivan's personal tally, for anyone who cares, is elusive.
Rival 'rich lists' published by national Irish newspapers have valued him at between €100m and €250m in the last five years. But O'Sullivan claims that it is not money that motivates him.
"I haven't really had to work ever since my first company went public many decades ago," he says.
"Now it's really about the chance for us to help shape new industries, to try and create options for people on the planet."
There is a personal impetus behind some of what informs this motivation, particularly in the biotech and life sciences fields.
"My son has autism and my mother died of Alzheimer's," he says. "We have companies that area creating new opportunities on the hardware and life sciences side where we might actually have new cures and mechanisms for diagnoses.
"We make a ton of investments in those areas that we think might make a difference. So yes, there's a personal tinge to it now."
One of the side effects to backing so many startups with relatively modest amounts of backing is that O'Sullivan seems inclined to stretch his horizons beyond the predictable software and fintech plays that most Irish investors limit themselves to.
"We've backed entire new industries," he says. "Take cellular agriculture. We helped pioneer that. For example, a company we launched in Ireland, Moofree [now called Perfect Day], produces milk without cows. This is synthetic biology to produce animal products without the animal. "We've now done quite a few companies in that area."
SOSV has been cited by analysts and trade press (such as 'Nature Biotechnology Magazine') as one of the most active investors in such alternative biotech sectors.
One of its more recently created funds is IndieBio, a €25m pot set up to seek out promising young firms in the mould of Moofree.
O'Sullivan also reserves a little extra investment cash for unusually promising bets that he identifies.
One such bet is Synthex, a San Francisco-based biotechnology startup that O'Sullivan believes could significantly advance medical science on certain types of cancer.
"It's a very promising cancer therapeutic that has come out of our Indie Bio programme," he says. "It has shown positive results on early stage trials for pancreatic cancer and there are some very good indications for other, normally fatal cancers. We've taken an outside bet on that, they're raising a new round of $30m [€26.4m]."
Aside from personal considerations, O'Sullivan has other ethical considerations he claims are important.
"We're a big leader on the gender issue, often ranked number one or two in the VC industry in terms of the number of companies we back with a female founder.
"Between 36pc and 38pc of our teams have at least one female founder, which is way better than the industry average."
To be fair, it is. A recent Irish Independent study found that 15pc of companies in receipt of venture capital in Ireland last year had one or more female co-founder.
The research also revealed that just 3pc of venture funding allocated to Irish tech startups went to a female-founded firm.
O'Sullivan has had an interesting path to where he is now. He grew up in a poor household in New York, one of nine children. He clawed his way through school and college, before graduating with an electrical engineering degree t o focus on computer programming.
Eventually he co-founded and built a street-mapping company called MapInfo, which went on to make him almost $20m through a $200m public flotation in the mid-1990s.
Since then, he has built up a formidable career as an angel investor, backing companies such as Harmonix ('Guitar Hero') and Netflix.
SOSV's rules of engagement focus on small, early-stage companies. This, O'Sullivan believes, is a more natural bet than lumping €100m into an advanced tech company that's going for greater market share. It also places SOSV into a hyper-active category as far as its portfolio volume of companies goes.
"What we do is to run a global network of accelerators that attract around 4,000 or more applications from aspiring startups, generally in deep tech industries," he says. "Then we sift through those applications and try to identify 150 rising stars of the next millennium, giving them some capital and devoting some staff to them."
On average, this amounts to around €300,000 for each firm.
"Every year we put in about €50m," he says. "Having said that, the new fund will rise to around €70m even though we're keeping the same number of startups."
The industries that SOSV focuses on are largely around medical devices, robotics, life sciences and other hardware.
"It's normally about €150,000 for a first investment with a maximum of about €5m," says O'Sullivan.
One of the reasons he has focused on angel-stage investments over major venture rounds is that he doesn't believe the bigger Series B and C events are really about venture capital anymore.
"The goalposts are completely shifted," he says. "You're seeing big private equity players in already-established companies that shouldn't' be considered startups at all. They're employing more than 10,000 people. In a normal universe, you wouldn't consider that to be VC at all.
"Consider that a normal investment portfolio is 20 to 40 companies. But the industry is now awash with capital. Now you've got VCs managing €2bn, where your average cheque size needs to be €40m to €50m.
"You're now no longer backing early-stage startups, you're just getting a piece of a company that's already doing millions in revenue and you're a private equity player."
Regrets? He has a few. He was an early backer of Netflix and Apple. But when it seemed they were doing well, he took the gains.
"Financially I would be a multi-billionaire if I'd just held on to a few more shares," he says with a smile.
"I had a reasonable position in Amazon, too. I still have sizeable positions in those companies, though.
"I do get nervous about Netflix because of the gap in price and earnings, but the value they're generating is so strategic, it is definitely one of the most critical companies for entertainment."