Venture capitalism
Venture capitalist Richard A. Moran makes the case for a strong VC community in Ireland.
A friend told me recently that the role of a venture capitalist (VC) is to see the future. I like that description and, in fact, we do have an impact on the future. The decision to fund an entrepreneur at a start-up company can create companies, jobs and effect the economy of a region for years in the future and there are plenty of examples of that impact. The histories of most of the biggest tech companies started with risky decisions by VCs who made a guess about the future. But the lenses through which a VC sees the future are complex, nuanced and optimistic. A few of those special lenses can help the technology sector in Ireland.
Try on these VC lenses...
When I entered the conference room, there was a car windshield perched in the middle of the table. This was not a small glass model but a full blown windshield that would fit into a 2010 Ford. The glass had wires protruding from the edges and at the other end of the wires, was a real car steering wheel with buttons on it.
The entrepreneurs in the room were pitching their idea of creating a video-game company. In particular, these video games will appear on the windshield of your car while you are driving. The controllers and joy stick were all embedded in the car's steering wheel. They were asking for $5m to move the idea along.
You heard that right - playing video games on the car windshield while driving. Where does one begin to ask questions about the idea? Legality? Safety? Liability? Car company approvals? Best scores in Tetris? Why are you wasting my time? Did your mother not teach you any common sense? We addressed those questions quickly.
But stop laughing, there was more to discuss with the group of smart people in the room. The macro-economic and tech trends tell us that games will continue to be a growth category. We know also that the car is becoming the "third space" where we live; the other two being home and office. The impact technology is having on the car is booming. So the questions turned to how else and where else the technology might be used. The conversation even morphed into memories of the video game Pong by Atari and how it taught us that there were alternative uses for the traditional television set.
The meeting ended with relationships built because it had turned into a productive time for us and the entrepreneurs. No funding was provided but we all agreed that there might be something to be gleaned from the technology and that we will stay in touch. Maybe there is an idea in this windshield or maybe not, but given the number of cars and the number of gamers, it could be big.
Video games on the car windshield may be an unusual example but I would guess early meetings between VCs and the likes of Intel or Apple of Facebook or Google might not have been that different. Each company had created and applied a technology that at the time didn't exist. And that defines the role of venture capital in any economy. VCs exist to create companies that create value.
As a member of the Irish Technology Leadership Group (ITLG), I have been back and forth between Silicon Valley and Ireland many times in the last few years. I know the top priority in Ireland is to boost the economy and create jobs and I see lots of activity in those arenas.
The phrases of "smart economy" "innovation" and others are the rallying cry, as they should be. The efforts I see in this regard are well intended. The words that need to be moved to the top of the list are "company creation" and that's where VCs can help.
Silicon Valley VCs travelling to Ireland to meet Irish start-ups are the exception. Most will not travel for 16 hours through London to get to Ireland when they can pick from the best and brightest innovation available in the Valley on their doorstep. Irish companies need to have a HQ or business development base in the Valley in close proximity to Sandhill Road, and that is what the ITLG is providing through the Irish Innovation Centre in downtown San Jose to support young Irish technology companies.
Ireland needs to build a VC infrastructure but it doesn't need to try to replicate the VC community in Silicon Valley. What is needed is a balance of venture-capital firms and money in Ireland as well as a developed relationship base with the VCs in Silicon Valley which will facilitate syndicated deals.
My experience in working with entrepreneurs in Ireland is that there are big and bright ideas and there could be more, but the lack of capital to fund the ideas hurts the entire tech sector and, in turn, the economy. Capital helps develop companies quickly and the VC relationships that are inherent in that investment accelerate company growth.
The venture world does not see failure as the end of a career, only a hiccup from which everyone can learn. Those windshield video guys I described don't have a black mark on their permanent record. They now have a bunch of interested parties and relationships that may come back for their next big idea.
Anecdotal evidence suggests that there are plenty of technology firms in Ireland with growth potential. But if the banks are not lending and will not be for the foreseeable future, then how will these firms get access to the necessary funding?
The creation of a venture-capital infrastructure in Ireland is a big part of the solution to the dilemma. My friend is right, venture capitalists do see the future. And I see the future development of the tech community in Ireland growing most quickly when the VC community grows with it.
Richard Moran, executive in residence at Venrock, is a venture capitalist in Silicon Valley and a member of the ITLG.
