It’s the Irish start-up’s version of the American dream: start a business, grow it and have a major US company come snap it up.
At this stage, however, things can turn nightmarish, with the founding team typically departing before the ink on the term sheet dries.
Not so for Annrai O’Toole, whose 1999 enterprise software start-up, Cape Clear, was acquired by US company Workday in 2008. Not only did the top team stay put but they have stayed on ever since, helping grow Workday into the international organisation it is today.
That Cape Clear was successful is unsurprising to those who track start-up teams, given O’Toole and many of his colleagues were ex-Iona Technologies, another home-grown success. O’Toole was that company’s chief technical officer. Today he is CTO Workday in Europe.
One of the main reasons for the success of the acquisition, for both sides, was the good cultural fit between the US and the Irish organisations. “What Workday wanted to achieve in enterprise applications resonated with our team and we had the same goals and desire to succeed in a world that was hurtling towards cloud computing,” says O’Toole.
“Pretty much every single person who had originally worked with Cape Clear is today still working with Workday. That’s how Workday has grown from a handful of people to over 400 people today in Dublin.”
For Irish start-ups looking to follow in his footsteps, his advice is simple: “Focus on solving big problems. It’s all about changing the world. Look at problems which technology can solve at scale. The world probably doesn’t really need another photo-sharing app.”
Do that and suitors will follow. “Companies shouldn’t be founded with the sole objective of being sold, although there is no shame in knowing when to accept an offer from a bigger player,” says O’Toole.
That’s something the team behind Genable can attest to. A bio-pharmaceutical TCD spin-out develops therapies for the treatment of genetic diseases. In March, it was acquired by Spark Therapeutics, a US company specialising in gene therapy development.
Genable’s product “has and will continue to greatly benefit from Spark’s knowledge and technology platform,” says Genable co-founder Prof Jane Farrar at the time of the announcement. Now a wholly owned subsidiary of Spark, Genable is to remain in Ireland.
Through industry partnerships and technology transfer offices, third-level institutions like Trinity are well placed to put innovative start-ups in touch with possible partners around the world, including the US. “Right now, one of our technology transfer managers is in Washington state, for example, spending three months working with the tech transfer office of a university there,” says Kevin Ennis of TCD’s Corporate Partnership and Knowledge Exchange Office, which fosters such linkages.
Innovative ag-tech start up MagGrow is based at NovaUCD, the Centre for New Ventures and Entrepreneurs at University College Dublin. It too has attracted US attention.
MagGrow, creator of a patent-protected mechanism for saving water when spraying crops, is one of just 12 companies participating in a prestigious US start-up accelerator programme called Thrive. Located in Salinas, California, it is backed by SVG Partners, a Silicon Valley venture capital company, with participants pitching competitively for seed funding of up to $5 million.
For founder and chief executive Gary Wickham, MagGrow represents a second bite at the entrepreneurial cherry. He is already co-founder of StayCity, a web-based serviced apartment solution with revenues of in excess of
30 million a year, which he exited to start MagGrow in 2013.
As a seasoned campaigner, he knows what it takes to attract US investment. “In the US you need teams with previous start-up and scaling-up experience. More than here [in Ireland], they look at the team rather than at the product. What they want to know is ‘Can these guys do this?’. Track record is hugely important. At home, investors do look at the team, but they are more likely to look at the product first,” says Wickham.
Do your homework. “Prepare like mad. I spent a year tailoring my pitch for a US audience. If you’re not sure, find people who have done it before over there and ask them what they wish they had done differently.”
In theory, there shouldn’t be a difference between pitching to Irish and US investors but sometimes there just is, according to Dublin’s Start-Up commissioner, entrepreneur and investor Niamh Bushnell. “Investors are all looking for the same thing – great teams, huge opportunities and channels for making money, but in the US they have a much bigger pool to choose from. The supply of start-ups is so large and that makes it very competitive,” she says.
“You’re facing intense competition so that, in a very short time, you have to create an emotional engagement with investors. People invest in people. It’s not about endlessly talking but about very succinctly telling them what you are doing, why you will be successful at this – as opposed to someone else – and why you are the right people to deliver. Trying to do that succinctly and in an emotionally engaging way is challenging.”
Be aware that US investors are locally minded. “They are not interested in start-ups that are not local so your customer strategy needs to be local, your anecdotes need to be local. I know one US VC who asks ‘Where do your kids go to school’, that’s his way of establishing just how local you are. So you need to ‘be local’ very quickly. And you need to be building for the US market. US investors are not interested in European companies building for European markets,” says Bushnell.
In terms of US acquisitions, Ireland’s strategic advantage as a hub for EMEA operations can give Irish-based start-ups additional tailwind. “This is where all the best US companies come to scale into Europe and the rest of the world, and from a product perspective now too, as well as a sales and marketing one. That credibility is here.”
She too has a caveat however. “Irish companies should not set out to be acquired. The aim is to innovate and grow great businesses,” she says.
Once that happens, the exits look after themselves.
