~ Carol Tallon, CEO of Property District and founder of Proptech Ireland

‘If you need advice, ask for money, but if you need money, ask for advice’

Earlier this month, I moderated the VC panel debate at TechConnect 2019 at the RDS.

Joining the panel were:

• Mark Nealon, Founder, MyStudyPal

• Ciaran Walsh, Founder , Dogs Internet of Things

• Niamh Sterling, Investment Consultant, HBAN

• Isabelle O’Keeffe, Principal, Suir Valley Ventures

Prior to the panel debate, I asked startups in my network (Proptech Ireland, VC Tech Check, DCU Ryan Academy, UCD etc) what they most wanted to know and the following is just a few of the questions raised:

• Should there be diversity quotas within allocation of VC funding – surely this would also be beneficial for the VCs in the long run?

Overwhelmingly, the opinions of the panelists and people in the rom all indicated ‘No’, however, there was a clear acknowledgment of unbalanced finance in favour of men.

• Does the VC culture of growth at all costs inhibit the potential of some excellent companies by forcing them to miss major developmental milestones in favor of pushing for huge profit?  

Possibly, yes – this is really a case of getting the right fit of innovator and investor (and this is very much a two-way street).

• How should a start-up determine if a VC is a right fit for them? And what are the warning signs that should make you walk away from a VC despite the offer and, separately, what are the red flags that will make a VC walk away from investing in your company?
  
  

Over-promises and unrealistic or unfounded targets hints at a level of inexperience or lack of expertise in the area. This is definitely a cause for concern for both parties.

• If the panel were offered 1 million funding from Enterprise Ireland for 10 pc or 1 million funding from a VC for 10 pc – which would they choose and why?

Overwhelmingly, the response was to accept the money from Enterprise Ireland!

By way of additional responses in the room (not necessarily from the panel):

One of the early points made was about the ease of dealing with Local Enterprise Offices (“everything was simple, straightforward, very easy to deal with, minimal paperwork and the quality of advice and guidance faultless”) and the often overwhelming complexity of dealing with Enterprise Ireland (“working through Enterprise Ireland involved form filling that could take a full day of work… and there appears to be absolutely no follow-up or direction for the unsuccessful applicants”).

Also, from our entrepreneurs on the panel:

“Public funds from LEO & EI stipulate job growth potential while private investors want private profits with employment creation as an accidental evil necessity. Any suggestions of bridging the gap / moving away from the present mind-set where both considerations are almost mutually exclusive?”

Big issues tackled in the room included the need for greater transparency about what investors want – specifically – and what startups can realistically deliver.

Due diligence practices varies from investor to investor, in any event, startups must be prepared to disclose all.

From our VCs:

“The funding gap is a hard one to solve…Ireland has a very plentiful pre-seed environment with lots of support from EI, the LEO’s and various accelerator programmes. I think versus a gap in the availability of seed funding as there are a number of seed funds, HBAN and privates that are actively investing it is more so that some of the companies are not at the point where an investor would invest €500k-€1mn+. This has a lot to do with traction, customer validation, product market fit etc…and due to the fact that the definitions and risk appetites for a seed investment in different geographic regions are different taking the US as an example where the rounds are much larger and the capital is invested to seed the idea and build the product versus the dynamics in Ireland where investors tend to be a lot more risk averse.

 

There is definitely a gap in the funding to bridge that €100k-€500k mark which is something to look at in details. I know that HBAN are very pivotal in providing that capital to the companies that are in that gap but I guess its understanding what more can be done. I do think that the point around people not knowing how much support there is available is quite key – the various EI programmes, innovation vouchers etc, DTIF fund…I definitely struggle to understand all the resources that are available and how to go about obtaining them.

 

There are various other elements to it though the EIS v EIIS scheme doesn’t help with encouraging more private individuals to put money into tech companies. I think there is an element of the accelerator programmes doing a hybrid of incubation and acceleration versus pure acceleration so ultimately it means that the companies are not necessarily investor ready at the end of it. It is also the understanding around how VC’s are set up and how in order to return money to their investors and ultimately be successful they need to have outsized returns so every company that they look to invest into you need to believe that it can have a very large exit.”

Also:

“One area that we could explore is what pre-seed start-ups can do to increase their pre-money valuations and look more attractive to VCs (gaining early traction etc.). In terms of whether early stage finance is a barrier, we may want to touch on what early stage supports are available for early stage start-ups to finance them to being VC ready.

Personally, I think there are a wealth of supports available for early stage start-ups in Ireland both financial and in terms of mentoring; from personal experience it can just be a little unclear as to what they are to first time entrepreneurs.”

*John Dolan, MD of Cardinal Capital Group, was profiled in The Sunday Business Post at the weekend and – from a funder’s perspective – he spoke of the “exciting opportunities for private equity companies” in Ireland right now.  

International VC Tech Check service now available in Ireland, UK and across the US:

If you are considering investing in a tech startup and want an objective, knowledge and technically-proficient assessment of the technologies already developed or in development  (to ensure the pipeline and budget targets are realistic in the context of resources), contact info@VCtechcheck.com.

~ Carol Tallon, CEO of Property District and founder of Proptech Ireland