Going to San Francisco: Irish firms are seeking their success in Silicon Valley
Time is money in Silicon Valley — and now a series of high-potential start-up companies from right across Ireland are beginning to get more of both in the technology-obsessed Bay Area of San Francisco
In Silicon Valley nobody lingers over a coffee for an hour and has a social chat - at least not when they are talking business. It is just one of the cultural challenges that awaits the growing number of Irish start-up firms heading west to try and fulfil their Californian dreams.
"The attention span here is very, very short," says Paul Burfield, Enterprise Ireland's senior vice-president, west and southern United States.
Burfield never asks someone for an hour of their time in Silicon Valley: "You get 15 minutes. 'What have you got? Is it helpful for me? Yes? Let's progress. No? Thanks for your time.' The coffee doesn't get finished."
But that has not stopped a huge increase in the flow of Irish companies seeking, often successfully, to do business in the area. More than 700 Irish firms are doing business in the US with an export volume of just under €3.7bn (£2.8bn) last year - up 11% on the previous year. About 140 of those companies are active on the west coast and 89 of them have a physical presence in the San Francisco Bay Area, with about 20 new offices opening each year.
"There is a healthy flow of Irish companies and a general receptiveness to Irish technology in Silicon Valley," says Burrell.
This in part is due to the fact that there are 1,100 US companies in Ireland and on average a US west coast company sets up here every two weeks. "There is a recognition of talent and capability between big tech and Irish companies already," he says.
Burfield, an Australian by birth, has been posted in California for three years. A key goal of Enterprise Ireland's presence in the region is to help Irish companies to think and look like west coast companies long before they even get there. Burfield says Irish success stories like Openet, VoxPro, messaging platform Intercom and billing software company Britebill have already shown what can be achieved by early engagement with Silicon Valley.
Only a few, like Castlepollard, Co Westmeath-based Mergon - which designs specialist moulded plastic parts for a wide range of uses - have managed to build key relationships from afar. Mergon, which was part of the Irish delegation that travelled for Taoiseach Leo Varadkar's recent west coast visit, has become a key supplier to one of the darlings of the Silicon Valley scene, Elon Musk's Tesla, simply through its own excellence.
"It's an absolutely unique ecosystem," says Burfield of the region. "There is something about being in the genuine centre of the tech universe and the centre of the funding of that universe that is unique and is not being replicated anywhere else."
The figures back this up. Last year, more than a third of the world's early-stage deals were done out of Silicon Valley. Nearly 50% of venture capital in the US is deployed in the area. Nevertheless, despite this huge availability of funding, competition is incredibly intense with more than 25,000 start-up companies based there too.
"They are all chasing the streets of gold," says Burfield. "There has been a perception in the past that you walk into the Valley and you get funded. It couldn't be further from the truth. Raising funding here is as difficult as it is going to get anywhere, despite the volume of cash."
Burfield says the average Silicon Valley venture capital partner looks at between 3,000 to 5,000 deals a year and invests in less than 1% of those. His message to Irish start-ups is to raise their early-stage capital in Ireland because it is easier to get and significantly less encumbered. But, he says, there is good reason for companies to then head to California for further funding.
"The sheer volume of what they are seeing makes them absolute subject matter experts in the trends and dynamics of their particular sector. So what we love about these guys is not necessarily their money but their knowledge.
"We like to see Irish companies coming for more than just money: it needs to be smart money that unlocks knowledge and a network. You can get the money in the UK or Ireland but it never comes with the level of knowledge that it comes with here. That's what makes this place unique."
To win big in the Bay area, you have to be prepared to work hard. The Irish companies that really do well in Silicon Valley are the ones who treat it as if it is London, says Burfield.
"You would never hesitate to fly from Dublin to London to see a customer. You have to treat this market in the same way because that is what is expected. If you don't commit to the market it's just not going to happen for you. If you're not here, you're not here."
Kerry company Taxamo, which offers an international VAT payment service for ecommerce companies that sell digital products, is on its third visit to the Valley since May. Management has made the decision to take an even bigger step and open an office there from January. Taxamo is based in Killorglin, Co Kerry, and was founded by John McCarthy, son of Brian McCarthy, founder of financial services group Fexco.
After the EU changed rules regarding the payment of VAT in 2015 - with many other countries since following suit - it has become the norm that the sales tax must be paid in the country where a customer is rather than where the company is based, making the payment of VAT much more complicated and laborious for these companies, not least the Californian tech giants. That means a Silicon Valley presence is crucial for a company like Taxamo.
The Kerry company initially developed a platform that was a technical solution to the VAT issue but this year added a whole new approach.
"We now assume the VAT liability for these global companies selling digital products and we take on the responsibility and associated risks that need to be managed for the company," says Dermot O'Shea, himself a former Fexco employee and board member.
"We are taking away a lot of headaches on VAT for our clients. Our market is global but the greatest concentration of opportunity is in the US, particularly San Francisco and the bay area."
O'Shea believes that Irish companies looking to break into the Valley have to be based there and for Taxamo, the nature of their business makes it even more of an imperative. "We have been travelling over and back from Ireland but we have recognised that we have to have a presence on the ground. We are dealing with tax law so companies are putting a lot of trust in us when they partner with us."
The founder of Irish semiconductor company Decawave, Ciaran Connell, has already gone that extra step and moved with his family to live in California.
"I was advised by a significant Fortune 100 company that you need to be in the Valley. There was a cost to it, to my family, etc, but there were a couple of good reasons to make the move.
"It allows us to know what is going on and, more importantly, to be heard and seen so that others know about us. For Decawave to be known you need to be where the knowing happens and that is Silicon Valley.
"It is the fulcrum of innoVation. People and companies come from all over the world to be immersed in the genetic primordial soup of technology and innoVation."
The company - founded in 2007 by Connell and fellow UCD graduate Michael McLaughlin, now its chief technology officer - makes integrated circuits for wireless systems that measure distance indoors, where GPS doesn't work. To date, Decawave has raised about $30m, with the last fundraising bringing in $4.5m (£3.4m) in 2015. The company is in the process of closing another significant funding round to introduce its next chip.
"We believe that our chip will be fundamental to every IoT (internet of things) node, knowing its location indoors. But there is no use having that capability unless it is achievable in terms of price and power: it has to be dirt cheap and has to consume really low power. We have the ability to do that. There's a truckload of mathematics involved."
Most of the maths is done in Dublin. Of Decawave's 65 engineers, 55 of them are in Dublin. But Connell leads a staff of five from a Silicon Valley office established two years ago that he sees as crucial to the company's future.
"You think Silicon Valley is just chips. But every industry in the world has their forward-thinking teams based here. The Valley is the marketplace for innovation, where you put forward your idea.
"But you develop the idea back at base because if we brought our innovation and algorithm teams to Silicon Valley we would lose them or we couldn't afford them. Instead we have a small Silicon Valley team so we know what is going on and other people know about us."
Of course, it's not all good news stories for Irish start-ups in Silicon Valley and sometimes the journey west is, at best, wasted or, at worst, an expensive disaster.
"Of course you get that," says Burfield. "We try and stop that happening before they get on a plane because there really is an enormous amount you can do from Ireland before you physically set foot in this market.
"You have got to do that prep work before you get here. In a market of more than 25,000 start-ups there is no way you are going to get the attention you want without a researched position of differentiation.
"You might create an incremental business that gets you €200,000 or €300,000 in exports but that is not the ambition we want to see in our clients."
One of the most common problems is when software companies appoint resellers or channel partners to represent them in the US market.
"They'll clap their hands and say 'right, that's the States done, let's go off to Canada or Australia or China' and they appoint a multitude of these channel partners. But they don't recognise the amount of time, effort, energy and resources it takes to manage those to success and we see them fail way too often."
But, says Burfield, Irish start-ups have tended to excel in sectors such as mobile applications, digital health, enterprise software and in advanced electronics.
"Those companies represent the cream and the question is, what do we need to do to transform them from a $2m (£1.76m) company to a $150m (£132m) company? That's the ambition we in Enterprise Ireland have for a lot of Irish start-ups. The value we can bring is our knowledge of and our network in Silicon Valley to help them with their value proposition to differentiate them from what already undoubtedly exists out here."
Dragons' Den star Barry O'Sullivan believes that the profile of Irish entrepreneurs and businesses has risen hugely since he went at the age of 25 to California, where he eventually ended up running a major division of Cisco for 25 years.
He and his wife, who is also Irish, always wanted to come back to Ireland. In 2014 he co-founded Altocloud, which uses software and machine learning to make it easier for customers to communicate with businesses and vice versa. He got involved partly as a way of spending time in both Ireland and Silicon Valley ahead of a planned full-time move back to Ireland if the company fulfils its promise.
"We have been dependent on the Silicon Valley companies coming to Ireland for long enough. What we really need is for our own indigenous companies to grow big employee bases in Ireland. We have 20 people employed in Galway doing all of our software engineering, but we would love to employ 1,000 there.
"You certainly need to be targeting the US market to achieve that and that is where 90% of Altocloud customers are."
"A lot of companies when they start out begin by trying to work with small customers first. We decided to go straight for the very largest customers. Banks, e-commerce companies, tech companies. To do that in the US you kind of have to be there. You can't do it from Ireland. So I'm out there a lot and my co-founder is based there as well. You can't get it done otherwise."
The huge Silicon Valley investment community is another obvious draw for an Irish company and Altocloud has a mix of Irish investors - including Enterprise Ireland and Dublin venture capital companies ACT and Delta - as well as US investors such as call centre software developer Five9.
O'Sullivan has learned many lessons during his time in California and has experienced Silicon Valley over quarter of a century from the perspective of both a huge embedded tech organisation and, now, as a small incoming Irish start-up.
A key lesson he has learned is that it is important to build a relationship with potential investors before you need an investment.
"If you can say 'I don't need money now but I hope to raise money in a year' that is the best place to be. So when you need the money you are not going in cold. If you are trying to raise money as you are running out of money you are going to end up giving away more of the company than you should have to."
But, for O'Sullivan, the starting point for any small Irish company heading to San Francisco is simply to figure out who is who.
"There are a lot of talkers but a lot of doers here as well," he says. "The key is to have a specific objective for every meeting. Have an ask in mind and make that ask."
In the 25 years he has been there, the Irish have become a much more visible - and successful - presence on the Silicon Valley scene. But if there is one improvement he could suggest it is that Irish people could do with sometimes being a little bit more direct, he says.
"They dance around things instead of coming straight out and saying it. That just does not work in Silicon Valley."
Ask, as they say, and you shall receive.