15th December 2010

Silicon Valley Angels Meet HBAN

With the excitement that surrounded the recent Dublin Web Summit and Founders event there was a true sense of ‘anything is possible’ amongst the Irish start up and tech community.  That thought was made reality when I found myself sitting in the office on Saturday am with two of Silicon Valley’s most influential Angel Investors – Jeff Clavier and Dave McClure.

Thanks to Brian Caulfield and a frantic collection of tweets, texts, and emails late Friday night we pulled together a bunch of 10 HBAN angels to meet with Jeff and Dave on Saturday morning.

After stocking up on unlimited coffee and pastries there followed a 90 min discussion on early stage investing in technology.  Most of the discussion  centred around supporting software, web, and ICT start ups that could potentially be very lucrative on little and efficient use of capital.  The cultural nuances between Californian and European investors became apparent as Irish investors gasped at the Valley’s spray and pray approach.  The shift toward seed investing was confirmed with the trend of investing small chunks of cash into many start ups prevailing. 

A portfolio approach to investing was agreed by all as a good way to mitigate risk and improve returns; however for Silicon Valley €100,000 into 10 companies has shifted to €25,000 into 40.  This seems like an interesting proposition but requires a very different approach to investment.  To invest multiple amounts of €25,000 due diligence must be particularly light to be able to get through that many deals.  This is where the difficulty lies for an angel investor – getting to yes, quickly.  Dave McClure suggested using standardised convertible loan notes to execute on these type of investments quickly avoiding the valuation issue.

The Dublin based HBAN Technology Investor Group have explored ways of standardising due diligence to streamline the process and execute on deals more quickly, but not to the extent that the Silicon Valley investors have.  There are fundamental cultural differences to consider and it is unlikely that European angel investors in general will adopt a Californian style of investing.  This is not necessarily a bad thing.

Sean Seton-Rogers, General Partner of PROFounders Capital, was also present at our impromptu angel session and highlighted European Investors’ concerns over follow on funding and the need to account for this from day one.  He suggested that unlike Silicon Valley follow on funding in Europe was not necessarily guaranteed and often had to be allocated up front.          

The session was a fascinating insight into the Silicon Valley way of early stage investing and highlighted the opportunity for growth in this sector in Ireland.

Words by Liz Fleming, Programme Manager HBAN