How To Create A Great Product, Based On Past Product Successes

Shay Garvey, Gary Leyden, Tony Kelly at UXDX EMEA. Video: https://youtu.be/6XJc9KXb9B0

Readable transcript: edited from the recording's captions for readability (fillers and false starts removed, punctuation and section headings added). Wording is the speaker's own. Timestamps are positions in the video. Names marked [?] could not be verified against the audio.

Introducing the panel and the stages they invest at

[00:00:00] Pamela: Our first speaker is Tony Kelly. Tony is the CTO and co-founder of a service company, Deposify.com. He was previously the CEO of Demonware and interim chief executive of Fluid Software. And Tony is a strategic angel investor with interest in 3D printing, online security and video games technology. Then we have Shay Garvey. Shay is a founding partner of early stage venture capital fund Frontline Ventures. He was part of the core team of Delta Partners that raised four funds and 235 billion between 1994 and 2007. And he has invested in 25 early stage tech companies and achieved a number of exits over a number of cycles.

[00:00:46] We have Paul O'Donnell, who is a Dublin-based partner at Greencoat Capital covering UK and Irish deal flow, with a particular focus on the wind, solar and biomass sectors. He has over 11 years' experience in investment and seven years' focus exclusively on renewables. He joined Greencoat Capital in 20 years, and he was a student and eight years after two years at Liberta. And I'm missing one person. Oh, Gary Leyden. Gary is head of the accelerator program at NDRC, and I'm going to ask Gary to tell a little bit about himself because I don't have it on me.

[00:01:26] Gary: Thanks, Pamela. NDRC are a very early stage investor, distinctly early stage investor, so we're probably the first investor in most of the companies that we go into. We go in close to idea stage, and today we've invested in about 200 companies. Those companies have now gone on to raise in excess of $130 million in follow-on funding: companies like SignWave, Boxever, Logentries, Drop, a whole range of companies. We invest through the accelerator model, so two to three times a year we invest in a cohort of ten companies. And what we're going to do is get them to focus on what's important, which is making sure they know their customer for what they're proposing to build.

[00:02:17] Pamela: I'm going to move to Paul and Shay next to ask them as well what stage companies they invest in.

[00:02:23] Paul: I work with Greencoat Capital, and we manage an investment fund on behalf of ESB, the Irish utility, which is a 200 billion euro growth capital fund. We invest in businesses that are past the proof of concept, that are into the commercialization phase and that are looking for growth capital to build out their business. We tend to invest somewhere in the region of 5 billion euros upwards to 20 billion euros over an interim period, across anything to do with clean, sustainability and resources.

[00:02:59] Pamela: And Shay, you invest in early stage seed companies.

[00:03:03] Shay: Yeah. Sectorally, it's quite specialized in software. And within software, it's nearly all business to business with a SaaS delivery model. We just think there's enough of those sorts of companies around right now to be a specialist investor in that area. As Gary said, we invest in some of the companies he just mentioned, Logentries, Boxever. And we invest at seed and we play up to Series A and even to Series B. The idea is to bring international larger VCs into the more successful companies.

[00:03:41] Pamela: Why did you decide to focus on the early stage, the seed stage?

[00:03:44] Shay: Yeah, it's a good question. A lot of people say you don't do seed by choice, especially as an institution; as angels it makes a lot of sense. But I suppose prior to being in VC, I was for ten years in three startups, and I've always remembered who wrote the first check. So you can get very close to the founders if you believe in the founders. And then, as we'll hear from the investor side, you can influence the culture of the organization if you write that first check. The challenge then is to ensure that that company really moves fast, because time is of the essence.

[00:04:24] Pamela: Tony, you're an angel investor, so you're probably writing that very first check to startups when they're at their riskiest.

[00:04:31] Tony: Yeah.

[00:04:32] Pamela: What makes you take the leap?

[00:04:35] Tony: It was a little bit of a choice. To Shay's point, I'll be going in with a small amount of money very early on, so I'm balancing that early stage risk with only putting a small amount of capital at risk, with the intention to follow on, hopefully, at a later stage. I'm partly going in at that stage because that's what I'm most interested in. I think I'm very much a tech developer at heart, and it often surprises some of the folks I'm investing in. I've never looked at a lot of code in the projects. I'm more concerned about how it's going to be used and how it's a representation of them getting to market, or whatever it might be.

[00:05:12] For me, it's just the most exciting stage. Just the way the mathematics works of investment and dilution, it just makes sense for me to put it in at the early stage. And I think that's what I'm most interested in, and I think that's where I'm of the most value.

Gut feel, the team and the market

[00:05:32] Pamela: And as you don't look at code, how do you determine what is worth investing in? Do you focus on the strength of the team?

[00:05:40] Tony: It's funny, I was talking at a fintech event a few weeks ago and everyone agreed with me. Obviously I'm not an institutional investor. I've had experience of fundraising through Activision, and through my startups, companies I'm working with directly. I think everyone is looking for the same information in terms of market opportunity and customer validation, et cetera. The team's an enormous part of it. I think, though, from what I can see, even on the institutional side, there's an enormous amount of emotion involved in some of these decisions.

[00:06:20] I was thinking about it quite recently, because I very much think I'm a good investor. If the numbers didn't add up, of course you're not going to go and do it. It's amazing the amount of companies you come across who have ticked all the boxes, or appear to have ticked all the boxes, but there's still something that pulls you back. And I've learned not to just invest if everything is right on paper but my gut is holding me back. I've learned to step back. So I do think there's an immense intangible in there. For me, I can make a decision rationally whether to invest very quickly, but I tend to want to meet the entrepreneurs and build a relationship over time.

[00:06:55] If they've been a referral and I don't have a prior relationship, I want to meet them a number of times. When I interview, I used to interview in a coffee shop; I wanted to be informed on what the person is like. I've had experience of hiring a senior developer at a game studio previously who, on paper, was a rock star. We couldn't believe he was coming to us. He aced the first half of the interview; we brought him over from Liverpool. We went to lunch, came back from lunch, and all three of us went, we would never hire him. Couldn't possibly, never. It turned out to be a really good decision in the end.

[00:07:28] So, long story short, I do think there are a lot of intangibles there. You want to see if you're going to be able to work with these people all the time, and startups are very stressful, by definition.

[00:07:42] Pamela: Is your gut ever wrong? Did you ever miss out on some really good investments?

[00:07:47] Tony: It's probably too early for me to say. I've been mentoring companies for 15, 16 years, but I've only been investing my own money for three. It's too early to say whether I've been in any way successful or not, but I'm very happy with the people I've passed on so far, which is not to say some of them are not going to be rocket ships. It just might not be for me.

[00:08:07] Shay: Yeah, I think over the years we looked at that, and everybody asks, is it the team? Is it the product? Is it the market? Generally it's not the product. Is it the team or the market? And the way we've come to conclude is that companies fail because of the team, but companies succeed because of the market. So a team is a hygiene factor, it's more than a hygiene factor, and companies fail, and they fail early frankly, if the team isn't right. But the team alone is just not good enough.

[00:08:40] I've been involved in investments where the team was adequate, but the market was there; they had figured it out. And these are startups: you have to be predicting where the market's going. They can't be in an established market. So if you get the timing right in the market, that's where the really successful companies are.

[00:09:01] Paul: Maybe just to add to that, we tend to invest slightly later. Some of the companies we invest in will be businesses that have come through the startup phase and gone into the growth phase. But we're seeing more and more traditional SME businesses, well-established companies that are family owned, that have been around, that are seeing the market opportunity. They're seeing something change in their business that creates an opportunity for them, and they are taking the decision themselves to go in and go after that opportunity. And that's where we're getting most excited at the moment.

[00:09:31] Real businessmen, people who've been around and know how to run their business day to day, but are taking a decision that involves risk, involves capital, to go and put the business in a slightly different direction. When you get those sorts of entrepreneurs, who are equally entrepreneurial and are taking a different approach to business, the comfort we get from the management team being prepared to go on that journey is very, very compelling for us.

Accelerators, follow-on funding and research-led companies

[00:09:58] Pamela: Gary, you're at the total opposite end of the scale, extremely early stage, sometimes idea level. Are there any startups that are too early for you?

[00:10:08] Gary: No. But I suppose the way we invest is in cohorts, so we invest in ten companies, but we probably meet about 150 companies to select those ten from. And one of the things that we've seen quite often is a team that we really, really like; there's just something about them. We're convinced about their ability to execute on an idea, just not the idea that they're proposing to us. And because we do very quick cycles, the feedback we give them is, look, here's why we don't like your idea, but we really like you. And then they can come back in three or six months' time and we can invest. Some of our best investments have come out of just that.

[00:10:54] Pamela: Do you see many companies going on to get funding from VCs and scaling much bigger?

[00:11:01] Gary: Yeah. Out of the 200 companies, well over 50% of the companies we invest in will go on to raise next stage funding. We're at that very early stage, and we have a very clear mandate that we're just a pre-seed investor. So it's critical that we get our ventures to a point where they can attract capital from the likes of Tony or Shay. We work very closely with that community, and we position ourselves as qualified deal flow for those next stage investors.

[00:11:30] Pamela: Paul, with the companies you're investing in, there would be much higher research and development, I would imagine, as they're all in renewables, energy, the whole area of energy. Do they need a lot more funding? They probably take a lot longer to actually be profitable and bring their money in.

[00:11:48] Paul: Yeah, research is at the core of everything that we invest in. Going back to what Shay said, we try to find really good markets and really good management teams, and for us what matters is the competitive advantage they bring to market. Almost every business that we've invested in has spun out of a university at some point, or the technology core is from a university. The most recent, an IoT business, was in Tyndall three years ago and will now be attending the Euro Business Awards this year. So research is at its core.

[00:12:19] Where we tend to invest, it's probably come out of the research stage. It's very much about product development. It's very much about linking product development to sales and having an incredible return on the investment that we're putting in. So the two areas that we focus on in the businesses that we invest in are product development and investing in sales teams, and we try to link those two things very, very carefully.

[00:12:45] There is a shift. Historically our sector, the clean tech sector, has been very engineering focused, very heavy, traditional heavy engineering, metal, manufacturing parts. But that's changing rapidly, and we're coming more and more into technology investments, which are more around big data, more around IoT platforms, and people are finding ways to create software and hardware solutions that can use data more efficiently and help the energy efficiency space.

[00:13:18] Pamela: And in the clean tech sector, are you more focused on renewables or energy efficiency?

[00:13:25] Paul: Again, both is the truth. I think the area we get most excited about is energy efficiency: the convergence of data with traditional hardware that's been in place, and what energy infrastructure can do to make things more efficient. We've invested in a business recently called Endigo, and its primary business is to deliver energy efficiency and energy savings. But the technology has a whole set of other uses, around understanding footfall, and it can pull in other forms of data to use for different reasons that are non-energy related. More and more we see that convergence between businesses that we invest in and other traditional technology opportunities.

Capital, the quick ramp and private money

[00:14:10] Pamela: And Shay, I know you're all about trying to give money to companies, but is there ever an advantage in having a lack of funds? Are startups more able to hit the ground running and have an advantage over big companies because of a lack of funds?

[00:14:24] Shay: Yeah. Again, I think in certain sectors there's a minimum amount of capital. For example, if you're doing med tech, or if you have to build a factory or you have to build a product, you need capital before you can get into revenue. But in software, especially what we do, we call it a quick ramp and a long road in terms of capital. To build a global company doing 100 million or even 50 million revenue does require a lot of capital. Look at how much even some of the bigger companies like Intercom are raising to be a global player. But the quick ramp isn't about capital. The quick is the important part.

[00:15:08] The key thing is to get to some validation. In our model, with a SaaS delivery, it's amazing how quick it is in this cycle as opposed to ten years ago, when it would take about 3 million just to build any sort of product; you had to build a kit, you had to do this, that and the other. Now you can build something pretty quickly, an MVP as we call it, and get corporates to say, yeah, we like it and we'll actually start buying it. So that's the quick ramp. It's easy to say there's lots of capital. Capital isn't the issue; it's the quick ramp. Then that's when the capital is needed to go beyond that.

[00:15:47] Pamela: You mentioned Intercom there. I know they raised over 117 million, but I read today that they make 1 million every ten days, which I thought was unbelievable. I saw that in Forbes magazine. I wouldn't mind a million every ten days myself. But do you think a lot of companies like that now are doing a private IPO? Ten or 15 years ago you would have had to IPO to get that much money, and now companies seem to get it from private investors and VCs.

[00:16:19] Shay: Yeah, I think long term that is a huge issue, and it's nothing to do with tech companies. They will do whatever they have to do to raise capital. The history of that is the financial shocks, the 2001 crash, 2008; the regulation of public markets now is so heavy nobody wants to go there. But the problem with that is it's only the rich, the big hedge funds, big pension funds maybe, but basically the very wealthy, who are investing in the privately held companies. They're going to get a lot more rich out of that, and you're going to create this issue. The States is the ultimate capitalist system, but it only works if everybody can buy stocks in what they see as interesting companies. That's no longer the case, and that's a real society issue coming down the tracks.

[00:17:10] But for the entrepreneur there are pros and cons, because in some ways it does allow them to build a company privately and develop, and if they can get capital at the right price, why wouldn't they? And not take on that public scrutiny.

How involved an angel gets

[00:17:29] Pamela: Tony, on the subject of building companies, how involved do you get in the companies that you've invested in? Obviously you have a lot of experience yourself in building companies. Is it hard sometimes to pull yourself back and not get too involved?

[00:17:44] Tony: There were two questions in there, so where do I start? That's the part I think I love the most, but it very much varies on the companies involved, where they're at, and what I'm doing as well. In the early stages, when I didn't have a day job and was just doing angel investments, I basically went in a day a week to a couple of the early companies. Then of course I joined Fluid full time for a year, and Fluid I thought would be the exception. A friend of mine had founded it a couple of years prior to my investing, and I was very interested in its growth.

[00:18:23] But with most of the other companies, my problem is that because I'm a techie and a developer, I want to be hands on in everything. I want to see the data, see the code. So partly my commentary about not looking at the code is deliberate. I don't want to get siphoned off into my interests. Because of my background, I probably see every games company that's going to pitch in the country, but I've yet to invest in any of them. It often surprises people that the last thing I care about here is the game. Most game developers get involved because of their passion for the product, not because they have a market or a need to access that market.

[00:19:02] So I guess that's more my approach. In some companies I'm a board member, in one or two. I think some startups find advantages in having friendly angel investors, because I tell startups I will never put a large amount of money into any one company. I can't afford to. So I'm never going to be a majority investor; I'm never going to be trying to control your company. I'm here. In some cases they didn't even have a cohesive vision at the time; I just fell in love with the team and the idea, and that worked out quite well. That was a lot more than anything else.

[00:19:35] But most others, I might just meet occasionally for informal coffees. I might get a business update as part of that, by way of mentoring, or do something on digital marketing, or in one case I helped a couple of folks negotiate a contract with a core customer. And then Deposify: 14 months after I invested, they wore me down, and I'm pretty much there full time, about five to five and a half days a week.

Choosing investors and focusing the early money

[00:20:08] Pamela: I'm going to bring you in there as well, Gary.

[00:20:11] Gary: I think what struck me there is one thing that is really important. Particularly at the very early stage, when you're so desperate for money to try and get to the next stage, you've got to do due diligence on your investor, being an angel or anybody, just to understand what they're going to bring, because picking the wrong angel investor can have a hugely negative impact on a business. So you've just got to make sure what their expectations are and how involved they want to get. There are good angel investors like Tony, and there are not so good ones, who I won't name.

[00:20:43] Pamela: You get very involved in startups for three months and then you send them on their way. Is that difficult at times?

[00:20:50] Gary: No. Personally, and that's probably similar to Tony, that's what I really enjoy, and that's where I feel I bring the most impact. What we want to do is just set the foundations really, really strong, get discipline into the team and get them focused on the right stuff. We don't invest a huge amount of capital, it's anywhere between 30 and 100 thousand, and you can go through that very, very quickly. So it's making sure that you're focused on the investable milestones. There are things you need to hit, because we're only going to invest in businesses that are going to scale up internationally and should be able to raise more capital. If you don't spend your early capital the right way, you can very quickly lose that opportunity.

What large companies can learn from startups

[00:21:35] Pamela: Another question for you, but I'm actually going to ask this to each of the panel. We have a lot of enterprise attendees. Do you think there's anything that large companies can learn from startups?

[00:21:45] Gary: Yeah. We've seen a huge amount of engagement, certainly over the last 18 months, from corporates wanting to engage more with startups. I think they've finally accepted that innovation needs to happen outside their organizations, and they need to find ways of engaging with startups, who are naturally more nimble and bring a different energy, a different focus and a different approach. So there absolutely is. But it's a double-edged sword for the startup. You can be dragged into an innovation conversation rather than a customer conversation, where they're there to learn about innovation rather than actually help you move your idea forward. So I think you go in with your eyes wide open to that.

[00:22:32] Paul: I'm actually living and breathing it at the moment. The utility sector is probably the most conservative historical sector there has been, and the quality of the product that the utilities would set themselves before they would buy anything off you was historically just unachievable for a startup. If you didn't come from a German company that was over 100 years old, you were going to struggle to get in with the buyers. And when ESB set up the Clean Tech Fund in 2008, they were very much of that mindset: old big power plants, a standard way of doing things, data didn't exist. The customer got the bill once a year, and the customer was a problem rather than a lot of the solution.

[00:23:15] I have lived and breathed the last four or five years of that massively changing landscape, and it takes a long time for a corporate to grasp it. They deny, deny, deny, and then all of a sudden you get this moment where they go, okay, we've got to start doing things differently. From our experience, I've now seen at ESB the change happening in the organization. It's slow change. They start off by engaging with external stakeholders, starting to look at more established companies to begin with and what they can bring.

[00:23:48] But over the last 18 months I've seen ESB seed their first two internal projects, which they've taken out of the organization and put into Dogpatch, where they can be out of the existing culture and be surrounded by a culture of fast-moving, all the things that the startups understand better than us. And more importantly, they support those companies, because there's no point in leaving the guys off on their own and saying come back with a successful business. They need to know they've got the support in the organization to make this a success, and that it wants it to be a success.

[00:24:24] Pamela: On that note, do you think the newer companies could be a bit of a threat to the older, established companies, like we've seen recently with Tesla and their solar powered roof tiles?

[00:24:34] Paul: I think you're seeing the need for the traditional OEMs and the traditional utilities to make strategic investments. In our sector at the moment you are seeing the big OEMs and the big utilities starting to make these investments. I think they are doing that because they see the threat that's out there, and they recognize it. The utility sector, as an example, has been the biggest losing sector by market value over the last five years or so. So if you're sitting there as a CEO, the market is telling you that business as usual is a dead game, you're over.

[00:25:11] I don't think that necessarily means that utilities cannot find an important role for themselves moving forward, or that they cannot partner with people like Tesla. But I see it coming more through collaboration and partnerships, and that requires the utilities and the OEMs to really embrace innovation, to find ways to partner with these companies and to create a more collaborative environment moving forward.

[00:25:43] Gary: Yeah, one of the most refreshing statements I heard was from a big international bank here. They said they'd prefer to lose their staff to a startup that they potentially may invest in, rather than seeing those staff go to a competitor. And the reality is, if there's a staff member sitting in your organization who's thinking about a startup, they're already on their way out the door, so you may as well try and retain some value in that relationship.

[00:26:08] Shay: Yeah, I wouldn't be as negative. People, especially in our world, criticize the large companies, that they're always overloaded and such a certain thing. The reality, and Paul mentioned it, is if you take energy, take the telecom sector: anybody who was in telecoms up until, say, the last decade, it was reliability. Even though they wanted customer focus, they set themselves this idea of 99.99%. People may not remember, but telephones used to work, compared to the crap that we're all using at the moment.

[00:26:42] On the other hand, there was no need for that, because people actually wanted ubiquitous devices, and they'd accept 66.66% of whatever we have. But at the end of the day, these large companies, be that the utilities or whatever, have huge balance sheets, they still have lots of assets, and a lot of them are global distribution platforms. The reality of it is, I think the whole tech sector is moving a bit like pharma. If you look at what happened in pharma, the Pfizers of the world have massive distribution platforms into various health systems, but the R&D is done by venture-backed companies. And I think we're going to see that more and more.

[00:27:24] But I wouldn't criticize these large companies, because their SLAs, as they call them, the service levels, are rightly high, whereas in our world it's trial, error, trial, error. Putting those two things together and criticizing large companies because they're not good at startups, I think is wrong. Startups have to be put somewhere else, because of the level of failure by definition. So the real challenge is how the large platforms pick at what stage they get involved in this innovation. And that's a tough one.

[00:27:59] Pamela: I agree for the most part. I wonder if a startup made mobile phones, would the battery life be way longer than with the likes of Samsung and Apple, who've never really improved the battery life?

[00:28:09] Shay: No, I would say that's 80% of what's happening. There are other companies, like Tesla, who are going straight for the corporates, coming in with a completely different business model, and they're going to capitalize. And ultimately Google, in their day, is going to hollow out some industries. They're already beginning to do it.

[00:28:31] Paul: I think sometimes we get in our minds companies like Tesla: oh my God, they're going to create this amazing new product, which is going to be a roof tile with solar. And we forget ourselves that here in Ireland we have a traditional manufacturing company called Kingspan, who happen to be the global leaders in making insulated roof panels. And we don't see Kingspan as a global technology company, wow, look at this amazing company. We see them as a product that sits at the side of the building site every now and then.

[00:29:02] But when I ask myself who I would want to have on my roof: the first thing I think of when I build a house is to have it warm, to have it work, and to make sure it's there. We have a huge amount of inherent knowledge and experience and international track record in specific products, and we sometimes see this press release in the USA and go, oh my God, Tesla are going to move into this. And we forget that back here in Ireland we probably have the global leader, who'd be the best starting point if you're going to create a product like that. But we don't wrap our arms around that in the same way the Americans, I think, would.

[00:29:41] Pamela: I think that's a really important point, actually. Too often we look at all these big American companies, but we have, as you say, a lot of the world leaders on our doorstep, be it Kerry or Glanbia or Dreamcore [?] or CRH. We've got a lot of the global leaders, and maybe we should be paying homage to them more rather than looking to Silicon Valley the whole time.

[00:30:03] Tony, I'm going to bring you in to see if you have any thoughts on what big companies can learn from startups.

[00:30:10] Tony: Well, I've been on both sides. I've worked for Microsoft and Intel, I've worked for Marks and Spencer, so I've worked in a lot of corporate environments, and obviously at Fluid and Deposify we have a lot of corporate customers and partners. I've got two almost contrary views. You read a lot at the moment in fintech about how some banks take three years to make decisions. In an Irish bank, for example, to change a full stop or a decimal point on an ATM, it takes 33 signatures and four months to get that change. In a startup, that's just ludicrous.

[00:30:50] Then on the opposite side, you've also got companies like Microsoft, who were late to the game, but over the last year have put in place a massive transition in terms of their philosophy, pumping out open source code and open sourcing a lot of IP. That will have a massive effect, I have no doubt, on open source. I'm a massive open source advocate myself; almost everything we've talked about building was open source. But even the open source community forgets how much corporate sponsorship and support has gone into supporting those communities.

[00:31:25] But then in terms of innovation, different companies do it very differently. I was staggered, as I got to work more with that environment, to see some of the innovations they're doing, and in some cases they're doing phenomenal projects. But in other cases I looked at it and thought, that's going to fall away, with a lot of entrepreneurship in big corporate environments, and it's going to fall flat on its face. It won't get the end-to-end support, and we know more experimentation from zero is needed.

[00:31:51] On the flip side, I've seen a few companies who would bring in early stage startups, with hot desks for example. That's almost part and parcel of it. I think it is a little bit of a nightmare. If I remember correctly, we had a couple of games companies in NDRC, a couple of different studios, and in some cases there's collaboration going on between the bigger studio and the smaller studio. I've done projects like that myself, where people from Intel then leave and go on to work with the partner. So there's a lot of collaboration, I think, going on, but it's very uneven. It spreads across the different companies, with different cultures and ways of adopting it.

[00:32:35] And then of course you see a lot of bandwagoning, I think. You see a lot of the banks in this country, for example, sponsoring startups. It's purely a marketing thing, because they see everyone else doing it. The only way I see it being done on any kind of really meaningful scale is backboard. Sorry, I don't need to talk about backboard all the time.

Blurring the lines and the rise of design

[00:32:56] Gary: Yeah, I'll take the last round. We launched a fintech initiative this morning, and what we saw was, on one hand, a really vibrant tech startup community, and on the other hand this huge financial services industry based down in the IFSC, and they were just two parallel worlds that were disconnected. So for the last two years we've been running events to create that opportunity and get them starting to engage with each other. Because the best ideas are going to come from people in the financial services industry, who have such insight into the problems that need fixing, but the enablers of that will be people coming from the technology community, who can apply different business models and new technologies to do that. So that's where the opportunity is: where you blur the lines between the two, really interesting stuff can happen.

[00:33:50] Pamela: You're seeing a lot of startups come through NDRC the whole time. Are you seeing trends emerging?

[00:33:55] Gary: I think we're too small to really see trends. Our job is really just to invest in the best 30 startups in a given year. We're fairly agnostic, but we do a lot of search activity around fintech and around health. Very broadly, a given cohort would probably be 50-50 B2B and B2C. And we're always amazed at the uniqueness of the ideas that come through.

[00:34:26] Pamela: Yeah, Shay?

[00:34:28] Shay: I think one trend, and again I'm comparing it to previous cycles, is definitely in B2B enterprise software. It used to be engineers, engineers. Look at Iona: it was in middleware, engineers, engineers. Nobody else would understand what the hell it was. But increasingly, and I think this speaks to this conference, Steve Jobs changed everything: the level of quality of what people are now used to. It used to be that consumer software was the poor relation and enterprise was all over it; that flipped completely around. Now people's expectation of user experience is Apple level, and if they're not getting that in the enterprise, there's a real issue.

[00:35:06] So for the first time we're seeing these startups that have designers. It's not all about the engineers anymore, and it's not even about commercial; it is about design. You need that wow factor, even in the enterprise. And I think it's a real opportunity for Ireland, because a lot of US software companies don't have the wow factor. When you take the gloss of Silicon Valley away, it's pretty funny stuff. So that's a big trend. And I also think that leads into, which is healthy, the composition of the startup teams. You have women, perhaps, who have come in from the arts, who have been an English major or something like that. So there's a mainstreaming going on. That's the biggest shift we've seen: design being at the core, and no longer engineering.

[00:35:56] Pamela: Are you noticing that as well, Tony? In a lot of the startups you're involved in, is there a bigger shift towards design and user experience, as opposed to development?

[00:36:06] Tony: 100%. I'm biased anyway; the only degree I've got is in design. Three of the six companies I invested in have a very strong design element. Fluid, for example, is a design tool. And weirdly enough, I invested in the 3D printing company and the cloud-based security company not really because of the tech, but partly because of the design focus. Lillian Robots [?] is obviously a very consumer, design-focused company, and then Barricade: what impressed me about them wasn't just the artificial intelligence and the security piece, but that part of the value prop was the visualization, the accessibility of design.

[00:36:49] And again, to Shay's point, I've worked in corporate software for years, and it terrifies me that there are 100 million lines of computer code in a car, and it's only one hack away from being jumped. So that terrifies me on one hand. On the other, I'm really heartened by the focus on usability and good practice, and even the maturation of development practices, because it just helps everyone; it makes it more cost efficient and easier to run. We just did a major technology project at Deposify, and the way I got it off the ground was I showed how this improvement was going to save us X amount of dollars and get us that bit closer to where we wanted to be in market.

[00:37:32] I think the challenge that's still there in making that transition is for designers and developers and engineers to be able to articulate a value proposition for a business person. It's not enough to say we need good design; we all know we like that. It's incredibly subjective, actually, what good design is. A well-known Irish company gets a lot of kudos for their design and their customer focus. As a user of their software in multiple companies, I think they're better at marketing than they are at delivery.

[00:38:02] So again, I just think that's what's changed. Design has become a commodity, but it's still very difficult to do it well, and you do need to justify the expense to the business, because there's an element of subjectivity there that needs to be bridged. But as we all get more mature with this, I find folks, and even some of my business partners who come from a technology background, are getting much more savvy and visual about this stuff. They'll come and talk about something that's maybe taking too long to load, and after introducing them to the concept, the next thing we're talking about latency and user affordance and this kind of stuff. It's fantastic to see that happening much more widely now than just among the small group of information architects and user designers and the developers that use them.

[00:38:51] Gary: Yeah, I suppose what we see from an investor point of view is that they outsource design at the early stage, just to help visualize what their MVP might look like, but it's not baked into the culture of the founders. So it gets them so far, but it doesn't get them to the next stage. And that's where you really need to be building it in.

[00:39:12] Pamela: Are you having to put a lot of that into the accelerator programs, and put a much bigger focus on design and user experience than you might have done a few years ago?

[00:39:20] Gary: I suppose we apply design thinking to it, but a lot of what we do is customer journeys, personas, really understanding the customer and starting there, because what we want to do is really understand the problem-solution fit. That's a key milestone that we want to get to. But our ideal team, our founding team, has someone with design thinking in it.

[00:39:46] Pamela: Our time is up, but I think we can all agree that was very good. So I would say thank you very much to our whole panel: to Tony, to Shay, to Paul and to Gary. Thank you.