Venturing to invest in businesses and people

THE FRIDAY INTERVIEW:Barry Maloney, partner at Balderton Capital

IT’S TIPPING down as the electronic gates leading into Barry Maloney’s impressive home in Glenageary, Co Dublin, open slowly. Across the large driveway, he stands at the top of the steps in the doorway to offer a warm handshake.

The house is the fruit of a successful career as an executive and investor in telecoms or technology-related fields. In Ireland, he is probably best known for the near €44 million windfall earned from the sale of Esat Telecom, which he led.

Maloney and Esat’s founder Denis O’Brien were once best friends and close business allies. They fell out spectacularly over Maloney’s evidence to the Moriarty tribunal in relation to an alleged payment by O’Brien to former communications minister Michael Lowry.

They haven’t spoken for 11 years but the relationship continues to follow Maloney around.

He hit the headlines recently when The Irish Timesrevealed he had written to the Taoiseach and Tánaiste saying he no longer wanted to take part in the Global Irish Economic Forum because O'Brien was attending.

Given Moriarty’s negative finding against O’Brien, Maloney didn’t feel his former colleague should be allowed to participate in the diaspora summit.

“It’s a pity you can’t write what was a personal letter to the two top officials [in Government] without it being in the public arena within a week. But I guess that’s Ireland,” he says while leaning back in a large, light-coloured luxurious couch.

Maloney says he sent it because it is important how Ireland is “perceived” abroad by investors. “It was a personal decision,” he explains. “I didn’t feel right about it and I decided that the best thing to do was just to avoid it.”

“I hope we’re not just going to focus on Denis O’Brien in this,” he adds by way of shutting down that line of inquiry.

So we move on.

Maloney’s career is about much more than his time with Esat or relations with O’Brien. He cut his corporate teeth with Digital Equipment, both in Dublin and Geneva, and with Xerox. After Esat, he became a venture capitalist in technology-related businesses in Europe.

“We’re backing an entrepreneur and an idea but you’re really making a bet on a person,” is how he describes the process involved in making an investment.

It began when he joined the European arm of US group Benchmark Capital. That morphed into Balderton Capital, where Maloney is one of four partners. Balderton has about €2 billion worth of assets under management across four funds.

“It is invested in five Irish companies, including software group Openet, whose founder Joe Hogan and chief executive Niall Norton, last month won the Ernst Young Entrepreneur of the Year Award.

“I was thrilled for them both, you won’t find two harder working guys,” he says.

He lists Openet and Dublin-based employee rewards group Globoforce, run by Eric Mosley, as potential IPO candidates.

“They are of sufficient scale, they are growing, they are profitable and they have big markets. They have very disruptive business models, both of them.”

IPOs are thin on the ground in the US and Europe given the current financial crisis. Maloney is no Mystic Meg when it comes to predicting when markets might open up again fully, but “the fact that Groupon got out recently is good”, he says.

Balderton’s last IPO was Betfair, the internet betting exchange, about a year ago. He lists that as one of Balderton’s best investments. There have been many others.

It exited social media website Bebo with a nice wedge of cash before Facebook grabbed that online space.

MySQL, in which it held a 15 per cent stake, was sold this year to Sun Microsystems for $1 billion, netting Balderton a tidy return.

“We have had more exits of in excess of €250 million than any other VC in Europe over the past 10 years,” he says coolly.

There have been some flops. Balderton invested the “bones of $100 million” in Irish electronic payments group Payzone and pay TV broadcaster Setanta Sports.

This money went up in smoke when both groups hit the rocks. Ironically, Payzone is now led by Mike Maloney, Barry’s brother.

It collapsed following the merger two years ago of Irish e-payment company Alphyra and British ATM operator Cardpoint. Founder and chief executive John Nagle was fired and a messy legal spat ensued.

“We made too many acquisitions too quickly on the Alphyra side of it and we probably paid too much for what we bought. Therefore, when the merger [with Cardpoint] came, there were a lot of cracks in the infrastructure that came to the fore very quickly. That’s why it collapsed.”

Setanta was different. It spent heavily to acquire live rights to football in England and Scotland and was ultimately outfoxed by cash-rich Sky Sports.

“We got close,” Maloney says ruefully. “At 1.4 million subscriptions . . . if we had been at 1.8 million we probably would have been in a better position come the second round of bidding .”

You win some, you lose some and he’s still a big fan of Setanta’s founders Mickey O’Rourke and Leonard Ryan, who thankfully salvaged the Irish business.

“They’re hustlers, they’re survivors . . . those kind of guys just never give up.”

Maloney is a wealthy and successful businessman but it all could have been so different. He was born in east Jerusalem (then part of Jordan) in 1959 where his Mayo-born father, a garda, was deployed with the United Nations.

“They were meant to be there for about 18 months but it lasted 30 years. It was a fantastic childhood. We were all sent home to boarding school when 11 or 12 and did college here.”

On boarding school he says: “You grow up very quickly. You’re 11 years of age, your parents drop you off and they’re 4,000 miles away. You’ve got to sink or swim. It works for some kids but for others it was quite damaging.

“I admire my parents for doing it because if they hadn’t, we would never have gotten a decent education because they were moving around so much.”

On leaving school, Maloney’s dad wanted him to become an Army cadet.

“I refused to even fill in the application form. He got really upset and we had the biggest and probably the only major row we’ve ever had. There was skin and hair flying.

“It was best avoided for me. I’m not sure I would have been tough enough.”

His steel in the heat of corporate battle suggests otherwise.

Maloney did economics and politics in UCD followed by a short course with Anco, now part of Fás.

“It was a graduate trainee programme. It was great. Part of it was a work placement so I spent some time in Guinness doing a work- flow study.”

After Digital and Xerox, he returned to Ireland in 1996 to join Esat just as telecommunications here was being liberalised.

“Let’s be clear, we were the best bid,” he says in reference to Esat’s winning of the second mobile phone licence. “We were absolutely the right selection for the government to make and we delivered.”

He is not impressed by the current state of telecoms here.

“It’s a real mess,” Maloney says. “The whole Eircom thing has been very damaging for the country. It’s lacked investment. It’s been damaging for business.

“[As a country] we’re probably over-invested on the mobile side and under-invested on the internet/broadband side.”

Maloney recently disconnected Eircom in his home as the broadband was unreliable. “It’s a joke.”

Maloney “loves” his job. “It’s very interesting . . . very stimulating. It gives me a worldwide perspective. You’re meeting the smartest entrepreneurs with the biggest ideas. We’re trying to make sure we back the ones that are going to make a difference.”

The travel can be a drag. “It’s tiring and it’s wearing but it’s fascinating stuff. And you get great satisfaction out of watching companies grow.”

Monday to Thursday he flits around the globe; the rest of the time is spent either in Dublin or at Mount Falcon in Mayo, a hotel he co-owns with some of his brothers and partners at Balderton.

How is it performing?

“Every hotel in Ireland is struggling but we’re doing relatively well. It’s very close [to profit]. This wasn’t built as a quick flip. We built it because we have an emotional attachment to the area and we’re in it for the long hall,” he says.

He is not amused by the cut-price offers by hotels controlled by the National Asset Management Agency.

“We get damaged by the kind of rates charged by Nama hotels and it’s very difficult to compete.”

With the euro’s future in doubt, Maloney expresses the hope that the Government has a plan B.

“I hope there’s somebody somewhere thinking about it. We may never have to use it but we better be thinking about it. That’s the issue the Government needs to focus on.”

ON THE RECORD

Name:Barry Maloney.

Job: Partner at Balderton Capital.

Age: 52.

Family: Married with three daughters.

Home: The family lives in Dublin, he also has an apartment in London.

Hobbies: "Shooting, poor golf and a bit of gym work."

Something that might surprise:Born in Jerusalem, he has a Jordanian birth certificate but has never pursued a passport. "Im not in a rush to apply."

Something we might expect:"Not filling in the forms to join the Army" as his father wanted him to.