Web Summit: what investors are looking for in start-ups

Forget about finding the next Facebook: it’s primarily about commercial evidence of success

 Draper Esprit partner Brian Caulfield: “Anybody who predicates their investment strategy on finding the next Facebook or Google is a lunatic.”

Draper Esprit partner Brian Caulfield: “Anybody who predicates their investment strategy on finding the next Facebook or Google is a lunatic.”

 

“Anybody who predicates their investment strategy on finding the next Facebook or Google is a lunatic,” Draper Esprit partner Brian Caulfield says.

Caulfield has attended every Web Summit since the beginning, but he’s not looking for the next Facebook or Google.

“They are exceptional companies and if you happen to hit on a company like them, it’s probably luck.”

The investor is attending this year’s tech conference on the lookout for start-ups in the areas of data, analytics, digital health, the Internet of Things and Artificial Intelligence (AI).

Commercial evidence

“We are primarily interested in start-ups at the Series A or Series B stage. It will need to have a product in the market and commercial evidence (of success)”.

“My final year project when I graduated from college was in the AI space. That was my main research interest, so I’m excited by it.”

Caulfield is also interested in fintech start-ups, especially ones which are picking apart the banking business model, such as CurrencyFair.

He believes there are some big opportunities in the analytics space too.

“We are putting a vast amount of sensors into the world and connecting those sensors to the web. There will be huge opportunities in analytics as a result.”

Has he ever met a start-up at Web Summit that he later invested in? Yes he has.

“Datahug won the Spark of Genius competition in the first year of Web Summit. I was a judge in the competition and I subsequently invested in them.”

For Caulfield, the market opportunity of the product or service the start-up is offering is the most important factor.

“If it’s not a big unsolved problem, then you’re wasting your time.”

“A lot of VCs will say it’s the entrepreneur first and I think they’re liars. They’ll often say ‘right guy, wrong company’ which proves they’re about the idea and market opportunity too.”

US expansion

Connor Cantwell, a partner at Boston and Dublin-based investment firm COSIMO Venture Partners, is on the lookout for Irish and UK start-ups aiming to expand into the US.

“We don’t get involved in hardware-related start-ups. We can make a more positive impact in the internet and software spaces,” he says.

“The US is very high on the agenda of many start-ups looking to scale, and those are the start-ups we want. We help them launch and expand in the US,” he adds.

On a macro level, Cantwell says he is attending the Web Summit to look at “developing trends and what is up and coming”.

“We’re always looking for exciting companies, one that are doing something unique and are interested in launching in the US.”

“We look at the business proposition and the team, as we need to be able to work with the team,” he says.

Frank Walsh, a partner at Enterprise Equity, is also on the lookout for trends.

“Web Summit is less about finding an investment opportunity for us. We want to get an insight into what is exciting the next generation of tech entrepreneurs,” he says.

Walsh says the tech conference is a chance for him to get away from the day-to-day management of the investment firm’s portfolio, to see what’s developing and see potential investees.

“We get to see a lot of potential investees in action, be it interacting with people at their stand or pitching.”

“I’m interested to see if there will be much happening in the drone space, as well as smartwatches, and their use as a new platform,” he added.