Sure Valley Ventures’ Isabelle O’Keeffe: Technology is the Driver for Change

Isabelle O’Keeffe is Principal at Sure Valley Ventures (SVV) an entrepreneur-led venture capital fund that invests in high growth, “frontiers of tech” software companies, that are solving significant real-world problems through disruptive AR/VR, IoT and AI technology platforms. She is also winner of the ‘Specialist Investor of the Year’ award at the Women in Finance Awards 2019.

At Sure Valley Ventures, you invest “at the frontiers of tech”. What does that mean – because there are a lot of frontiers today!

We’re looking for companies that can either change existing industries or create entirely new markets, with technology at the core; because we feel that, right now, tech is the most scalable and defensible advantage in business. Currently, we’re backing companies in the AR/VR space, in IoT and AI/machine learning.

Disruption has become quite a general term. For us, disruption is a technology that changes the way business is done. It’s a paradigm shift, and across our portfolio our companies are disrupting many different industries.

We also want to solve significant real-world problems. For example, we have backed Immersive VR Education, who are democratising education by allowing people access to University courses through a VR experience. It includes avatars that enable a more interactive learning environment. COVID has accelerated new ways of working and interacting, and frontier technologies like VR enable new, remote ways of connecting.

We often invest pre-revenue and sometimes even pre fully commercialised product: it’s often just a technology and a concept. When investing into companies that are using technology to create new markets It’s often hard to determine the size of the opportunity, the key customer and how to reach the market. That leaves us with a judgement based on the founders, the team they have assembled and their vision. There is sometimes the need to marry a highly technical founder with a more commercial focus and this can be done by bringing on a commercial lead or advisor.

The budgets required to get AR/VR, IoT and machine learning from the seed round to a viable product are much higher than perhaps the old dotcom round of investable products. How do you make those sorts of decisions?

It’s true. Sometimes it might take twelve months to launch a product. We help founders to be clever with their capital, to be acutely aware of what they will need. We also educate them on access to grant funding. In Europe there’s a huge amount of grant capital, through the European Union’s EIC accelerator programme, for example. We try to co-invest alongside smart capital, which gives founders an extra runway to get to market.

“COVID is transformative. But technology itself isn’t changing because of COVID; it is just accelerating adoption. Remote working and cyber risks have been around for a long time. As a tech focused investor predominantly investing into companies in the B2B space we are less exposed to the consumer market, which has been impacted in certain areas such as travel, hospitality and leisure in a lockdown situation.”

You mentioned COVID earlier, and VR is a great example of the sort of business which might in fact be improved by the COVID situation. How has COVID changed your world?

All investors have had to take stock and ensure that their portfolio is OK. A COVID business plan is ‘back-to-basics’ and really re-writing the plan. Our portfolio has in some senses benefited from tailwinds due to COVID: as well as VR, our cybersecurity investments are seeing increased interest from potential customers. Remote working for large organisations has meant a huge amount of risk associated with data loss and leakage, phishing and cyber-attacks. Getvisibility, for example, uses machine learning to classify data and mitigate data loss for enterprise customers like banks, insurance companies and government agencies.

COVID is transformative. But technology itself isn’t changing because of COVID; it is just accelerating adoption. Remote working and cyber risks have been around for a long time. As a tech-focused investor predominantly investing into companies in the B2B space we are less exposed to the consumer market, which has been impacted in certain areas such as travel, hospitality and leisure in a lockdown situation.

Let’s turn to fintech, a key sector for Sure Valley Ventures. Where’s the smart money?

Even before the current environment, my personal opinion on neo-banks is that the market was crowded and there wasn’t a huge amount of differentiation between offerings. My view of that world was that there would either be consolidation or bigger banks would buy the neo-banks.

For a traditional bank, the core value is in having the customer’s current account and being able to upsell more sophisticated products such as mortgages throughout the customer lifecycle. The neo-banks haven’t necessarily reached that point. The growth potential for neo-banks has been transaction charges and they have been moving into other products and services; however with lockdown there is significantly less spend on credit cards. People aren’t travelling. So that has impacted them significantly. Monzo’s last round saw a 40% drop in valuation.

I do think they are an innovative way of banking and, if they can weather the storm with a core offering, many will become attractive to bigger banks. There will continue to be consolidation.

That is the challenging part of fintech in the near term. The more interesting part is that the financial services industry is huge and full of processes that can be improved. Enabling technologies like AI and IoT will become a key focus for large organisations.

These organisations have been hell-bent on building their own technology platforms internally, whereas COVID has accelerated their understanding of a need to partner with smart, enabling fintech companies. I think key focus segments will be:

• Robotic Process Automation (RPA)
• Anything to do with data classification – and the use of AI to do so
• SMEs are suffering at the moment, particularly with poor access to capital, so lending platforms or even brokerage platforms for SMEs will be strong.
• With the move online, there will be new emphasis on KYC, identity fraud and cyber security.

It’s a mind shift that is needed. There is a huge opportunity for traditional banks, if they can really grasp innovation and run with it, to become winners; because they have the relationship with the customer, which is the most valuable part of the proposition.

You said in a past article that “an outside perspective is essential for a VC” and Sure Valley Ventures sells itself on being run by entrepreneurs. Take me through that.

People assume that investors know everything . They are smart people, but we meet founders in different industry verticals every day of the week and don’t have the in depth knowledge of their sectors that they do. We just have indicators as to what a good opportunity looks like; and certain bias and intuition towards an investment.

On the other hand, we bring our own perspectives. I worked in large organisations (Telefonica and NBC Universal) before Sure Valley Ventures –- and that gave me an understanding of their sales cycles. I worked in Telefonica’s M&A team, so I had access to different operating models within the group. If I meet a company whose end-customer is a bank or a Telco, I know how tricky that market is, how hard sales can be, and what needs to happen for the new venture to succeed.

Whenever investors come from operating backgrounds or have been entrepreneurs themselves, they bring huge value. Start-ups go through tricky times as they grow; and having someone on the board who has done it before and won’t lose their cool and can help the founder navigate the obstacles is of huge value to an entrepreneur.

There is also greater diversity of thought when people from different backgrounds come together as investors. It lessens conformity, groupthink and bias. When bias builds up in investment team, it can hugely impact investment performance.

It’s interesting that you mention your big company background. Instinctively, it makes sense to bring in investors who have been through the painful journey of entrepreneurship; but you are bringing knowledge of what it’s like to play against, or sell to, the big boys…

In my M&A role, I was on the other side of the transaction. Our ultimate goal with the companies we back is that they will either IPO or be acquired. I’ve been on the other side of the table, so I know how much effort is needed. The deal can fall over at any point – and that can ruin the business for a founder.

You also have several Board Observer roles (Buymie, Warducks). This is quite a controversial role: you watch all of the action and have none of the traction. How do you contribute in that role?

It’s like being a fly on the wall of companies as they build their businesses. In each of my Board Observer roles, the companies and the DNA of the founders are quite different. That determines the role I play at each board meeting.

Technically the role is to attend board meetings to advise companies and track them in terms of performance; for themselves and within the fund. Some founders have done it before and are well polished. Others need a little more support. If something is going quite wrong as a Director, I might suggest strongly that things are done differently or pull in other people who can help the company.

At heart, my stage of investing is a people business. And that doesn’t work when the perception of investors is scary , unforgiving and quite removed. The founder/investor relationship is pivotal and I think that having an open door and prioritising transparency with your founders is crucial. I want them to come to us when things are going wrong, not just hide everything behind a smile. The Board Observer role cements and formalises that relationship. I get most enjoyment out of it is when I can actually advise from experience.

It’s always a nuanced role, particularly when you are a co-investor with other investors; because each investor will play different roles at different times in the growth cycle.

“There is greater diversity of thought when people from different backgrounds come together as investors. It lessens conformity, groupthink and bias. When bias builds up in an investment team, it can hugely impact investment performance.”

You also won ‘Specialist Investor of the Year’ at the Women in Finance Awards, 2019. Tech and finance are notoriously female-unfriendly. Can women in the investment community redress the balance in the industry?

Absolutely. I have worked in male-dominated industries and teams for the majority of my career; and I can see a clear shift. In the VC world, there is a significant focus now on not just female founders but Diversity & Inclusion overall.

Diversity VC, for example, have a great programme called Future VC where they bring in individuals from different socio-economic backgrounds, ethnic backgrounds, female founders or female interns. They teach them how to become VCs and then partner them with major European VC funds. Many interns go full-time in major VC funds like Balderton Capital.

It’s a huge step in the right direction because, returning to my theme of diversity of roles and opinion, that applies to the investment team within a fund as well as the board of a business. Diversity on the investment team drives broader funding and supports more diverse management teams.

Our next recruitment protocol is to look very broadly across non-traditional backgrounds for VCs. And within the fund, we help our start-up companies to create policies internally for more diverse recruitment.

Most funds and investors are looking to push the diversity agenda. As we speak, Playfair Capital are about to host their next female founders event. They started off with ten VCs last year; they now have a community of sixty female VCs and something like 300 female founders. There’s a huge shift in the industry for sure.

And what about fintech in Ireland? Is the market still buoyant?

Fintech in Ireland is great. I came back from London two years ago with a fresh set of eyes, and I was bowled over by the amount of innovation and the tech ecosystem here. Ireland has a lot of infrastructure dynamics that are positive towards innovation:

• There’s lots of support from government agencies like Enterprise Ireland and the lower income tax rate here has attracted many tech and financial services companies.
• There’s a huge amount of talent which caters well to incoming corporations
• Brexit has meant that many financial services companies have relocated their headquarters here due to the passporting advantage for E-money licenses.
• There’s heritage. Stripe is considered a US company now, but its roots are here and it remains testament to the benefits and practicality of starting a global company here.
• Large companies based here need the services of disruptive start-ups. I recently met with a company using machine learning to help better calculate insurance underwriting risks. Another is building a platform to make it easier for insurers to manage their legacy, paper-based archives. Their first big enterprise customers are already here.

Everywhere you turn, there are interesting things happening in the Irish fintech ecosystem. Another good indicator to the potential here is the number of funds now putting boots on the ground in Dublin. The dedicated fintech backer, Finch Capital, has invested here. Hoxton Ventures has just announced another new fund, with some capital allocated to invest into Ireland. The central bank of Ireland is also working on a FCA-style Sandbox for fintech businesses called the Innovation Hub which will help us flourish even more.