Pat Phelan says Ireland's startup scene desperately needs more 'exits'
The tech founder turned beauty clinic owner thinks local firms take too long to sell overseas.
SEASONED ENTREPRENEUR PAT Phelan is firm in his belief that Irish startups need to get better at sales if they are to have any hope of achieving large-scale ‘exits’.
Young companies should also be able to build something of scale more quickly – which means doing business outside of Ireland as soon as possible, he said.
The Cork man is best known as the founder of fraud-detection firm Trustev, which was acquired by TransUnion for $44 million in 2015.
He’s since turned his hand to an entirely different industry - heading up a chain of cosmetics clinics called Sisu. Now that he has returned to the startup life, Phelan is trying to practice what he preaches.
“You have to get out of Ireland. We’ll have international clinics open this year – and that’s in year one,” he told Fora.
“I think we don’t understand sales early enough in the startup cycle and I think there’s a huge opportunity for learning around that.”
However for startups to think about international expansion, that also usually meant raising seed money – and, as many players in Ireland’s startup sector have noted, there is a lack of crucial, early stage investor cash in the country.
Phelan was able to draw from his extensive network to raise €1 million for Sisu “pretty easy”, enlisting high-profile backers like PCH’s Liam Casey and Voxpro founders Dan and Linda Kiely.
Most startups aren’t as fortunate in recruiting well-heeled investors, and they face significant hurdles in getting access to that “couple of hundred grand to get the bloody thing stood up”, he admitted.
Pat Phelan
However Phelan put the lack of initial capital for startups down to Ireland’s lack of major ‘exits’ – when firms are either acquired or go public for large sums, allowing founders to return their money to the ecosystem with their own investments.
“If you want to talk to people who’ve exited in Ireland I can name me, Colm Lyon (Realex Payments), Dan Kiely (Voxpro), Ray Nolan (Hostelworld) … after that I’m starting to run out of ideas.”
Seed funding
Phelan tried his hand at investing with the launch of a fund in 2016 – only to ditch the initiative a year later, citing the “awful” calibre of the pitches he encountered.
However despite abandoning the fund concept, he said he’s very open to investing in Irish companies.
“I’m not seeing enough people coming to me looking for money.”
“Obviously with my background I’m very interested in AI and machine learning,” he said, although he added that the food sector was also an area of interest.
Once startups get their hands on that elusive seed money, that’s the time to move fast and start selling internationally, otherwise the money is just “babysitting you along forever”, Phelan said.
He will be speaking at the Start Summit in Dublin next week, when he expects to be “drilling home” that message to fledgling entrepreneurs.
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Sisu’s plans
When it comes to his own enterprise, Phelan said he is determined to make a success of Sisu at a global scale – even though, thanks to the Trustev acquisition, he already has “all the money I’ll ever need”.
“I get a ton of offers of board (seats), which would probably be much easier to do … but I really like this early-to-mid stage and to do something new. That’s what I’m excited about.”
Sisu is preparing to open its second clinic in Cork, while the UK is likely the company’s first international target market ahead of mainland Europe.
Pat Phelan (centre)
“We have a very big opportunity in the Netherlands to open a chain of clinics.”
Sisu has had meetings with business partners in New York and has also identified a partner in the Gulf, he added.
Phelan doesn’t anticipate that Sisu will raise any more funding this year but expects to be generating revenues of €10 million a year by the end of 2019.
