Roger Maggs, founder and general partner of seed investor Celtic House, has been involved with the company since its inception in 1994. He talks about how the company started out with a $25 million fund in 1996 and currently has $1 billion under management in over 50 companies, of which six are now publicly-traded and 10 have been acquired.
Maggs’ close friend, the telecommunications entrepreneur Dr Terence Matthews, funded Celtic House. He approached Maggs in London to diversify some assets through seed and early stage VC investing. Matthews, still the only limited partner, reinvested his profits from the first fund and the firm has now invested almost half of its $250 million Celtic House Fund II. It is likely that Celtic’s next fund will be opened to outside investors.
How long have you been in the venture capital business?
There are several answers to that question and it depends what you define as venture capital. The present fund that I work for, Celtic House, was founded in 1994, so that makes it seven years. Immediately before that, from 1986 to 1994, I was involved in M&A as vice president of a company called Alcan Aluminium, based in Montreal, Canada. Before that and for a very short while I ran a corporate venture outfit in Boston, but that was back in the late eighties. So for this particular seed fund, it has been around seven years.
What do you look for when making an investment?
We are very much, as you know, seed investors. So, what you are looking for when starting up a company is very specific. You don’t look at the performance figures because there aren’t any and you don’t look at the competition because the company isn’t established enough to have any competition. The three core elements we focus on are the experience, competence and energy of the company’s founders. We are primarily looking at the people in the company.
Indeed, Celtic’s strategy focuses on people first and the market second. In addition to that, we of course look at their product map and the vision of what they are going to sell. I’d describe Celtic house as searching the sea, looking for the beginnings of a wave looking for a product that the world is going to want in five years’ time.
We don’t want a product that already exists. In short, we are looking for a product space that is five years out. I’d summarise it as the validity of a future space. It has to be the future. We are looking to see if the world is going to develop in that direction and want the product.
How did Celtic House come about?
It was down to our founder and one and only funder, Terry Matthews, who also founded Mitel and Newbridge Networks, two of Canada’s most celebrated high-tech success stories. I’ve known Terry for many years in fact we were at university together at the University of Wales. After university, we both left Britain I went to South America and Terry went to Canada, where I eventually ended up living for eight years. Terry had the money and kept nagging me to do something with him and the idea was for a venture fund rather than his own personal investment vehicle. And so, in 1994, I joined Terry to establish Celtic House to fund emerging companies whose products would support Newbridge’s corporate and technological objectives. Terry provided us with the first few million and we’ve never had to raise funding from anyone else. In 1996, we brought in two Ottawa partners Tom Valis and Andrew Waitman, who became managing general partner.
How would you describe your investment philosophy and what differentiates your approach?
I think we very much reflect in our philosophy the attitude of Terry Matthews himself. It’s an approach based on a profound understanding of what a new technology company needs to succeed in a rapidly evolving marketplace. We look for high risk, something that is brand new, with no performance and no comparable companies. We don’t try to minimise risk. We maximise our risk and look for companies that are founder-centric. It is the people that are of the utmost importance for us. Once we have made an investment, it’s hands out, noses in. We leave the founders to their own devices and don’t supervise them.
Where does Celtic House see itself in the context of the European VC scene?
Celtic House focuses on investments in Britain, North America and Canada. There are currently no plans to expand in Europe. We’re small. I’d like to say and I hope that we play a role that few of the other established funds play, that is seed capital. That role of seed financing is normally the role of angels. We see ourselves as a small fund, but a big angel. We can bring more to a portfolio company than an angel does.
Are there any new regions where Celtic is planning to make its mark?
This week, I was at our new offices at Redwood Shores, California, which is between San Jose and San Francisco. Following a decision last April to restructure, we added five new partners to the team. We opened an office in Toronto with two new partners and also added partners to our Ottawa and London offices.
Michelle Dundas Macpherson, heading the new Redshore offices is our first US-based partner. She will be bringing Canadian technology to the US, making connections for our international companies and helping them to establish offices in the US. She will also be looking for deals in potential US portfolio companies.
This is a big step for us going into Silicon Valley. We are trying to make our mark there as we already have in the UK and parts of the US. We’ve had successful investments in the US, but we have never before had someone on the ground there. This is a terribly important step for us.
What, for you, is Celtic’s most memorable deal?
The word memorable brings to mind something you keep remembering and the deals I keep remembering are the ones that I missed and shouldn’t have. There are a few that spring to mind. I can be cryptic and mention a particular deal that was in Cambridge and was a company focused on the blue tooth sector.
Looking at deals, there are three types of investments: the ones that made it, the ones that go under and fail, and the opportunities that you miss. If you dwell for too long on your successes, you become complacent and that is the beginning of the end for a venture capitalist.
You have to forget about the failures and carry on. But for me, the deals that keep me awake, are the ones that I didn’t catch.
Celtic House has offices in Canada, the UK and the US, from which it invests in early stage high technology companies that specialise in telecommunications, storage, networking and Internet infrastructure. Its funding track record includes UK successes Bookham Technologies, nCipher, and Orchestream and the firm was recently named as winner of the “Seed Investor of the Year,” by Thomson Financial Venture Economics, who sponsored the award at the European Technology Gala awards in March.