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In our sixth series Maree Morrissey talks to Dermot O'Shea and Ronan Quinlan, co-founders of Taoglas, about their business' crux at present.
Established by Dermot O'Shea and Ronan Quinlan in 2004, Taoglas supplies customised high performance antenna solutions for the automotive and electronics industries. BACKGROUNDIn 2004 O'Shea travelled to Taiwan to establish relationships with factories where he met Quinlan who had been working in the Taiwan electronics industry for over six years. The duo subsequently set up their head office in Enniscorthy, Co. Wexford, and also established international offices in Taiwan and Hong Kong in 2004. Taoglas employs two full-time and three part-time people. Dermot O'Shea, Director of European operations, explains the reasoning behind setting up international offices. "We wanted to establish a global competitive electronics brand with corporate, R&D, finance and sales headquarters in Ireland but with production in the most cost effective and advanced facilities globally." O'Shea asserts that Taoglas is unique in the antenna industry as they offer their customers true choice while also remaining competitive by offering Asian manufacturing pricing.
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| MANAGING GROWTH |
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The automotive market is a particularly difficult one for smaller
suppliers, in what is a very competitive industry. Taoglas has in
many ways got over the first hurdle in setting up this business and
developing innovation products, but many challenges lie ahead. The
ability to manage growth will be a key challenge.
EXPONENTIAL SALES GROWTH One of the targets the directors have set is to achieve exponential sales growth. This has been the downfall for many young enterprises. I would opt for steady double digit year on year growth as a target, and plan to manage it so that the underlying support network and R&D capabilities grow in equal measure. It is difficult to see how automotive manufactures would want to deal directly with Taoglas for what is likely to be a single component in any vehicle. The market for mobile technology is growing rapidly, and the company seems to have a good product that manufacturers want, but perhaps strategic alliances with mobile phone companies and satellite navigation suppliers would be a safer bet than aspiring to be a tier one supplier? JUST IN TIME With a good product which is innovative, reliable and competitively priced, maybe the focus should shift to supply considerations and logistics. When the product works well, the ability to meet sporadic production schedules and supply on a 'just in time' basis can help in winning supply contracts. Kevin Sheehan, Partner, Owner Manager Group, Deloitte. |
| NEW APPLICATIONS |
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Taoglas is a high tech company operating in a fast moving sector where
R&D needs to be continuous and investment is critical.
FORMING ALLIANCES The company should continue to develop its distribution channels but also needs to forge close alliances and partnerships with end users. It may then be in a better position to identify new applications for its technology and products. However, Taoglas may encounter challenges in establishing its technological credentials. One way to overcome this would be to work with an Institute of Technology to form a R&D cooperation agreement. THE ROLL OUT Where Taoglas has developed and sold proven commercial applications for its products, it should look to roll out those applications to new markets and sectors.With regard to business angel investment, the company will meet with strong competition from other high tech companies. The return on investment sought by an investor is likely to be a multiple of two or three times the investment within a timeframe of three years. Key to achieving best terms from Taoglas' perspective will be proven commercial success, available markets and the possibility of patent protection for its products. Gerry O' Neill, Assessment Officer, First Step |
| LEASING OPTIONS |
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Taoglas is currently in the expansionary phase of its business lifecycle.
While this is good news, it can bring certain business dangers with
it. A growing business demands a constant cashflow so the business
should ensure that it does not over commit cash reserves into projects.
R&D CENTRE To finance the establishment of the R&D centre, all finance sources (i.e. internal company sources, venture capitalists, business angels, grants and bank finance, etc) should be carefully evaluated for their suitability to the Taoglas business model. EQUIPMENT FINANCE Taoglas should consider leasing as a finance option to fund the acquisition of specialised testing and laboratory equipment. With leasing:
However, with leasing the business never owns the asset and the cost over the life of the asset may be higher. Adrian Moynihan, Business Strategy, AIB |
| EVALUATING THE ANGEL INVESTOR |
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A business angel is someone who brings money and expertise to an investment
opportunity. Taoglas is a new type of Irish start-up, specialising
in design, R&D, logistics, marketing and customer service but
which outsources some of its manufacturing. This presents a different
set of challenges to those of a conventional business and requires
very specific skills from the promoters. An analysis of these skills
requirements will point to the role a business angel might play.
SECTORAL EXPERIENCE Based on European research, angel investors look at 100 projects before investing in one. After this, they do not tend to be in the investment market for up to three years afterwards because they are following their investment. TIMING RANGE The exit strategy in terms of timing and percentage are variable and are highly influenced by the angel investor's perception of the risk involved and their expertise in the particular sector. Therefore, it is not really possible to talk about an ‘average' but rather a range. In terms of timing, an angel will seek to exit in a three to five year period and, for every €1,000 invested, will hope to get back €3,500-€8,000. Pat Maher, Executive Director, Enterprise Ireland |
| BECOMING A GLOBAL FORCE |
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There is no single definition of a virtual organisation but Taoglas
comes near enough to qualify. The management need to embrace the concept
of organisational flexibility, unconstrained by traditional barriers
of place or time where results are not achieved in the traditional
way.
A CLEAR EDGE Taoglas needs to see itself as an umbrella organisation for different initiatives which have customer supply and satisfaction at its core. O'Shea and Quinlan seem to have the mindset that distance does not hinder them and the use of specialised technology companies through strategic partnerships and alliances gives them an advantage that they can profit from, if managed efficiently. EXPLOITING RESOURCES On the sales, marketing and after care service, the company should
concentrate initially on a temporary network of independent companies
that share skills, costs and resources to exploit market opportunities.
With the right fit of competencies, shared values, mutual trust
and proper division of marketing responsibilities, the advantages
of using local agencies can be exploited to the full without the
need for excessive investment. The promoters now need to prepare
a full strategy for Taoglas as a world class business, able to compete
in its chosen markets. Mark Fielding, Chief Executive, ISME |
If you would like a chance to feature in Irish Entrepreneur's new section 'Crux of The Matter,' then all you have to do is email us with your full contact details to cruxofthematter@irishentrepreneur.com and we will be in touch.
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| © 2007 Irish Entrepreneur Irish Entrepreneur is published by Morrissey Media Ltd. 3 Dublin Road, Naas, Co. Kildare. T: + 353 45 866200 F: + 353 45 883709 E: info@irishentrepreneur.com |
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