Barry J Whyte - The Impossible Dream: The spectacular rise and fall of Steorn, one of the Celtic Tigers most audacious start-ups

THE IMPOSSIBLE
DREAM

THE SPECTACULAR RISE AND FALL OF
STEORN, THE CELTIC TIGERS MOST
AUDACIOUS START-UP

BARRY J WHYTE

Gill Books

For Gillian, Grace and Conor, with love.

The history of perpetual motion is a history of the fool-hardiness of either half-learned, or totally ignorant persons.

Henry Dircks, Perpetuum Mobile: Or, A History of the Search for Self-Motive (1861)

Lets be straight about this: I accept there were failures in the political system; I accept that I have to take responsibility as a member of the governing party during that period for what happened. But lets be fair about it: we all partied.

Brian Lenihan, Jr, Minister for Finance, on RT Television, 24 November 2010

Contents

INTRODUCING SHAUN MCCARTHY

Shaun McCarthy in His Own Words

Steorn was the kind of thing that, if youre in any way interested in technology, and if youve seen the shit Ive seen and I know that sounds kind of like, Hey, Ive seen aliens, dude you know that the technology was really important. And thats not something were ever going to walk away from.

I put a quarter of a million of my own money into it, which is small beer compared with the rest of the investors, but then I didnt have millions to spend.

Thats the nature of being a founder or proponent of these things. Nobody wouldve won as much as me if Id pulled it off and I still think one day Ill pull it off but thats the nature of capitalism, ultimately.

We risked more. I know that the people who wrote very large cheques dont see it that way, but we did risk more than just money. That became very apparent. Just use Google. Thats just the nature of trying to be aggressive with a start-up business. When it all works out, youre a legend; when it doesnt, youre a scumbag.

We love a failure, Barry, you know that.

Maybe if we hadnt gone out and raised so much money and put ourselves in this position I mean, Im not trying to avoid responsibility, but we put ourselves in a situation which resulted in where it resulted, whereas, in hindsight, the project shouldve been done a completely different way.

I have to measure it by a different yardstick now in hindsight. What were doing now with the technology is so completely different in its approach.

If you dont learn the lessons of your life, the lessons arent lessons.

____________

In November 2016, I sat down in a noisy coffee shop near Trinity College, Dublin, with Shaun McCarthy. McCarthy is an eminently likeable character. Roguish, rumpled, wearing a permanent uniform of T-shirt and jeans, and almost perpetually wreathed in cigarette smoke, he revels in an anti-establishment outlook and never resists an opportunity to deprecate himself, an apparent effort to puncture any sense that his ambition might be mistaken for pomposity.

Yet that morning he was despondent. His shoulders were slumped and his face, usually impish and smiling, was slack and looked exhausted. His usual stream-of-consciousness style of near monologue had slowed to a crawl and he preceded a great many of his answers with short, rueful sighs. He had some justification: his lifes work the creation of what he claimed was perpetual energy had come to a juddering halt. His company, Steorn, originally founded as a consultancy firm and named for an old Irish word meaning to guide or to manage prudently, was being liquidated. Its failure was not just the loss of more than a decades work by him, and the loss of 23 million invested by his shareholders, but also the loss of his reputation.

He knew that he had confirmed the prejudices of thousands of sceptics and cynics who had declared his company a fraud.

If I was looking at this from the outside, Im either an idiot or a scam artist. Theres no middle ground. The laws are immutable, he told me that day. And after 15 years, the possibility for a scam is reduced to near zero, which means youre just wrong, which means you must be an idiot.

He was playing online poker to pay the bills, he told me, aware that a decade spent as chief executive of Steorn did not look great on his CV. I wouldnt get a job as a taxi driver in this town. I knew from the moment I said I think we should make this public that this was in poker terminology an all-in play. I dont get to pull my chips back now.

But of more concern to McCarthy than his reputation was his awareness that plenty of his investors were angry about the outcome. We took their money. We raised their expectations, and it fell flat on its fucking face. Theyve a right to be angry about that.

To understand why, you have to remember that, a decade before, Ireland had been at the apex of a period of collective madness. It was rich, and it wasnt handling it particularly well. In its defence, it had never been rich before it was used to being the poorest of the rich countries, with no industry of its own and no financial centre, just fields, and its biggest export had always been its young men and women but that summer it had reached the peak of a bizarre time known as the Celtic Tiger, during which time it often seemed like Ireland was drunk on money.

Over the course of the preceding decade, Irish people had come to possess that most heady of combinations: confidence and cash. It was an incredible, unprecedented, unrepeatable time, and it wrought an abiding change in the country, its people and its habits. Instead of emigrating to New York to work in bars, as they had always done, Irish people were flying there for the weekend to do their Christmas shopping. Instead of bringing ham sandwiches wrapped in tinfoil to watch two local Gaelic football teams slog it out in some winter league match, they were flying to Rome in the spring to watch Irelands rugby team beat the much weaker Italian team, boasting Veni, vidi, VISA as they did so. It was a motto for a spendthrift age. Prudence and caution were gone, relics of a bygone era. The old rules no longer applied.

The summer of 2006 was also when Ireland learned about Steorn and Shaun McCarthy. The company took an advertisement in the Economist to announce that it had discovered a machine that could create energy from nothing. Imagine never having to recharge your phone, it asked. Imagine never having to refuel your car. It channelled George Bernard Shaw: all great truths begin as blasphemies.

The advertisement was bold and brash, and it irritated a great many people in that new and confident Ireland. After all, we were rich now, no longer peasants, no longer to be looked down on. Why were these characters trying to embarrass us on the world stage?

For others, it wasnt embarrassing: it was exhilarating. Oil prices were surging. A house in Longford, Cork or Mayo was worth as much as a house in London or New York. And prices were still rising, never to fall again. Why couldnt it be true that the old rules no longer applied? Maybe this Steorn thing wasnt just blasphemy. Maybe.

On such fertile ground, Steorn was born. If the price of a house could go up forever, why was it impossible that someone could create energy from nothing? It was a feverish and intoxicating time and, as we know now, utterly wrongheaded. More than that, it was out of character. After centuries of near poverty, Irish people had, within a few years, shed their caution and frugality and apparently decided that our wealth would simply continue to create itself. From where? It didnt matter, just so long as we continued to spend and invest.

More than four hundred people did precisely that in Steorn, and they werent just the gullible and unsophisticated investors one might expect would invest in a company promoting perpetual energy. Steorns share register was a veritable whos who of high society during the Celtic Tiger years. There were high-profile figures from virtually all of Dublins best-known brokerages and financial institutions. There were barristers, solicitors and bankers as well as small- and medium-sized business owners from every part of Ireland. There were doctors and consultants, academics and accountants, pensions advisors and business consultants. You may conclude that an investment in Steorn was stupid, but its investors were not.