Exploring new world of opportunity
THE FRIDAY INTERVIEW - Ray Nolan, technology entrepreneur: AT $340 MILLION (about €230 million), Ray Nolan’s baby last week became the single-largest company exit of the past decade in Ireland, surpassing E-Tel, Iona Technologies, StockByte and Sterile Technologies.
But Nolan, co-founder of Web Reservations International (WRI), the parent company of the hugely successful Hostelworld.com accommodation booking site, travel site Boo.com and other properties, hasn’t rushed out to spend any of the $100 million or so that he confirms he banked over the years from WRI.
“We were pretty good to ourselves all the way up [at WRI],” he acknowledges. “We took cash out when we could.”
He adds that he has just returned from New York, where he didn’t buy anything or even go shopping. “Except a visit to the Apple Store, of course.”
An initial public offering (IPO) fell through last year, but US private equity firm Hellman Friedman paid cash for the Irish company, which had put itself up for sale recently.
Nolan, imposing and confident, looks every bit the Silicon Valley-style laid-back tech entrepreneur who has just signed off on one big deal and is already thinking about the next.
A serial entrepreneur, he set up his first company at 22, Raven Computing (which was sold and became Coretime, which in turn was sold to Sage).
WRI was set up a decade ago with business partner and Avalon Hostel owner Tom Kennedy, after Nolan had sold Kennedy a hostel booking package.
Nolan went back to Kennedy 18 months later with the idea of expanding from standalone booking software to a web-based global booking management system for hostels: Hostelworld.com.
The proposition was simple: travellers could book a hostel online, and 10 per cent of the transaction would go to Hostelworld, with the rest going to the hostel. Although individual bookings were tiny in terms of revenue – perhaps a euro or two – scale brought enormous profits. On €350 million worth of transactions last year, Hostelworld took in €38 million in revenue and banked €19.8 million in profit.
The company grew at a blistering pace, Nolan says. “The chart in the IPO prospectus was your basic hockey-stick graph but we said, those are profits, not predictions.”
He says the group had a 65 per cent ebitda (earnings before interest, taxes, depreciation and amortisation) margin.
Malahide-born Nolan must have seemed an unlikely future multimillionaire. He is a self-taught programmer who sold his first program at 17 (a computer game).
He then spent six years doing poorly in classes in electrical engineering at Dublin Institute of Technology (“I was a disaster, but every single aspect of computing and technology interested me”), and netted his first job at Smurfit by sending a CV and explaining he had failed all his college courses but he could program.
After eight months he went to work in Saudi Arabia, and then returned to Ireland and set up Raven in 1988. His work, he says, “had to be in technology. Even now, I love the sheer job of solving a laborious problem.”
The hostel software sold to Kennedy came out of Raven and led to Hostelworld, which enabled hostels to utilise complex booking technology without having to run any software themselves. Nolan spent his fifth wedding anniversary in a bar persuading Kennedy to form the partnership.
Hostelworld then drove its expansion by gaining the support of a stable of prominent investors, including U2 manager Paul McGuinness, and venture funding from US-based Summit Partners.
Nolan says he loved working with Kennedy. “With Tom, I had the best travel companion. It wasn’t work, it was fun. We had a great double act.”
He enjoyed selling the company and its concept in the US through the “pure, in-your-face honestness that is being Irish”. He thinks Irish companies seriously undersell their Irishness, a quality greatly valued in Silicon Valley.
In 2007, the pair proposed taking WRI public, and planned a 2008 flotation. At that point, Nolan stepped down as chief executive, was replaced by Feargal Mooney, and became a non-executive director.
“We were trying to push it out to a $600 million to $700 million market cap. That’s a big IPO. It was so big that the market only had to cough and we knew the IPO was off.”
And, of course, by the end of 2008 the market did a lot more than cough, causing the directors to shelve the IPO, to Nolan’s regret: “It was a great candidate for an IPO.”
In late October, word went out that WRI was putting itself up for sale, aiming for $275 million. Industry speculation was that one of the major travel sites – Priceline or Expedia – would bid for the profit-making company.
Nolan says they presented WRI as offering major opportunities for nabbing travel customers when in the 20- to 30-year-old hostel-user age and holding them for life. In addition, the age bracket offered major opportunities for selling more products and services – books, gadgets, and so on.
But they didn’t bite. Too expensive in the current climate? Nolan shrugs.
“All I can say is there are more things than price. There’s the culture of the company. We all did travel and are online, yes, but many other elements of their business aren’t like ours.”
As a private equity group, it is likely the new owners will resell WRI at some point in the future.
Was he glad he had stepped down even though the company IPO didn’t go through?
“Maybe I didn’t think about it enough, if the IPO didn’t happen, but yeah, it was time. It had been 10 years; maybe it needed more than I could give to it.
“If I stayed, it would have meant I was going to have to sign up for five years. I wasn’t prepared to do that, or pretend I was. The company was all about integrity, about never crossing anybody.”
Nolan most likes being in companies “in the hyper phase”, when they start off and grow fast. He says he wants “to add value, not just write cheques” at any new ventures.
He has plenty on his plate – involvement with “at least 10 tech companies, at some level”, including four major Irish company involvements: CloudSplit, Asavie.com, Worky. com, and RevaHealth.
“I fully believe I’m riding four horses and one of those is the next Hostelworld.”
He is also quite confident “there’s one good company left in me”.
If Nolan has a frustration, it’s that he believes Ireland may have missed an opportunity to be a major technology player. “I think the Irish Government missed the web, period, when we had the chance to turn Ireland into the European Silicon Valley,” he says.
“It’s about five years too late, but maybe we still have a chance.” There are plenty of lively young companies, he adds.
He is also critical of IDA Ireland’s focus on bringing in major technology multinationals without balancing the needs of developing an indigenous tech sector.
“Bringing Google into Dublin was their single-biggest failure because the local internet companies then couldn’t get staff. They sucked all the talent into Google and had endless rounds of interviews so no one would commit to another job.
“On the face of it, it’s more jobs and good news. You get the easy win, but in the long term, is it worth it?”
These are weighty questions which will no doubt remain active for him, given his continuing commitment to homegrown start-ups.
But, for now, as his LinkedIn.com profile says: “Ray Nolan is content!”
“We built something great, had great fun, and worked with phenomenal people,” says Nolan. “I’m a great believer in kissing all the frogs. I found a great-looking princess in Hostelworld.”
On The Record
Job:serial technology entrepreneur
Family:Married with children
First computer:Sinclair ZX Spectrum
Age at which he sold his first computer program:17
Age at which he formed his first company:22
In the news:He is Ireland’s latest technology multimillionaire, having sold the company he co-founded, Web Reservations International, to San Francisco-based private equity investor Hellman Friedman for about $340 million (about €230 million) in cash. His personal shareholding was 25 per cent; he will have taken about $100 million out of the company in its 10-year history.