How Ray Nolan is spending his €100m Hostelworld windfall
Hard punching, fast-car driving tech super investor Ray Nolan is the closest thing we have to Silicon Valley's Elon Musk. He spoke to Donal Lynch about his latest genius idea
Ray Nolan has a pain in his arse but a spring in his step. The pain is from a snowboarding accident - he's a one-man takedown of the notion that all tech guys are unathletic geeks - and the spring is from the fact that he's just gone and done it again.
As of an hour-and-a-half ago he's taken over "the biggest competitor" of XSellco, his e-commerce portal which "removes the pain of managing multiple interfaces for those selling online".
He won't say which competitor, exactly, until the ink is dry on every signature but he's quietly thrilled.
XSellco's cloud-based platform has been under development for the last two years and he is the interim CEO before the permanent appointment is announced later this year.
"To put it in perspective we now do over €100m a month through (Amazon eBay etc). Today we've bought our biggest competitor - they are about five times our size. It suggests that together we'll support customers who do €500m of business.
"It's a phenomenal deal for both sides," he grins.
He characterises XSellco as "an enterprise-type product" that was a bit of a flabby mess until he swept in.
"The software became big, the implementation was huge, the costs were high", he says. "We cleaned house, a few people had to leave and I took over. Now it's a focussed team business. We do CRM (Customer Relationship Management) for e-commerce, which is not done.
"If you sell stuff on Amazon, eBay, different platforms, you still had to deal directly with each of them. Is there an issue with a product, is it the wrong size? We put answers to all those in one nice, easy place. You're still our customer but we show you everything you need to answer those questions.
"So people are getting through their support in 25pc of the time. We're just about to do language translation. It's like giving people back hours of their lives."
Nolan is arguably Ireland's most successful internet entrepreneur and he has distinguished form in terms of creating market-disrupting technologies.
He chairs a number of other internet companies, including healthcare search engine WhatClinic.com. He is also a director of Smartbin, a provider of management software to the waste-collection industry - and Nolan also developed the Ultimate Rugby app with Ireland rugby legend Brian O'Driscoll. (Nolan's own two knees are among his rugby-related aches and pains.)
Over the years he has developed a razor-sharp instinct for when to sell up and move on - but he hates the term serial entrepreneur ("you have people calling themselves that just because they failed six times") and there is no doubting he's kissed a few frogs on his way to landing the handsome prince - which is how he characterises XSellco.
His biggest loss of all shall remain nameless. "I went into one too quickly and must've lost one mil. But it was the cheapest money I ever lost. Because I will never lose money like that again. I can't say who, because the guy... he is fucked now - and frankly he deserves to be fucked."
Nolan started his first company, Raven Computing, when he was 22, writing software and building databases.
"We started doing one-off products and built products from there."
Raven was the genesis for many of the businesses that followed, including time billing software firm Coretime, which he sold to accounting giant Sage in 2004, and Web Reservations International, which he founded in 1999.
The latter company began as a booking engine for Hostelworld.com which eventually grew to 12m visitors a month. As with XSellco Nolan took some strategic risks, such as buying competitors as well as domain names, including Boo.com and Hostels.com.
The Malahide man deftly steered the business forward, returning €500m on an initial investment of €150,000. Its parent company WRI was bought by private equity firm Hellman Friedman in 2009, resulting in a whopping payout for Nolan. Even now though he won't be drawn on the figures made by him and his partners (who include former Baltimore executive Paddy Holohan and former U2 manager Paul McGuinness).
"I made a lot of money, but we all did" is all he'll say.
Nolan has had his mistakes too, as he himself readily admits. Worky.com - "a social network for ordinary people" - turned out to be a bit of a turkey. "HR in general is a world that I haven't succeeded in," he concedes. "Worky.com is a case in point. It was trying to be LinkedIn for the average person. But disrupting the HR industry is very difficult, there's so many moving parts.
"The problem is that the industry likes CVs and likes people. Worky was too broad. It needed to be a place for people in specific industries to network. If you're here, attracting people onto your platform in, say, the US, is expensive.
"Case in point is Skillpages. They paid a blue fortune to attract people. I thought, I'm not spending any more of my money - I'll let them figure it out."
Nolan grew up in "an ordinary kind of a background, semi-d in Malahide". His father was a vet and Nolan says "What I took from him is integrity. I won't talk behind your back or do a deal that puts you on the back foot."
He went on to study at Kevin Street but dropped out he says before graduating (on their website they claim he completed a diploma in electrical engineering) and left to try his hand at writing code.
The advent of the internet in the early 1990s gave him scope to sell to a much bigger market. "We migrated to the web and instead of trying to sell copies of software for a few grand, we just started giving it away," he recalls.
"This was Ireland, small time in a way," he says. "You could write the best-selling software in the market but then there might be nothing left to sell. We had probably sold all the copies we could sell in Ireland and it was really the end of the line by the time the web came along."
He says that he "knew immediately the power of the internet. We had built some software for the hostel market. When I address a market I try to solve problems, to change how things are done.
The way the hostel market worked in the 1990s was that people running hostels would get an email based on a search done on Google, and just maybe there was a possibility someone would read that email and a booking was made, probably three days later.
"So we said: 'Look, if we could connect people to make real-time decisions and book live without talking to anybody, it might work."
With characteristic bluntness he has characterised the hostel booking game as "the bottom of the barrel in a bottom-feeding industry." He says the trick was that "instead of trying to sell a big-ticket item, which I always hated, we said let's just give it away for free. We'd only make money if they sold beds.
"We started writing code in March 1999. We were in four countries by Christmas and in 12 countries within a year. It was 2001 before I began working full-time on it. It was an entire industry that was crying out for technology. Before we knew it we were live in 100 countries."
Building the business involved strategic risk-taking, such as buying competitors as well as such domain names as Boo.com and Hostels.com.
It also led to some clever breakthroughs, including setting up what would become a web-industry standard. "We were the first people to do online hotel reviews, before Tripadvisor or anybody else came along.
We had the audacity to think that an Irish company would go and do something that would become the standard for the internet."
Given his successes with web ventures and impeccable instincts for investment I wonder if he thinks there is a bubble in web stock now?
"No, not even close to a bubble. It might be nice for some people if the cool kids who are making fortunes and driving Ferraris got a bit of a slap, but the reality is that these are profitable companies.
"On Twitter every second tweet is a paid tweet - that's money changing hands. Apple Payments, I heard the number and it's huge, they're getting 70 basis points on every transaction, they can be bigger than Visa."
He's said in the past that the web industry can save Ireland. Does he feel enough is being done in political circles to encourage investment?
"Don't go there. I have such a problem with politicians jumping into shots of success stories that they had no hand act or part in. I've never done a photo with a politician, not deliberately.
"Though I did one in China in Hostelworld. I was on a government trade mission and I went to the breakfast. And I brought our only rep in China, who was at that point working out of her house, and she wanted to meet Micheal Martin because she fancied him. And I went to one of the officials and said (in conspiratorial tone) 'this woman is going to do €30m of business with us.' And I knew that would interest them. And she got to meet him. That was a thrill for her, I just looked on bemused."
At least someone might forgive Fianna Fail. Nolan says he found the bust years somewhat cleansing in terms of our national character.
"I don't think we necessarily became nicer people during the boom. The greed is good mentality was proven not to be good. It suits different cultures but we weren't good at it. We thought we were never worthy to compete on world stage, then we overshot runway on our success. Then we sort of overcompensated the other way, became self-flagellating, sort of like 'you were never worth it'."
He says he has "quite a lot of scorn for those who have been allowed to walk away from their debts. And I'm not talking about Mr and Mrs Average. I'm talking about big developers who landed Ireland Inc with a €500m bill.
"I was in the company of a builder who was taking risks with other people's money. And he was talking about his debts and he said: 'Well they can't get blood out of a stone.'
"I just said to him: 'Right, but do you actually need the soft-top Bentley?' I could spend an afternoon telling you about the Nama five arriving for events in choppers. I remember being in Breakers Hotel in Florida, a pretty high-end place, and seeing Sean Dunne while he was bankrupt, with his missus."
He thinks the tax system here still discriminates against entrepreneurs. "The tax system is still driven by property. You can buy property, sit on it, sell it and contribute no tax. How does it work that the builders who fucked us before are now allowed back in the game? We get what we deserve in Ireland."
He finishes our meeting with an anecdote that illustrates to him a lot of the problems with the way things are run in the public sphere vs his own entrepreneurial world.
"I went to a senior government official with source code for something I'd spent €2m on. I was giving it to them. Six months later they rang me back and I never heard from them. I now know they're about to release something that costs them way more, even though I gave it to them.
"What does that say? Well, I think it tells its own story."
The Karma police really do exist
If I could give my youthful self some advice I’d say… “that physical pain is your body’s way of saying stop. And also that you were right with the integrity thing. When we didn’t have a pot to piss in there were temptations but the Karma police really do exist.”
My favourite toy is... “the one wheel. It’s like snowboarding on the street. There’s an electric motor. It’s an expensive toy.”
My greatest extravagance is… “every now and again I drink a decent bottle of wine. Only with the right people and never on my own. I could count on the fingers of one hand the amount of €10k bottles of wine I’ve had.”
The next big tech thing is… “If you were to ask me where the billion-dollar company in Ireland is right now it’s got to be Ding. They have some great new hires at senior level.”
The brokest I’ve ever been was… “there’s a story that does the rounds in Malahide which says that someone saw me buying 50p worth of petrol. It could be true but I probably just put the wrong fucking trousers on.”
Sunday Indo Business