The dealmaker: Fred Karlsson on the lessons of start-up life

5 Jul 2017

Fred Karlsson, co-founder of and PurpleTag. Image: co-founder Fred Karlsson says it’s easy to start a company. The difficult part is making it a success.

“It really has become a household name, hasn’t it?” exclaimed Fred Karlsson, when I tell him how my mum is always asking me to “go onto the DoneDeal” on my phone and fetch her a price for something or other.

Fred, a native of Sweden, founded in 2005 with his Irish wife Geraldine and, by 2015, the classifieds service had become one of the nation’s most trafficked sites, with more than 600,000 visitors a day and more than €4.5bn worth of goods traded.

‘If you get a chance to be part of a start-up, even if it fails, you learn so much’

Future Human

In 2011, Norwegian media player Schibsted acquired a majority stake in the company, soon growing this to 100pc. In 2015, Distilled Media Group and Schibsted merged with Distilled Media’s properties, and

Today, the Karlssons are early-stage investors in online companies, with a strong focus on product and market fit, analytics and growth.

Fred, who will be speaking at next week’s Bank of Ireland-supported Startup Grind in Dublin (12 July), showed early entrepreneurial flair at the age of 14 when he bought and sold video games.

He came to Ireland in 1997 after he finished university to work in the technology industry, and soon found himself working at PC manufacturer Gateway 2000.

“Back then, Dublin was an easy place to move to and Gateway arranged everything for me in terms of banking and taxes. My plan was to live in Dublin for six months, which seemed like a lifetime to someone just out of college. I ended up staying for a further three years because the tech scene at the time was booming, and companies – just like today – were throwing money and perks at you.

“I then met my wife-to-be Geraldine, a Wexford lady, and after we started going out, we decided to travel and we lived in Australia and eventually, we wound up back home in Sweden.”

The genesis of the idea for was sparked while the Karlssons were living there. “Sweden was a bit ahead of the curve and my dad was using these sites to buy and sell items, which was interesting at the time because, back in Ireland, older people still hadn’t begun using the internet.

“It was while we were trying to sell an apartment-load of Ikea furniture that we were amazed that we sold the lot within three days for cash.

“But in Ireland at the time, if we were looking to buy second-hand furniture, it was only in small ads in the back of the newspaper.

“We knew there was a huge opportunity. Rivals like Buy and Sell were dabbling with the web but were basically doing print stuff online.”

Returning to Ireland – and Wexford specifically – Fred rekindled the entrepreneurial spirit he had when he was 14 and decided to put some serious effort into

“When I wasn’t working for a tech company, I was always consulting. I was always a bit of a free spirit who dabbled with ideas but never gave them a proper chance. But this was my first real effort at it.

“When we started, we did it part-time. I was working for a bank and Geraldine worked at Microsoft.

“As the business grew, I committed to it full-time and then Geraldine joined full-time. We hired our first employees in 2009.”

The detail in retail

Like most entrepreneurs, Fred found it easy to start the business up but discovered that sustaining it and building it was a wholly different matter.

“Because I was a programmer, I had no problem writing the website at first. And we launched it and thought that would be it. We learned very quickly that launching was just the start, but learning what people really wanted was the hard part.

“For example, Irish people are Europeans, but definitely think slightly different than Swedish people. Because of the size of Sweden, it could take 24 hours to drive to some places; there was a big emphasis on a map as the centerpiece, but not so much in Ireland. Irish people love driving and an Irish person would happily drive from Dublin to Wexford to save €10 on a table but would spend €30 on petrol, whereas a Swedish person wouldn’t drive to the next town.”

When launched at first, the site had no inventory and placed ads for free for users, before switching to the paid model.

“When we launched in 2005, there was already a Craigslist up and running in Ireland and they were pushing into different countries. They started off strong but never sustained it in Ireland. We also looked at how eBay was doing things and realised that there was a need for a service that advertised goods at a certain price rather than auction.

“We placed a huge emphasis on making sure older people could use the site because they were the people just arriving on the internet in 2005 for the first time. We also always emphasised the personal touch, and that resonated with the public.”

Proving that you could build an internet business from anywhere – provided you have broadband – the Karlssons set up in Geraldine’s native Wexford.

“We consciously set up business in Wexford when we started. We figured that with any business in Ireland, you are going to spend a few days a month visiting Dublin, but why not work where we wanted to live?”

The only challenge to this, Fred said, was recruiting tech talent. But this ultimately turned out to be a blessing in disguise.

“We needed programmers, lots of them, and they weren’t living in Wexford. But eventually, we found people who were looking to move to the country and settle down to raise a family. Wexford was the ideal place for them. We read all the time about IT companies struggling to keep programmers for more than one year, but we found people who were living in Wexford for lifestyle reasons and found it a great place to work and raise a family and, as a result, we had very low turnover.”

Another thing that worked was putting effort into customer support. “We saw this as an essential piece of marketing because the better the experience a person who was selling something had with us, the more likely they were to keep coming back. And they did. It was powerful.”

Tech valuations are crazy

The Karlssons exited from two years ago and now spend their time working with other start-ups.

“We are active on boards and as investors, we give guidance and support. In some ways, I miss the life of running one company where you focused only on one thing, the business, but being able to work with a number of different websites and founders is a privilege.”

Compared with today, starting a business in 2005 was a very different affair.

“It’s a great time to start a company in Ireland because there is so much support out there. Not only that, but there are experienced entrepreneurs like us who are happy to give our time. All of these accelerators and incubators didn’t really exist back then and remember, we were in Wexford.”

His key advice to would-be or existing founders is to always be cognisant that it is easy to start a business, but it is far more difficult to make it a success.

“What I am seeing out there is that it is harder and harder to come up with original online ideas without stumbling across someone with the same idea or a similar idea. The competition out there is so fierce.

“At the same time, if you get a chance to be part of a start-up, even if it fails, you learn so much.

“It really opened my mind. In hindsight, when we started, I was doing it as a techie who could program, but suddenly I was doing other stuff in terms of business decisions, marketing, relating to customers – everything that needed to come together for a business to succeed.”

Despite the booming start-up scene, Fred feels that some of the valuations being applied in the US are off the charts.

“This is because people who are professional money-raisers are getting involved. But some of the valuations early-on are totally crazy and I’m not sure it’s healthy for the overall internet industry,” he concludes.

“People are being distracted by valuations when what they should really be thinking about is their prime focus: what is the product, who is the customer and how does all of that match up?”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years