Phorest’s Ronan Perceval: ‘Start-ups should be under less pressure to sell’

16 Nov 2016415 Shares

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Phorest CEO Ronan Perceval. Image: Phorest

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Phorest co-founder Ronan Perceval was part of an entrepreneurial revolution at Trinity College Dublin in the early 2000s, which yielded a number of successful Irish-born tech brands that are still around today.

When you think of successful rock bands like U2, The Beatles or The Rolling Stones, you often wonder about their origins and the factors that brought the members together, and what made them gel. Sometimes the location, like a school or a recording studio, form part of the myth or legend.

But when it comes to the tech start-up tradition in Ireland, few would realise that Publications at Trinity College Dublin (TCD) – where students ran the radio station, the Trinity News newspaper and various magazines – would be the breeding ground for some of the most successful tech brand names to emerge from Ireland.

‘When I heard Dylan selling advertising on the phone for one of the magazines, I knew I needed to get to know that guy’
– RONAN PERCEVAL

Speaking at tomorrow night’s (17 November) Startup Grind Limerick supported by Bank of Ireland, Perceval originally co-founded Phorest with Dylan Collins and Sean Blanchfield. The company has morphed into one of the biggest scheduling platforms for beauty salons in Europe, with 88pc of salons in Ireland and 19pc of the UK market.

Collins and Blanchfield went on to create Demonware, a multiplayer games platform bought by Activision for $17m. Collins is now active in venture capital while Blanchfield runs PageFair, a platform for countering the effects of ad-blocking on media companies.

An entrepreneurial breeding ground

Phorest’s Ronan Perceval: ‘Start-ups should be under less pressure to sell’

From left: Dylan Collins and Ronan Perceval in their Talbot Street offices circa 2002.

“One aspect of studying in the arts block in particular is that we only had eight hours of lectures a week. And you could usually get a half-decent degree going to five or six of those, and cramming for six weeks in the summer to make sure you passed.

“This left tons of time to get involved with other things; whether it was acting, running the newspaper, drinking, or in me and Dylan’s case, working 35 hours a week in a start-up.

“Looking back, it was a breeding ground for entrepreneurship because the team working on a publication had to sell enough advertising to get whatever it was printed,” Perceval recalled.

“You also had to produce all the content, manage contributors, and manage the operations of getting something printed properly and then distributed in the right places. I was editing a supplement for the Trinity News fairly early on when I heard Dylan selling advertising on the phone for one of the magazines, and I knew I needed to get to know that guy.

“Myself and Dylan were immediately drawn together because we were the only people we knew in Trinity who said they wanted to start a tech business. We tried a few things, including an arts and craft marketplace, or a proto-Etsy called CelticBreeze.com [and] a jobs site called JobsHog.com. It was around that time that Sean arrived on the scene, as a rare like-minded person but importantly, a proper tech brain.

“In our third year, we luckily got jobs working for Oxygen.ie – which was Ireland’s seventh-biggest website at the time. With full autonomy over what we could do, we started and ran No54.ie, which was a Big Brother-style apartment above the office, with five university students living rent-free and streamed 24/7.

“Dylan closed all the partnerships, including €50k sponsorship from AIB [and] a free and constantly stocked fridge from Guinness, while I built the website, despite having never written a line of code before. It launched on the Late Late Show and was the second-biggest streamed event ever in Europe at the time. Over 50,000 Irish people watched the first night, incredibly all over dial-up! Myself and Dylan gained a lot of confidence from the responsibility of doing that, especially because we were still full-time students.”

The dot-com crash of 2000 led to inevitable lay-offs, which Perceval now remembers as a blessing in disguise, because it enabled him to double down and study for his exams.

After the exams, Textbynumbers.com was launched and the start-up conducted one of Ireland’s first mobile brand campaigns for Smirnoff Ice.

Buoyed by this success but convinced SMS would become a commodity, the trio were hunting for the next big thing and Blanchfield, who was doing a PhD in peer-to-peer networking, had a hunch about reducing the cost of people playing console and PC games online.

This was the start of Phorest Networks, the precursor to Demonware.

“This was in the middle of the dot-com crisis, when companies like Baltimore Technologies disappeared and nobody in Ireland trusted tech – and least of all a couple of students out of Trinity – so we found it pretty hard. In fact, it took nearly a year before we closed €600,000, and to keep us going and pay for an office on Talbot Street during that year, we kept Textbynumbers running with the idea of winding it up, once Phorest Networks kicked off properly.

“However, a few months after we completed the raise, had renamed Phorest Networks to Demonware and moved into a new office on Abbey Street, I realised that my heart wasn’t [in] it.

“I couldn’t get excited about [the] computer gaming industry like the lads could, and also felt uncomfortable about the fundraising process. It seemed to me that even though we had just spent a year fundraising, we were already having to plan what we had to achieve in order to make the next raise.

“I had been more excited by seeing nightclubs and travel agents use Textbynumbers to get customers in the door. Maybe a bit naively, I wanted to spend my time running a business and seeing those results every day, rather than selling ideas to investors.

“So I decided to leave Demonware and the three of us came to an arrangement, where I took the name Phorest and the Textbynumbers.com product to help get a new venture started.”

Seeing the Phorest for the trees

Perceval decided that from day one, Phorest would be bootstrapped and he didn’t want to build a business just to sell it.

“Phorest was initially just me and my co-founder Jamie Myerscough, another TCD graduate who had been in Dylan’s class.

“We ran the bulk text service Textbynumbers.com to cover our initial costs while we figured out some business ideas.

“After eight months or so of trying different ideas, we built a simple appointment software which sent reminders by text message to cut down on no-shows. We were very excited with this product, because we thought it would work with any business that took appointments, eg doctors, dentists etc. But it didn’t turn out like that.”

As Perceval recounts in a blog post earlier this year entitled How to Find Your Niche, it was in 2004, a year after he left Demonware, that Phorest began selling software to salons.

In 2005, the decision was made to concentrate 100pc on the salon business.

As Perceval points out, the salon industry is one of the biggest cottage industries in the world, with around 4m salons worldwide.

“It is a whopper industry that employs 120m people, and yet you’ve probably never heard of any tech company operating in it.

“The fragmented nature of it means lots of challenges, but also opportunities. It is hard to get a technically unsophisticated and highly fragmented market to adopt software, but it also means that there is no large incumbent ruling the roost.

“As of today, Phorest runs 88pc of the salons in Ireland using some sort of appointment software. In the UK, we have reached 19pc of the market and [are] growing quickly. We are the largest SaaS player in the UK, as the two bigger competitors have an on-premise solution. We launched in Finland in 2013 and this year, became the number three provider there, and [are] on target to get to number one or number two in the next few years. We also launched in the States in 2014 and that is now our fastest growing market.”

Today, Phorest has 110 employees and is profitable with revenues of around €9m.

“However, that came after a number of years of slower growth from 2008 to 2011, where we struggled to build a proper cloud infrastructure. Building things for the long run seems to pay off for us more and more as each year goes by.”

Perceval said that the key trends driving software-as-a-service uptake in vertical markets are social media, mobile and machine learning.

“As salon owners become comfortable using Facebook on their phones, they are more likely to adopt a solution like ours. The product itself is SaaS but is really a platform for lots of marketing services that sit on top, and many of which we provide.

So for example, we pledge to help salons get their clients back in more often. So we offer them a branded mobile app, lots of different automated SMS and email notifications, a loyalty program, online booking widgets for their websites – all of which increase their retention rates.

“To get a feel for the scale of the platform, 3m hair and beauty appointments are processed through our system every month in the UK and Ireland alone, and there are 12m active consumers in the UK and Ireland who interact with the software on a regular basis; whether to book online, earn loyalty points, or purchase a shampoo in a salon. This means we have assembled the largest data set of what is happening in the industry here. The future of using that unique data set is in developing AI tools to help the salon owner run his/her business better and more profitably.”

Bootstrapping and discipline

Phorest was bootstrapped from 2004 until 2011 when the company did an angel round of €1.2m.

“We don’t intend to do another round of funding if we can help it, because we are of the belief that the real opportunity in this industry is over the long run of over 20 years, and if we raise more money, then the outlook of the company will naturally become more short-term, as investors need a return within 5-7 years.

‘In the last 18 months, a number of very exciting businesses were sold that I believe could have gone on and potentially become the next Kerry or Ryanair’
– RONAN PERCEVAL

“Could we have got to this point faster if we had raised more? Probably. But I believe the insights into the hair and beauty industry we have learnt over the last 10 years set us up for a very exciting next few decades. And if we had raised early on, when we hit pretty ropey times, I think we would have been under pressure to exit, rather than spend the years we did figuring things out.”

This stoical approach to growing a business informs Perceval’s feelings on the entrepreneurial scene in Ireland in 2016.

“People sell out too early in my opinion. This isn’t to rain on anyone’s parade, because I know how hard it is to get a company to any sort of scale. But once a half-decent offer comes along, not only are your investors keen to realise their investment, but it means you would be financially secure for life. It is very hard to turn down.

“Once a company exits, it usually means the end of the road for that idea. I know there are exceptions but they are very rare. In the last 18 months, a number of very exciting businesses were sold that I believe could have gone on and potentially become the next Kerry or Ryanair.

“So how do we change that mindset? One way is for companies to bootstrap or be more self-funded, because then they are less under pressure to sell. Another is to encourage a situation where entrepreneurs can take more off the table, so that they aren’t under financial pressure or temptation when an offer comes along. I know the top guys in Enterprise Ireland are thinking deeply about this and am hoping to see some changes in policy from them around this.

“In the past 12 years, how many Irish businesses have gone to IPO?”

Perceval explained the key thing that has set Phorest apart has been its approach and how it sees itself.

“We don’t consider ourselves a software company. Rather, we are a hair and beauty company, on a mission to help salons get their clients back in more often, spending more.

“We have a long-term mission and have attracted, and continue to attract, people stoked by that concept. Particularly, people burned from working their ass off for a company that gets sold and then the culture changes for the worse.”

While Perceval isn’t a Limerick native, he spent his formative years in the county as a student at Glenstal Abbey; past students have included the Web Summit’s Paddy Cosgrave and Frontline Ventures’ Will Prendergast.

“One thing about Glenstal is that it is run by Benedictine monks, who are well known for being the most entrepreneurial of any religious order. When we were there, the monks were running and starting enterprises all the time. They were making and selling honey, wooden furniture, and music (they had a number one hit when we were there). They were also incredibly good at marketing themselves as a product, something Benedictines all over the world excel at.

“The monks were very relaxed and encouraged you to try different things and develop your own interests.”

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com