Brent Hoberman
lastminute.com

In 1998, Brent Hoberman, together with Martha Lane Fox, founded www.lastminute.com, an online travel and gift business that IPOed at the peak of the dot-com bubble and managed to survive the bubble's burst.

Hoberman remained CEO of www.lastminute.com Ltd until 2006. Sabre acquired www.lastminute.com in 2005 for £577 million.

Hoberman also founded www.mydeco.com, a VC-backed online furniture and interior design start-up that provides 3D technology for consumers to design their own rooms online. In July 2009, he co-founded PROfounders Capital, a fund that invests in early-stage internet start-ups. In 2010 he also co-founded made.com a company that crowdsources furniture and sells direct from consumers to factories.

Pedro Santos: What was the original idea behind www.lastminute.com and how did it evolve to become what it is today?

Brent Hoberman: The original idea was very much about me as a customer wanting to be able to buy things on the internet. And back in '95, actually, when I had the idea, there was nothing that I wanted to buy on the internet except for books from Amazon in the US.

So the idea was to do everything at the last minute—that you would be able to do everything from going away, to going out, to staying in—at the last minute. Then within that, it was about inspiration and solutions. In other words, that we could inspire people with a great idea at a great price and we could give them solutions, convenience, and availability for products on a broad range of stuff at the last minute.

Santos: After you had that idea, what was the first thing that you did to actually implement it?

Hoberman: Actually, it was to do nothing, because it was '95. It was too early. So I sat down with a friend and we wrote about ten pages on it, and then we put it in a drawer because we thought it was too early—as I said—because we had no experience on the internet and the market was too small.

So we waited. Part of the game plan was to get real work experience on the internet. So I got ten months of experience in '97, having left my consultancy job, and worked for a start-up QXL, the online auction company. I also worked for LineOne, the internet service provider, owned by BT and News Corp.

So that gave me some experience. And then eventually, I left QXL, saw that the internet was really taking off in '97, and immediately started working on a business plan for www.lastminute.com. I asked one friend to do it first. The guy had helped me years before. He wasn't available, so I then asked Martha Lane Fox. And together we wrote the business plan and we sent it off to about twenty people, of which about half agreed to see us and half of those agreed to fund us. So five of that twenty.

We raised £600,000 for forty percent of the company.

Santos: And what was the original business model?

Hoberman: The original was transactions. Making money on sales and advertising.

Santos: So it kept the same business model all the way through?

Hoberman: Yes. We kept the same business model. Because at the time, I think it was big enough. The other thing we had was B2B, so we would sell the technology to other potential competitors, and also sell products into travel agencies.

Santos: How did you convince the companies to put the inventory in your web site?

Hoberman: That was I think one of the most surprising aspects of it. When you look back in hindsight: that as a really tiny company in the very beginning, we were able to get deals that the much bigger players weren't able to get. And I think partly because we were evangelizing the internet and these companies wanted to be established on the internet. We were sort of like free R&D to some extent, and we also worked within their existing constraints. If they wanted to fax inventory prices rather than send them over even e-mail or anything more automatic, we would resource up the manpower to do that.

So we made that investment, that early investment in both technology and in people to make sure we could work with the suppliers in the way they needed to work with us. And the second thing is we were able to convince them that the sales would be incremental and avoid cannibalization of their core business by listing them in a channel that would be essentially opaque to their core customers and, therefore, not cannibalize their pricing.

Santos: And how did you reach out to so many different types of companies? You had so many industries in there.

Hoberman: It was hard. In the beginning, we had a small team. We had ten people and just a lot of relentless selling. So definitely, salesmanship is one of the keys behind any entrepreneurial venture, I think.

Santos: And was the IPO an original objective from the start?

Hoberman: No. The objective was just to build a great business, selling everything at the last minute, and the IPO just happened as an opportunity as the market became hot and we realized we could—and we needed to leverage the last technology investment of twenty to twenty-five million pounds over a significant base.

Santos: And when you decided to IPO, you IPOed right next to the bubble bursting. Did you see it coming?

Hoberman: We priced the market peak, on March 10th, 2000, which is the day the stock market actually peaked. And we went out on March the 14th.

We increased the price by more than any other European IPO had ever done, I think. And we went public probably quicker than any other European company had done from launching the business to IPO day. About eighteen months from launch day.

Santos: But was it something that you realized, that the market was going to peak? Or was it just a coincidence?

Hoberman: Well, we knew the market was very positive for companies like ours, so we saw that the timing couldn't get much better. But we didn't know how the market would treat us. We didn't know the price would go down ninety-five percent at one point either.

Santos: And how did your role change after the company went public?

Hoberman: Well, you always have a board, but I think the key thing is you have to spend a lot more time with public market investors obviously. Repeating yourself is never a good thing for an entrepreneur. Repeating the strategy and explaining the business to people who are less familiar with it, who are obviously not on your board and, therefore, not as exposed every day or every month to the data. So it's more of an education process and again more of a selling process, constantly.

Trying to sell the future cash flow to that professional investor audience. It's a global audience, so you have to do a lot of traveling for that as well.

Santos: You did fourteen acquisitions. Did you decide to grow only by acquisition?

Hoberman: We grew one hundred percent organically through the growth of the core business. So I imagine that we got to something like £1.3 billion, by the time I left, in gross bookings. Half that business was organic. It was just under the core brand and it was growing at one hundred percent a year over the first, five-year period. The other half was through the fourteen acquisitions that we built, obviously enabled by the large amount of money we raised. We raised about £200 million pounds—about one hundred and twenty in the IPO, and seventy million in bonds, and then I guess about twenty before that. So about two hundred and ten. So obviously, between a mix of paper and cash, we were able to be very aggressive and to buy companies that we saw to be a strategic fit.

Santos: How did you mix all those companies together while keeping a culture?

Hoberman: It's very hard to keep the founding entrepreneurs, particularly in this type of business where the technology is something that has to become centralized or you have to replace all the technology. They don't get the same levels of control that they're used to. But to be honest, it was very much about our belief in the www.lastminute.com culture. So we were really trying to buy businesses that fit in and then could grow into that culture.

Santos: And did you succeed?

Hoberman: Not always. But, of course, with big companies, it's definitely not always. But on the whole, I think the companies we bought were very good strategically. There's probably one or two I wouldn't have done, with hindsight, but that's quite a good batting ratio. And I think where we could have done better is that our core systems, because we were such a fast- growing company, the core systems that we had were not necessarily ready to be plugged in to every type of business. Let's say a French business or a German business that maybe needed a lot of modifications, lots of work on the back-end finances, etc., etc. So some of that slowed us down.

Santos: And in 2005, the company was sold. What led to the sale?

Hoberman: We weren't necessarily for sale, but we had multiple offers. We had three companies looking to acquire us. We were the last remaining independent strategic asset of our scale in Europe, so it made sense. As a public company, you've got to consider those offers. And basically, the fact that there were multiple offers, and we weren't desperately keen on selling meant that you negotiate the best price for your shareholders. So basically, that's what the thinking was and that there were some synergies to being part of a global company.

Santos: Okay. And looking back, what were the main lessons from your experience at lastminute?

Hoberman: The main lesson I guess I'm left with is to have an innovative idea that is slightly ahead of its time, and that the consumers and the media will be excited about that innovation. Another valuable lesson is to have a simple concept that you can explain very quickly to people. If they say, “I want that as a consumer,” and you can see yourself and many of your friends buying from it, then you're probably onto a good thing. Another lesson is that to scale breaks some barriers. In our case, negotiating power with suppliers and the ability to invest in cutting-edge technology. And the last lesson was that we could have done more investment earlier on in the back-end system to be more efficient at the back-end processes.

Santos: Can you give me an idea of the main challenges that you had?

Hoberman: I think it's this constant issue of liquidity of supply. So getting enough amazing deals and balancing that with the right level of customer demand so you're not getting stuff you can't sell or getting stuff that sells out too quickly. And the second thing is that in those days, it was managing a web site, which I guess was one of the biggest web sites in Europe in scale. Being able to scale that effectively without it crashing and all that. And I think also rapid development—I believe that the more rapidly you develop and launch stuff, the more successful you will be. I believe it's the right thing to just launch quickly and often. It is clearly the way to go. I guess I could have had more confidence in our ability to do that. Because it means if you make mistakes, you make smaller mistakes.

Santos: My last question is what advice would you give to new entrepreneurs?

Hoberman: Well, I guess one of them is it's more exciting if you feel like you're changing the world in a positive and innovative way. So launching innovative businesses that, therefore, having the potential to be growable rather than copycats, is more rewarding. Maybe not financially, but emotionally and intellectually. So we'd love to see more of those out of Europe. And secondly, I guess, its tenacity. You have to know when to be tenacious. Or when you're being tenacious and when you're being just wrong. So, that's a tough call. But definitely, you've got to be superbly tenacious, and there will be incredible barriers, and it's always harder than you think. It takes longer than you think and it's more expensive than you think. But it can also be more rewarding than you think.