CEO at Fastpayhotels
Alex is the founder and CEO of Fastpayhotels. Fastpayhotels launched in 2016 as new B2B hotel distributor. The company was awarded Start Up the Year by Travolution UK in 2016. Alex grew up as the son of a hotelier and worked in hotels when he was a student, in Venezuela and in Spain. His first job after university was working for a Spanish tour operator. From there he joined Thomas Cook, followed by positions at Opodo and Expedia in increasingly senior roles. At Expedia Alex was Online Partner Marketing Director, leading the marketing efforts across branded affiliates, display, metasearch and various other online Expedia partnerships. His last job before becoming an entrepreneur was with Low Cost Travel Group where he was COO and observer on the board. Read moreView Profile Page
What prepared you to make the leap into entrepreneurship?
I grew up as the son of a hotelier and the son of a travel agent who was indeed an entrepreneur. I worked in and around hotels when I was a student, both in Venezuela and in Spain. My first job when I left university was working for a Spanish tour operator. From there I worked for Thomas Cook, Opodo and with Expedia in progressively senior roles. My last job before I became an entrepreneur was working for a company called Low Cost Travel Group where I was COO and I was an observer on the board as it happened, for that business. I think what happens as well is that if you grow up in an industry and you learn it back to front and live and breathe it. The nuances of how things change over time and identifying gaps and opportunities within the industry obviously become more of an instinct than a data driven decision.
I’m aware that an awful lot of people will come out of MBA schools and identify data and identify a gap. For me there was a high level of instinctiveness, an instinct in making a decision on where I wanted to set up my business. That being said I was fortunate to have a good education which did allow me to put together the right business cases and the right systems to be able to make some intelligent decisions about why I wanted to set up my business.
As it happened, my best experience was working for a business that, well, I worked for two very different businesses as my last two jobs before I became a businessman. I look back now, I worked for Expedia which was insanely well run, very smart people with a highly strategic lens on everything. I followed that up with a business that was very poorly run, with not as smart people as Expedia to put it politely. I think the contrast of seeing a business degrade itself and run itself badly was probably in my view the best thing that I saw. When you go from something that’s incredibly well run to something incredibly badly run, you learn about what good management looks like. I’m continuously aware that, certainly as I hire people that walk out of businesses that are very well run and come and work for us. I gather huge amount of intelligence from learning where businesses are well run, but there’s nothing like a failure to teach you when things run badly.
I found that process, going from Expedia to Low Cost for example (I left the business and about a year and a half later it went to the wall), I look back now as a businessman and I can make decisions and it makes me realise when I can see businesses moving forward towards a well run Expedia type position to a business that went to the wall and understanding the consequences of bad decision making and taking unnecessary risks etc. That kind of insight is what drove me to setup my own business.
In narrowing down the business plan, were there any frameworks that you deployed or did you rely on your deep understanding of the mechanics of the industry?
I was aware that I needed to raise money to get going, so I had to find first principles and frameworks that were… You can come up with a lot of clever spreadsheets and to be fair, one thing I’ve learned is, any spreadsheet you can manipulate to tell you what you want it to. After a while, it’s so late that evening, you’re so desperate to make sure it all makes sense, (because you’ve already quit your job at that point), you can make the spreadsheet tell you what you want it to.
So every metric has to come across a sensitivity analysis and then you’ve got to literally go against the most negative view on all of your sensitivity analysis and do that. Even then things made sense, that was quite a powerful process that we went through as we built the business idea. Certainly what I learned is, it was great to have a partner that just… I’m a very positive commercial type person and she’s a very technical operational person. She continually knocked down my assumptions by 60%, she said if I can cut down 60% of your optimism and this still makes sense then we’ve probably got something. That was quite a healthy process.
How did you manage this uncertainty around the solidity of the business model and the accuracy of the numbers in such an early stage venture?
You’ve got to go back to the core at that point, which is why you had the idea in the first place. I found that bringing people with me on the data and emotional journey made sure that they jumped on the same train, that is the same. Whenever I sat down in front of someone for the first time and said “I’ve had an idea, this is the idea”, people would say “Well how did you come across this idea, what are you thinking?” and you say “I happened to be sitting in an office in Amsterdam and this data came across my eyes and this is what I thought was the future etc.” That, people understood.
Everybody knows that you can manipulate a spreadsheet to say whatever you need it to say, but what you can’t modify is “Here’s an idea that I had based on this dataset, based on this trend, based on my experience.” That I found, people were much more willing to engage with than a business plan or a sensitivity analysis. Because data can be manipulated but the trend was there and I was able to sit in front of people and say “I spotted a trend, I think this is how I want to capitalise on this trend, here’s my take on the business model that we can adapt for the trend that I’ve seen.”
People like that original story a lot, people said “There’s integrity to your pitch and there’s an inspiration to your pitch which I can identify with.” That’s how I found I negotiated those early weeks and months. Because people said “I can see how you’ve got to this conclusion, it’s not Pie in the Sky, you’re not a crazy guy and you haven’t come up to me with this incredibly powerful spreadsheet (which I’m never going to actually check or read through, I’m just going to look at page 45 of the cash flow, P&L and balance sheet projections on the back of your memo)”. But at this stage of the investment no one is running massive due diligence on the value of your spreadsheets, but people do want to know if there’s an integrity to the reasoning that you’ve put together. The more detail you can give on that eureka moment engenders an awful lot of goodwill and credibility.
How did you go about financing the business and selecting investors?
Nothing says “Please give me your money for this venture” quite like putting your own money in. Skin in the game is a big deal, there’s no way I would have pulled this off if I’d walked in and said to someone “My kids go to a nice school, I drive a nice car, I have a nice home, I’m not willing to risk any of that, but by the way I’d like some money from you in my business.” That as a first time entrepreneur, maybe if I’d done it three or four times it’d be a different story, but as a first time entrepreneur, skin in the game is a big deal. I was very clear on that with my Angel Investors. I said “Look, this is how much I earned, this is my salary, this is what I own and this is how much money I’m putting in, I want you to understand that what I’m putting in is a lot of money. For me, not for you because you’ve got a lot more money than I have.”
That was the right approach as far as I’m concerned, skin in the game. I looked up regional funding, soft loans, development funds etc. I applied for a couple of grants and that sort of thing and I landed some of those, they were very useful. Those regional, institutional type things, while they’re a bit cumbersome, (I’m based in Spain, they’re even more cumbersome here I suspect than in other parts of the world) but there’s quite a lot of credibility in those things. Even if it’s a tiny amount, Angel investors will say “Listen, you’ve cleared the hoops of quite a lot of bureaucracy, there must be something solid about what you’re presenting because not everyone has access to this kind of funding.” So I got some soft regional government grants, I put my own money in and I really took risks, genuinely took personal loans, mortgaging houses, credit cards etc, I went for it.
We raised initially around €2,000,000 and the rest of it came from three Angel funds. If you’ve got the right story and you’re doing it with integrity and you’re the right personality, we were lucky enough to find not just Angels, but actually good Angels. One of the things we were very clear on as founders is that we weren’t willing just to take money, we actually want to take Angels that could give us more than just money. For those first two and a half years we ran the business like quite a formal board, because those Angels, at that initial stage were able to take us aside and bring up things you don’t ordinarily think about. For example we took our third and fourth employees on and one of the big decisions we needed to make was, was this a business that was going to have laptops or desktops.
It’s a really silly decision, but actually as employees, someone has probably made that decision for us the whole of our employment life and we’d walked into offices and they said “Here’s your seat, we use Samsung, we use these kind of printers, we use this kind of intranet and this is the kind of laptop or desktop you get to use.” When you start having to make decisions yourself, just having angels that said “Can you tell me how you do IT, who installs your printers, how do you manage your office, how do you pay your electricity, which bank do you usually use?” Really weird decisions that after a while become obvious to the entrepreneur but the first time you do it, they’re kind of strange because as an employee you’ve never had to face these kind of things.
It’s quite good to have Angels for that kind of reference and say “What day of the month do you pay your salaries to your employees, on the 25th, the 28th on the 1st? Why should I pay them on this day rather than that day?” Silly things like that, having someone as an Angel that’s done that kind of stuff, for us added value because we were worried about things like ‘how do you pay a salary? Do you need a checkbook?’ because we just didn’t know anything about all of that kind of stuff.
How much time did that take you?
It took 5-6 months easily, all the time you’re gaining momentum, but it’s exhausting because settling the business in and making it operational and signing up customers and suppliers is a full time job. Setting up the core components of the business, having an office, recruiting, interviewing is a full time job. Then dealing with investors and pitching them and understanding on which day they’re going to give you the money and under what terms, the shareholders agreement, is also a full time job. But there’s only one of you and you’re essentially running three full time jobs. That is an exhausting period obviously.