Four or five weeks ago I read the news about Phorest’s €20M funding round. You probably read it too.
Phorest is a salon management software used by thousands of beauty salons and millions of customers around the world. I’ve talked and interviewed Phorest CEO and Founder Ronan Perceval many times before. He’s also one of the startup leaders here in Ireland that I regularly reach out to for advice and feedback on my own work, in the Commissioner role and more recently with TechIreland. Phorest was also an early sponsor of TechIreland.
Ronan has written and talked a lot about the value of bootstrapping, and about building companies that last for decades, so I was excited to sit down with him last week and hear about this new phase in Phorest’s development, including the story behind this impressive new funding round.
For our full and expansive conversation listen to the 36-minute podcast here. Meantime, below are some key paraphrased takeaways from yours truly. Thanks for reading, Niamh
The Back Story:
- Phorest was founded in 2004 and remained bootstrapped until 2011 when the company took on a seed round of €1M from Enterprise Equity, a syndicate of angels, HBAN and EI. Bringing these investors on board helped us to become better structured and brought us a great chairman in Pat Garvey.
- Before the €1M investment Phorest was not growing that fast, about 10% annually with revenues of €1M. Now, we’’re growing 40% annually.
The Phorest philosophy:
- It’s always been really important for us to stay in control of the company. We want a shot at building a company that will last for generations and I want to spend my career working at Phorest and then somebody else will run it.
The how and why of the €20M funding:
- Your investors are not around for 50 years. They’re around for 7 or 10 years tops. Our investors were waiting for an event (an exit) to happen and that’s fair enough. We’d also grown a lot so they were going to be making a decent return.
- We wanted to keep doing what we were doing and we didn’t need to raise money but then it dawned on me that we were going to have to do a funding round to realise that event for our investors. I didn’t have any money personally to buy them out, and we would have had to take on huge debt to do that, putting pressure on the business, or go with another 3-5 year play, and we didn’t want that.
- We managed to find funders that were evergreen, long term funders. Family money is technically evergreen money, but it was important that our investors also understood SaaS. So we went with Susquehanna Growth Equity (SGE) who are based in Philadelphia. Their money comes from a SaaS business that’s 30-40 years old and is still 100% owned by the 3 founders. They know SaaS and only invest in SMB SaaS whereas the expertise in Ireland is more enterprise SaaS. Plus, their investment was a long-term play.
- The headlines talk about funding of €20M, but only €5M went into Phorest. The rest went to our old investors so that money is gone and those investors are very happy. At the same time, we still have majority control of the company. EI is still invested which is important because they’re supportive of founders, and the other old investors that remain know there may not be another event for a while. If it’s 20 years, it’s 20 years.
The company’s vision then and now:
- If anything our vision is even stronger and we have investors who are really aligned with us. I’ve talked and written about the way I feel about building companies for the long-term and about bootstrapping many times before. Writing about it helped me to articulate it but it was still just a concept. The way we talk about the company now is that it’s “evergreen”.
- Evergreen is about going for the long run and being in control of your own destiny. It took me over 10 years to understand and articulate it. We can’t just kick that can down the road, we’re clear about that now.
The evergreen message:
It really appeals to people who’ve worked in startups that have blown up really fast with loads of funding and then gone sideways. It also appeals to companies who are having trouble with investors. People who’ve been in it really relate to it but others who haven’t don’t get it as much.
Perspectives for young companies:
- There are people I mentor now who are building SaaS tools. They need to do what’s right for their businesses and raising money sooner might be right for them, but I encourage them to keep the business as lean as possible, to build out the customer base and product as much as they can before going for funding. And because they have 20 customers, not 100 customers, they’re building relationships, building confidence and making better decisions. And that confidence comes from achieving good results rather than from just having a lot of money.
- In my experience, I want to come into work every day because I’m proud of our product and our relationship with clients. Those things mean more to me than having success with funding rounds. And, if our people are passionate about doing a good job, it’s harder for us to be beaten and easier for us to win. That’s a competitive advantage for us.
Aspirational 2030 headline for Phorest?
- By 2030, I’d wish that Phorest is talked and written about in the same way as other evergreen Irish companies, like Kerry Group, CRH, and Glanbia. Companies that are based out of Ireland and are truly international leaders, that are doing it out of Ireland and don’t have to be anywhere else to be the largest in their industry. There’s no reason why Phorest can’t be that company in the salon industry.
2030 Aspiration for Ireland?
- Obviously, there are short term things like housing. They take longer than they should but eventually they will get fixed. Longer term, the aspiration would be that Ireland have more companies on the Irish stock market. I don’t think there’s been a major company, a major brand, IPO on the stock market here in 15-20 years. It would be really nice if every 5 years or so we produced a company that’s the best in the world at something and that creates a whole ecosystem of companies around it, the way Kerry Group did. We’ve an amazing food industry in Ireland with loads of food companies who’ve come out of Kerry and get their confidence from that. It would be nice to see that. Like Iona. There hasn’t been another Iona. Yet.
Thanks for reading, Niamh Bushnell
Published: August 2, 2018