By Amanda Morrall
Tim Williams left New Zealand in 1993 with NZ$2000 in his pocket, a gutful of ambition and a small notebook of business ideas he'd kept since childhood.
He returned to New Zealand less than a decade later having pioneered one of Japan's most successful internet marketing businesses.
Williams, who this month joins the Icehouse as a director, spoke to interest.co.nz about how he made his riches and offered some advice for would be Kiwi entrepreneurs.
Q) How did your story begin?
A) Well, I was always interested in business but I was working at the Auckland University Department of Molecular Medicine, which was a great place to work but I had, shall I say, a very difficult boss arrive one day and I could see how difficult life was going to be if I stayed working for that person. I decided to visit my brother who was working at the New Zealand embassy in Tokyo. I had a view of going to Asia and visiting him on the way to China. That was the catalyst for a question mark at home about what I was doing.
Q) You had an idea of going into medicine but ended up in internet marketing. How did that happen?
A) I left New Zealand with NZ$2,000 in savings and when I arrived and crashed on my brother's floor in Tokyo, where a beer was NZ$10, I realised I wasn't going to get very far with NZ$2,000. I found Japan and the people very nice and my brother was integrated so I got to join various clubs through him. I had a great time and then thought I couldn't go to China with what was then NZ$1,000. So I gave myself six months to give Japan a go.
I didn't have a distinctive plan about how I was going to set up a business. I had a look around and ended up teaching English at a junior high school. I was teaching four days a week, and only 12 hours a week, so I had a lot of time to think about what I was doing and every week was a three day weekend. So I used that as a base. After doing that for a time, I thought 'well, Japan has a large population (130 million), it had the second largest GDP in the world (at that time), people loved technology and credit card penetration is huge; every person has about two credit cards.
Having a lot of time on my hands, I was reading Peter Drucker and trying to assess the macroeconomic trends. I thought there could be something done in terms of I.T. and the internet so I was looking at the macro-environment that I was in. That cast me towards a technology based business. I didn't know how to speak Japanese or anything about technology so it was a realisation process and then it was "how the heck am I going to do it?''
Q) So how did you do it?
A)I landed in Japan in late 1993, spent a few years learning the language, part-time teaching, hatching ideas and travelling through Asia a lot, then in mid 1996, my business partner and I started a business called TransPacific. It was quite hilarious because I had a little note book that I'd kept from the age of seven or eight and I'd always been interested in property for some reason. I had this notebook full of silly ideas, some of which were irrelevant by then but my business partner had a similar book with all his ideas. We had a BBQ and shared and rubbished one another's ideas and eventually came to agreement that the internet was the place to start.
The advantage for us at that time was that in America the Internet was just starting to move and it was English language based. We could look at the trends in America and there was almost nothing in Japan. There were a few shopping malls coming out at the time and we used that as a learning ground for first ideas. We thought 'why don't we provide a hosting service for websites and sell domain names?' My partner's brother in law is a programmer so we asked him to make a hosting service and we launched one in early '97 and started selling hosting packages and domain names whilst keeping separate jobs.
TransPacific grew to NZ$1 million in turnover in three years. It then morphed. The hosting domain business is very nerdy and we could see it was going to become commoditised. We were selling packages for NZ$150 a month and today you can get the same package for NZ$5-NZ$10 a month. We took every single cent we had in the bank (yen) and we bought a licence from an internet marketing company in Santa Barbara called ValueClick. It was a click based advertising system so every time an internet user sees a banner add or a text link and clicks on it, the advertiser gets charged. We brought that to Japan in late 1998.
At that time ad agencies were flabbergasted you could do it, it was really the first packaged internet media product available to ad agencies. It went crazy and we took that company public by May 2000. It went so quickly that we were growing and growing. I thought advertising is one thing...the long-term sensible thing to do was to form a sales channel and that would be ideally the way sales people work, which is knock on doors, sell product and make a commission, go home and repeat as often as possible. The US shareholder told us they weren't interested because they were doing so well in the U.S. So I decided to make the system through another company named ValueCommerce. We launched in November 1999, after a year of engineering to make the system.
Q) How did you fund your businesses?
A) The first business we'd made, we bootstrapped it. We started off with no salary, trading bottles off whiskey for second hand equipment, sleeping in the office. We used to take the curtains down each night and sleep under the curtains because we didn't want to go home. We had no money and we just did every thing with cash flow. With ValueCommerce in '99 the tech space was a bit bubbly. When I was in the middle of doing the development work some venture capitalist rang and offer us some investment money but I said I was busy and to call back two months later. He rang back two months later.
To cut a long story short, with the Value Commerce business we went the aggressive route, which is raise a lot of money and build the business quickly because everyone at that time was doing it quickly. We raised NZ$38 million from the private equity markets in the space of two years. I was 28-29, we went from three employees to 200 and being that age with that kind of background of course you're going to make mistakes. We were also fuelled by the banks who were saying you've already done one IPO, get this thing going as fast as you can and rollout another one.
We created the brand very quickly because we got a lot of customers and because we were the first in that space we had first mover advantage so we grew very quickly. We were massively loss making for the first two or three years and when things slowed down the shareholders were very reactive. We went from a stage where some of them were demanding their capital back. We rejected that because we knew we had a good business, we did some restructurings, which I wouldn't wish on anybody. Fundamentally as the bubble burst the world changed and everyone was very conscious of how they were spending money. Ironically, as the economy grew worse, our business got better and better to the stage where in 2004 we could have gone public with that company.
Through friends of friends we started talking to Yahoo Japan. Like many of those discussions, we'd come together and then divorce and then come back again. They wanted to buy the whole company, we wanted to take it public. We ended up selling 49% of the company to them. It was Japan's first ever private company tender offer bid and I was in the middle of getting 1,000 different pieces of paper from 108 different shareholders in seven different countries which was quite nice to finish. We got a very nice price for that half of the company. With Yahoo on board we grew the business, did a lot of work together then listed the company on the Tokyo Stock Exchange.
Q) How's the business fared through the global economic crisis?
A) From a stakeholders perspective sometimes the prices were better then they were today. The fundamentals are that the business grows each year. We did NZ$100 million in turnover, NZ$7 million in profit last year. From the time we went public, it's been building up a war chest. We sit on NZ$60 million in cash and every month it keeps growing and growing.
The lovely thing about the exchange is we have 2500 advertisers, we have 40 million products in the product data base. They're all based in Japan, we have the entire Yahoo shopping data base as well as the Amazon Japan data base, and all the major e-commerce players in Japan. We serve about 15 billion ads a month. Somewhere between two and three million a day will click on an ad and of those 3% will buy something. The average transaction price in Japan is NZ$150. So the business facilitates in excess of 1 billion of turn-over quite easily. It's staggering to think that something that big started off by two people sitting talking at a table.
Q) Is it skill or luck or a bit of both that drives big success?
A) We'd all love to say its skill. But I think when hard work and opportunity collide people form the luck. In our case, definitely the timing was perfect. The best thing I ever did was read Peter Drucker's book and look at all the macro things.
Q) Any cautions for budding business owners?
A) I guess maybe one other factor is your stage of life. At that stage, mentally I said to myself 'well I'm going to try my best to succeed in business until 35 and then if not I'd call a spade a spade and I'd fall back on my scientific background.' So I had nothing to lose. The only person who was going to be affected by my decision was me. That allowed me to take a lot more risk than many people would and that involved personal guarantees and things. Some pretty crazy things, I can say now looking back with a smile on my face.
If you want to go into business you have to look at your life stage and decide how much risk you can take. It's always easier if it's just you because you only have yourself to pick up. I think if you are going in with anything under a four year time horizon you're dreaming. Of course, there's always exceptions where someone makes a massive success in a year or two like we did with Value Click but that's the exception not the rule.
You have to have that time commitment, then the plan itself, especially in today's age. Unfortunately, capital markets are tight at the moment, so you'll have to be pretty creative in terms of the capital you can get. The amount you can get is harder and you'll have to be more careful in the way it's used.
Q) Do you still see opportunity still in Japan?
A) Yes, in terms of the internet in general there is still a lot of opportunity. I think a lot of it lies in with taking some of the existing old business and trying to add a modern way to doing things to that. As an example, five years ago we bought out a little photo restoration company in Albany that had wicked software tools to fix damaged photos, so an operator could digitally enhance it and print it out, and if necessary, could colourise it. We took that idea to Japan and to America, where now if you go into Wall Mart, or Wall Greens in America and go up to photo kiosk there's a photo restoration unit which is our business.
That business has been doing quite well and we're trying to expand that into school photography in New Zealand which has been the same for 80 years. So we are working on that, I don't know how it will go. It could be anything that people take for granted in daily life. I think there are many ways technology can be used to take profitable business sectors and make them better or share in the profit of those. That's where it's probably easier to create niches rather than try to become the next Facebook.
Q) Is passion the driver?
A) I think by default you have to have a lot of drive. I think by default I'm optimistic. You have to be fast to let things go. If something doesn't go your way, rather than brood about it, you have to let go and just have a never-give-up attitude. I think as long as you can stay motivated and never give up, theoretically you should be able to succeed at most things. I think it's when people get depressed or when they're doing it on their own, they can get into a negative spiral. We went through tonnes of dark times but you have to man up or front up, or do what you have to do, and say 'That's yesterday', look at tomorrow and keep going. So many people say 'That's too hard, or that's too risky' and if you listen to those people you shouldn't go into business. You have to say to yourself; 'What everyone else says I don't care about for four years' and if you're not making head way then I guess you might reassess things.
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