Hotels.ng CEO, Mark Essien, is one of the few successful Nigerian startup founders with a technical background. His online hotels booking and reservation startup recently raised $1.2 million in funding from EchoVC and Omidyar Network.
Techpoint caught up with Mark Essien at Hotels.ng’s new office building, where he shared his experiences building the company, from generating revenue, to raising funds and recruiting intelligent staff.
First of all, congratulations on securing $1.2 million funding and on this new office
Could you tell us a little about your educational and professional background?
My primary and secondary education were in Ikot Ekpene, Akwa Ibom, Nigeria. Then I went to Germany for my Bachelors in Computer Engineering (Hardware, Robotics) at Beuth University, Berlin. Finally, I did my MSc in Computer Science at Freie University Berlin, also in Germany.
My very first job was working in the cinema as a ticket tearer. I was only there for about 1 or 2 months. After that I left and went to work night shifts taking care of a paralysed man. That was where I learnt my programming.
This was while you were in school?
No I hadn’t started school yet. Nigeria is among a list of 30 or so countries from where you cannot go to university straight up in Germany. You have to do a year of something similar to A levels, before you can go to university. I also didn’t pass the mandatory German language test so, I had to do an additional 6 months; in all one and a half years. It was during that period that I was doing these jobs.
So I was learning programming during my night shifts taking care of the paralysed man. Within 3 months, I had developed a file sharing software which was acquired by a big software company. They shut it down shortly afterwards. At the time I only knew how to write code in Visual Basic. But when I joined them, they were building the same kind of software in C++. I was given a book to learn it, 2 weeks after my boss came back saying “you must be ready now, let’s start”. That was basically my work experience and it gave me a lot very advanced knowledge in programming.
So you came back home immediately after you completed your Masters degree?
Yes. There was a gap between my Bachelors and my Masters. It was during that period I created the first version ofHotels.ng. It was nothing more than a list of hotels at the time. But immediately I was done with that, I left Germany to come home and actually build it into a business. I was sure that I wanted to come back home. I was just looking for a technological company I could build that would work in Nigeria.
This was around 2012 when eCommerce was beginning to rear its head in the local scene. How did you decide that building a Hotels booking platform would be viable?
There is a philosophy that I came up with in 2008. It is actually a blog post which I never published. But I go and check it every now and then. It outlines that for you to do anything that will actually be successful, you cannot have preconceptions. You must be flexible. You have to go and discover what will work and then do it that way. It’s a hard world out there, you have to find what you have to do to survive. You need to be able to switch your mentality from a certain sense of enlightenment. It’s a bit abstract but, many people feel like the thing that will work is in them, rather than from the outside. All you can do is fulfil it from the outside.
So once I had that mental switch, I became very focused at looking at what the market wants, not what I want, and if I can go in to fulfil that. Picking hotels was basically a function of understanding that this was something that worked in many markets and could potentially work in Nigeria. After making those two assumptions, I then tested them in the real world. So I created the website, I kept it on there for many months and I could see people showing real interest in it. So I knew that it would work. And if it hadn’t I would have kept trying something else till I found something that found potential to become much bigger than it was. So that’s why I picked hotels. It was simply based on analysis.
How easy was it making a business out of Hotels.ng?
I think the first problem was not how to make a business out of it because it would have been impossible without capital. The first problem was getting the capital. Besides that, it was challenging but in a normal way. I don’t think my experience creating it would have been much different form any other person that is creating any business. Obviously it was hard, but its hard for everybody. There is’nothing extra-ordinarily hard about it.
After raising a total of $250k in seed funding from Jason Njoku’s SPARK in 2013, you didn’t raise any further funds until this year. I am curious, how were you able to manage that? Most startups would fall into the trap of burning their seed funding too fast.
We did burn the money relatively fast – we spent the $250,00 in a year. I know, it seems difficult to believe. You see, one always thinks the money is so much but it’s never actually that much. One thing is the salaries. Salaries are the biggest expenses by far. All the rest will be small compared to the salaries you have to pay.
We weren’t spending that much but we had a few significant expenses. If you are spending $20,000 per month, in 10 months you’ve spend $200,000. That’s roughly how we were operating. Obviously there was absolutely no revenue in the beginning (2012). So at the beginning of 2013 we then raised the first $75,000 from SPARK. We got the next round around July, 2013. By January of 2014, the money had finished and we survived. It wasn’t that difficult because we made revenue. For the entire 2014, we made enough revenue to keep the 25-man team alive and working well, till we were able to secure the recent round of funding.
Many people don’t achieve it so why didn’t we die? I’d say that first of all, it was because we are in a relatively big market. Second, at the point that we were living on revenue, everybody working in the company had their income tied to our overall revenue. Also we were quite focused on our revenue drivers, nothing outside of that, and because of that we were able to make those revenue drivers work. I’d say most of it is that we were just in the right market. When you are in the right market, you will survive, because the market is always big enough to keep you alive. However, there are other websites just like ours that are dead. When we came in, we were not the first in the space. Most of the sites we met, nobody remembers them now, unfortunately. The main difference between them and us was that first of all, we were able to raise capital. More that that, we were able to gain traction. We knew how to reach customers and they didn’t.
“When you are in the right market, you will survive, because the market is always big enough to keep you alive” – Mark Essien (Tweet this)
I always say the first thing is you need to make sure there is a market for your product. The second thing is distribution. You need to know how you’re going to distribute your product. If you don’t know how to distribute your product, it doesn’t matter how great it is, no one will know that it exists.
Speaking of revenue, how does Hotels.ng make money?
It’s very simple. We get referral fees – the hotels pay us commission per booking.
But my impression is that most hotel managements would be resistant to such an arrangement, seeing as the average Nigerian businessman is a Ludite.
You think so? But they’ve always done this with taxi drivers. We don’t come telling them something they had not heard before. We are doing the exact same thing, but in a more structured manner.
Would say it was generally easy convincing them to get on board?
It wasn’t that easy. But we always operate in a very practical manner. So what we would do is first of all do a listing. We’d make them allow us list them on our website and demonstrate that we can bring customers before we start collecting commission. Up till now, whenever we sign up a new hotel, we wait to achieve 5 bookings before we start charging commission. The first 5 bookings are kinda like a free trial period.
Some are of the opinion that tech founders don’t generally make the best CEOs. Seeing as you’ve proven yourself to be a pretty good CEO, what’s your take on that?
First of all, in Silicon Valley, tech founders do make the better CEOs. So this isn’t a global thing, it is something that remains isolated to Nigeria. But let’s look at the reality of the situation. The people that we call good CEOs right now in the Nigerian tech ecosystem, most of what they did is raise large sums of money. We don’t really know that they’re that great because we don’t know of any tech company that is making massive amounts of revenue, or is so significant. What we know actually is that non-tech founders are the best people to raise money.
We are equating raising a lot of with being a good CEO. But who says that is really the case here? I’d say that the problem here is that tech founders do not have the connections or opportunities or ability to talk such that they can raise money. But if they did, I believe they’d probably make better CEOs than non-tech founders.
The reason is that when you are in a technology company, you are basically building on technology, it is the very essence of everything that you are creating. And when you understand what you are doing, it’s much easier to get things done. You don’t need a complicated explanation, people are not telling you a lot of strange things. You know exactly what is to be done and you actually get it done. So by virtue of that you’d naturally become a better CEO.
Another belief that I have is that it’s easier for an engineer to learn finance than for a finance person to learn engineering. So in that sense, the guy who starts from engineering can easily go and learn finance and other things.
But I would say something about tech founders in Nigeria I find rather unfortunate. A lot of tech founders in Nigeria think that they’re smart. They see themselves as being clever and because of that, they don’t listen or pay attention to what others are saying. They are more intent on demonstrating their knowledge or talking so they don’t really pay attention. When they don’t pay attention they don’t learn. When they don’t learn, they’re not able to adapt properly. But to run a business, to be an entrepreneur requires that you are constantly correcting your causes, constantly learning and adapting. Anybody that is obstinate would never make it.
What have been the biggest challenges running Hotels.ng?
The way I see it, every single day there is a new and different challenge. So there is not one single big problem that sticks. The entire running of the company is constantly a challenge. But it is a manageable challenge. There a things I can influence and things I cannot influence. One of the things that I cannot influence for example is the process of raising money. Obviously, when I started I didn’t have much experience. I think like a lot of other founders are also going to agree. It’s very difficult to raise money in Africa. I think we are quite fortunate that we were able to raise capital, considering how little availability of capital to raise here.
Other than that, one of the things that I think is very challenging, and probably for everybody, is having to play many roles in the beginning. When you are running a company like this, there are some things that naturally you do well, and you want to keep doing them because they’re within your strength. For example, if I am a coder, I’ll always want to code because I know if I code, I will succeed. But there are some things that are naturally difficult for me, for example let’s imagine I were bad in finance (I am not bad in finance) , I would tend to ignore it and spent the least of my attention on it. But the problem is you have to do these things – finance, fund raising, PR, you have to do all of it when you’re a founder of a company. So you don’t get the opportunity to say no to any of that. That is one of the most challenging things – realising you have to do the things you do well as much as the things you don’t do well. Because typically you cannot afford to hire experts in those fields. So first of all getting that mental switch that you must learn to do everything it is challenging. It was definitely challenging for me.
You have quite an interesting, borderline entertaining, recruitment process. Can you tell us more about it?
When you are hiring, there are a couple of things you need to balance. You can hire for experience. Say you are looking for a digital marketer, you hire someone that has experience in the field. You can also hire for intelligence. If you hire for experience, because Nigeria has so few people that are very expert in particular fields, you’d find out that the person that is experienced would often be extremely expensive, because everybody is looking for the same scarce experience resource.
Our philosophy is not to hire for experience, particularity for anything that can be learnt relatively easily. If a person is smart enough, they will probably pickup anything in a month or two. So instead of hiring for experience, we prefer to hire for intelligence and then we’ll just tell the person what needs to be done. That was the first part of the theory
The second theory has been controversially debated within the company and it’s that people don’t really change. You have to hire the type of person you want to have right from the start. You’re never going to hire somebody and then end up with another type of person. So what we devised is a series of questions designed around what we believe a person that has a certain type of ability should be able to answer properly. In our very first test where we got our current head of PR and marketing and general content, it was just a bunch of questions that were intended to show how good this person can handle very complex content and the depth of the person’s thinking. The questions keep getting harder and more abstract and whoever was able to demonstrate a depth of thinking that was very sound, we were basically sure that the person is intelligent. Afterwards I talk to the person and then try and make a judgement call on if the person is going to have the necessary dedication and all the other attributes we are looking for. The good thing is that we end up with people that are even underrating themselves because having to answer all those questions, you really see the complexity of a person’s thought process.
I prefer not to look at people’s pictures or their CVs as a means of recruitment. I don’t see the point. First of all if you look at people’s picture you can bias yourself instinctively. But when we do an email Q& A, it is very open. I wish the person’s name wouldn’t even show but unfortunately it does. But then all you base it on is what the person is thinking and how they reason.
“I prefer not to look at people’s pictures or their CVs as a means of recruitment. I don’t see the point” – Mark Essien (Tweet this)
Pulling from your experience so far, what advice can you give budding tech entrepreneurs within the ecosystem?
First of all, market is everything. Pick the right market. If you are in a bad market, nothing will save you.
Don’t be stubborn. If you hear a wise word, accept it and do it that way.
Tell you story. Don’t go and hide what you’re doing, thinking you will become big once you get featured on a tech blog. One story is not enough. Let people know who you are, let them be aware of what you are doing. Don’t hide in the shadows.
“Market is everything. Pick the right market. If you are in a bad market, nothing will save you.” – Mark Essien (Tweet this).
If you are not technical, make sure you start learning enough to actually create tech products.
Finally, read and write. Reading expands you mind, writing helps clarify your vague thoughts.