INTERNET businesses are rarely fast growing and profitable at the same time,” David Soskin tells me. He should know: he once headed up the media sector of ABN Amro’s corporate finance wing. But as Soskin proudly points out, this has never been the case for the flight price comparison website Cheapflights – the company he used to run and on the board of which he still sits. And he can certainly prove it: Cheapflights has been listed in both the Sunday Times’ Tech Track 100 and Profit Track 100 this year.
“I came across so many internet businesses when I was at ABN Ambro and there seemed to be two things that characterised them: they are generally loss-making and need to raise lots and lots of money to keep them going.” But Soskin struck gold with Cheapflights: “I’ve always been very excited about Cheapflights. It is such a great business model.”
SIMPLE BUT EFFECTIVE
The model is simple but extremely effective. It collates flight prices and allows the customer to choose. The airline or tour provider then pays Cheapflights a set fee on a per click basis. “Pay-per-click may now be Google’s great money spinner, but we were the first people in the UK to use it,” says Soskin.
Soskin explains that it works so well because if the airlines and tour providers aren’t quick enough with payment, Cheapflights simply cuts them off the list: “It hurts their business more than it hurts ours.” He explains that this kept control of their cash flow. “Often the most difficult thing for start-ups to do is to manage the cash. We averaged an organic growth rate of 50 per cent thanks to that model.”
But it wasn’t all easy for Soskin: “Going from a large company to a start up was a huge jump. You take a huge salary sacrifice and you have to be comfortable dealing with constant change – you’ll be miserable otherwise.” He certainly made a huge leap. He left his plush office in the City for a small serviced office above a Foxtons estate agency by Clapham station. “I have never for a second regretted it though. I was never very good at working for other people.”
Soskin was initially part of a small team at Cheapflights. With fellow investor Hugo Burge, he bought out the founder and there was an orderly transition before Soskin started building up the business. “In the early years, my family were quite surprised that I’d taken on what they perceived as such a risky venture. I don’t blame them, my timing was immaculate: it was the end of what people call the dot-com crash.” But as Soskin explains, this was great for his business: “The competition wasn’t so intense and you could hire great people as there weren’t many other opportunities around for them.”
“It was really challenging though. You have to get used to doing every part of the business. There aren’t people to buy the milk or stamps. But that said, it was a great training for doing what I’m doing now – that is, investing in other digital businesses. It means I really understand how digital businesses tick.”
As a result, in 2006 Soskin and Burge set up an investment company called Howzat Media that invests purely in digital businesses. “I have no country bias, I’m just looking for more companies like Cheapflights. Not doing the same thing, but with the same growth potential.”
CV | DAVID SOSKIN
Company name: Cheapflights Media
Job title: Director (former CEO)
Company turnover: £30.2m (Year to December 2009); air tickets worth £1.8bn sold to site users in 2010
No. of staff: 100
Studied: History, Oxford. Business, Harvard.
Reading: George Bush’s autobiography
Idol: Abraham Lincoln
Favourite business book: Liar’s Poker
Awards: Finalist for the Ernst & Young Entrepreneur of the Year Award 2006
Motto: “There are only two sorts of internet company: the quick and the dead.”
First ambition: Member of Parliament