Charles Nasser, founder and CEO of Claranet

Megabuyte, February 2014. Original article (£).

Screen Shot 2014-02-13 at 18.13.32The Megabuyte Interview: Charles Nasser
“I was in the south of France. I know exactly where I was, I was sitting on a bench with my girlfriend. I was peeling a tangerine.” Charles Nasser is telling the story of how he came up with the idea for Claranet, the business he founded when he was 26. This is how the CEO, now 44, tells all his stories: with lots of details and tangents, like he’s reliving rather than remembering. On the bench that day, Nasser had been bemoaning life as a consultant, keen to do something else. “So my girlfriend said, ‘Well you are good with technology and you can run your own business. What’s the most happening thing in technology right now?’ This was 1st January 1996 and the answer was the internet. So a resolution was set: by the end of the month, Nasser would create a business related to the internet. “It didn’t know quite what, but that 30 second conversation changed my life.”

It really was that simple, Nasser insists, but of course there’s nothing simple about building an internet business that not only survived the dot-com boom, but even thrived through it. Managed services provider Claranet is expected to pull in £124m in revenues this year, offering hosting, networks and communications services to European companies. Nasser and I have met in Claranet’s central London offices, where the CEO serves tea in company logo mugs. He’s tie-less in a plain white shirt and black trousers, with a watch fitting for a global circumnavigation; I wouldn’t be surprised if that was on Nasser’s list for the new year, now with the North Pole already checked off.

Relationships at the centre
The thing that strikes you first about Nasser is just how soft-spoken he is, to the point where you may even think he’s shy. But once he gets talking a different picture emerges: this guy’s just really smart. Some very innovative solutions to Claranet’s early obstacles is proof of this, but he’s also the kind of person who’ll write analytics software for the markets, not because he cares about finance but because “I was interested in chaos theory and neural networks, and I thought financial markets were the best place to analyse it”.

But back to Claranet. 2012 saw the arrival of cloud provider Star, small cell specialist Ubiquisys, and French hosting company Typhon; while the acquisition spree paused in 2013, this year they will probably add “a whole bunch” more. This is part of the long-term strategy, Nasser asserts: “Growing organically is going to be slow, and as there’s value in being larger in our business, acquisitions are a natural way of doing it. It’s an absolute cornerstone of the strategy, because the things we do are increasingly mission critical for our customers. … They want us to demonstrate a track record and that we will be around for a while.”

The desire to build a business with enduring client relationships has always been a core motivation for Nasser. When asked about his plans for Claranet, he skips past the stated ambition for creating a strong European hosting player and goes straight to the connections: “This was as much a personal goal as a business goal: to have something where a relationship matters and creates value.” Claranet was a consumer company at first, before moving on to businesses and then towards hosting.

But the customer has always been leading the way for the company’s direction, Nasser asserts. This is also the reason the dot-com boom, which came only a few years after the start, was “a non-event”. “We just saw our business doing this,” says Nasser, indicating a rising curve, “throughout the whole period. There was no before and after for us. … If you look at internet use, which is fundamentally what our business is built on, it kept growing throughout. We didn’t have [major] financial shareholders, so although expectations might have gone up and down, the fundamentals of the business didn’t. We just kept growing.”

The pre-pay adventure
He calls it “a lucky escape”, the fact that he was turned down by the venture capitalists back in 1997. “I was just too early. Six months later they would have all given me offers.” Back then, Nasser was looking for £1m for 25% of the business, but no one thought Claranet could compete with the major telecom players. So why didn’t he go back?

The short answer is that Nasser didn’t need to: “We racked our brains and invented something which became very common: pre-paid internet access.” Nasser gives me the long answer too, starting with how cheap long-distance calls were commonplace but no one had thought of using the same method to access the internet. “So I literally downloaded off the Oftel [now Ofcom] website, and I read the entire regulations to understand how cheap phone calls work.” He explains it: the pricing, the access agreements, who bills for what. “So I went to these guys and said, ‘I want to use your interconnect, but I want to put a modem on the end of it in.’ They all looked at me funny. Nobody had ever asked them that question.” BT wouldn’t even meet him, Nasser recalls, but soon it was done: Claranet started offering internet access for half the price of a local call. Customers pre-paid in £20 chunks, and this is how, in six months, Nasser raised £2m. He laughs: “Don’t need a bank!”

Nasser has stuck to the decision not to take money from private equity backers ever since, despite numerous offers. “That was a huge lesson for me: only take the money if you really need it, and make sure you explore not just financial but also commercial alternatives. It gave us a huge amount of freedom. If I had financial investors and said, ‘I want to go to France but it might take me five years to start making money,’ they wouldn’t let me do it.” Nasser won’t say exactly how much of the company he owns, but it’s a “vast majority”. But with the ongoing acquisition spree, will this have to change?

The short answer is no, because debt still provides all the funding Claranet needs. “Today we have people willing to lend us money, and we are on our fourth round of three-year facilities. Every time we borrow, we repay, we refinance, we borrow, we repay, we refinance.” Nasser keeps the financial leverage “quite low”, in recognition of his modest risk tolerance as the majority owner: “I want to be able to sleep at night. … We are taking some risk in acquiring companies, but we want that risk to remain in line with our customers’ expectations.” While Nasser says Claranet makes enough money now do do whatever it wants, he may well consider a float someday: “But I think we are too small for that yet.”

Professional loves
It’s very personal to Nasser, what happens with Claranet. He says this several times, describing how he’s always curious to learn, and how a fundamental value for the company is continued improvement: “You must always be humble and think there’s more to it, that we can do better. That makes life more interesting as well.”

Looking back at Nasser’s route to Claranet, exploration certainly seems to be a guiding principle. Nasser studied electrical engineering at Imperial College, before getting a diploma in accounting and finance. Then he started a PhD, but stopped when his supervisor left. This was when Nasser fell into consulting “by accident”, but his heart wasn’t in it. “When I quit my PhD I was completely disheartened. … I was working on hobby projects: designing computers, architecture, inventing chips, stuff in my bedroom that I found exciting but most people find very boring.” During this time he also did a finance degree at the London Business School, in the evenings. He’s still in touch with many of his professors there, returning sometimes to give lectures.

It all sounds a bit random, I say, meaning this in the best way; exploring options will often lead to unexpected good results. “Well it’s very personal for me,” says Nasser, pausing for a moment. “But let me make it clear: technology is something I will always love.” He describes how he, at 13, would programme computers with zeroes and ones, teaching himself just for fun. “At Imperial College I saw a different dimension, it went from being fun to being seriously complicated on an intellectual level. I found it extremely fulfilling mentally. … There’s still a part of me who finds that very exciting: the pleasure you get from something cerebral, from solving real life problems using your brain. What I do now is fulfilling in different ways, but [technology] is still my first professional love.”

About the discovery
This is also why Nasser didn’t follow the rest of his classmates into finance: that thrill of discovery and solving a problem that’s eluded you. “Maybe it’s like when explorers discover something nobody else has seen before. I think that excitement is what’s stuck me to technology until now.” Building a company could be another form of exploration, I suggest. “Yes. I like the unknown, I like the fact that you’re not following a trodden path. It makes life interesting. I really, really mean this: I still wake up every day excited to do what I do. I’m extremely fortunate.”

Speaking of exploration, Nasser has now visited about 94 countries, plus the North Pole. “Oh that was great!” He laughs. “Like a lot of the big decisions in my life it happened by accident. Circumstances happen.” Nasser tells me the story of how he ended up going, in detail of course, and how his travel mates included the first woman from Kazakhstan to climb Everest, and her brother: “The hardest man I’ve seen in my life. It was minus 40C and he would walk with all his layers open, his chest bare. I felt like the dreary guy in the team.” I try to object, as this is a story about the Arctic after all, but Nasser won’t hear it. “It was fantastic, I loved every minute of it. … I would be looking out the tent every morning and smiling from ear to ear, thinking how lucky I am to be doing this. It’s harsh, but it’s incredible.”

Next up for Nasser and his passport is Bolivia, but the travel schedule has slowed somewhat: he’s raising two children, aged three and five. “When they’re old enough we’ll strap backpacks on them!” I have no doubt. Expecting to hear one last detailed story, I ask my last question: Who is Clara? The girlfriend, the mother, or the cat? Nasser laughs, as there is no Clara. And for once it’s a short story: he needed a name for his new company, and one day he walked into his building: Clarabel House. “I looked at it and thought, ‘one day the business will be big enough to take up a whole building’. Maybe Clarabel Internet? But it’s a mouthful, so I shortened it to Claranet. That’s it, a very boring story.”

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