Posted on: Tuesday, October 9, 2001
A change in style pays off for Viata
By John Duchemin
Advertiser Staff Writer
In June, Viata Software could have been voted the Hawai'i company least likely to get venture money. Yelling at a panel of venture capitalists, as Viata president J.W. Ellsworth did, will do that to you.
Now, Viata is sitting on a million bucks in new investments, with another $2 million in forgiven debt — freshly converted to equity.
What changed? Not the company, which for months has had several paying customers — and a complete Internet software platform for wholesale travel arrangements, an unfilled niche in a huge market ($2.6 billion a year in Hawai'i wholesale transactions alone).
What's different is that Viata officials know how to sell themselves, several observers said. The communication of Viata's advantages improved so much that the company convinced John Dean, one of the Silicon Valley's lending luminaries, to personally chip in money.
Viata is the latest company to get venture money in Hawai'i. While the amount of money is small compared to deals like the $230 million financing of Pihana Pacific, another Honolulu company, Viata now stands as a prime example of how to dress yourself up to attract investors.
Not that it was easy.
On June 6, Ellsworth pitched Viata to a panel of venture capitalists from Hawai'i and the Mainland. It was technically a dry run for a conference on Maui, the Wayne Brown Investor's Choice 2001, in which Viata and several other local start-ups would present themselves to potential investors.
But the venture capitalists were real, and they were brutally honest. Some didn't take to Ellsworth's pitch, a rambling 10-minute attempt to explain how his complex business could solve the costly intricacies of wholesale travel.
Ellsworth didn't take to the venture capitalists either.
"You obviously weren't listening past the first five minutes," he snapped at one critic, Kirk Westbrook of International Venture Corp., and proceeded to argue while a collective wince spread among observers. Several people later said that Ellsworth, former president of Aston Hotels & Resorts who un-retired last summer to lead Viata, came across as arrogant and lacking in focus.
Not what he had in mind. Ellsworth now admits he was "a little feisty" that day — but says he learned a lot from the experience.
"Ours is not an easy message to get across," he said. "If someone didn't understand what we were saying, then I guess we weren't doing it right."
The company has designed an online platform for transactions between hotels, airlines, car rental agencies, wholesale travel companies and travel agents. Most of those transactions are now done on paper or antiquated booking systems, which can cost tens of dollars per customer served. Viata claims its program will be cheaper and easier to manage.
By June 21, the date of the Maui conference, Ellsworth knew how to say what he needed to say. He focused his presentation on key points. Several observers said it was smooth, polished and to the point. It was one of the highlights of the conference, they said.
Among the impressed listeners was Dean, the former chairman of Silicon Valley Bank and a part-time Hawai'i resident who has shown a keen interest in the state's technology scene. Dean said Viata's Maui presentation helped clinch his eventual investment.
"(Ellsworth) was like Barry Bonds," said Dean, who said that Viata will be his primary investment in Hawai'i.
For Viata, life is bound to get easier with a million dollars in the till. The company has landed clients including Outrigger Hotels & Resorts; charter air company Hawai'i Vacations, which runs flights between Anchorage, Alaska, and Honolulu; local packagers Hawaiian VIP and Creative Holidays; and the Ramada Inn Union Square in San Francisco, which Ellsworth owns.
But the company faces challenges. It must get its system up and running for its first few clients — due to happen this fall. It must convince the rest of the travel industry that its product is useful.
Viata faces competitors including Get2Hawaii, a like-minded startup and subsidiary of Panda Travel. And like other travel-oriented companies, Viata must also stave off the industry-wide shock that followed the Sept. 11 attacks.
The venture money will support the company until it can get some cash flow, Ellsworth said. Viata will rely on a per-transaction fee for most of its revenue, he said.
"Right now cash flow is a trickle," he said. "But this money will let us bridge the gap until we can get revenue."
