At just 36, Hamnett Hill has a survivor's perspective on the upheaval shaking global financial markets. He's been there before, as the boss of a startup family company that crashed and almost burned in the 2000-2002 dot-com flameout. But he survived, as did his Montreal company, Zero Knowledge Systems, a computer privacy outfit that has since evolved into its present incarnation, Radialpoint Inc. He talks about the lessons of market meltdowns.
You're the CEO of Radialpoint? I am president and CEO. My father [Hammie Hill] is a partner of mine. He and one of my brothers, Austin, started the business with me.
Hammie is my CFO and chairman and so we have a balance of power that works pretty well. My brother, Austin, is off by himself doing angel investing and he has two active startups. He really likes the early stuff.
So you survived the dot-com bubble?
It was a heck of a learning experience, both on the way up and in reacting to what happened to the markets afterward.
You went from hundreds of people to just a core staff?
We had an incredible group we had pulled together - 260-270 people from all around the world, cryptology experts, marketing experts.
When in 2001 it was pretty clear that capital markets were not going to continue to fund companies, and that customers really needed to fund companies, we needed to react. So over nine months to a year we went down to 50 people.
A lot of the people who were laid off had spent time and effort working on the company. But because we made those hard decisions, we've been able to hire back over 25 of those people as we've grown again. It speaks to the realities of the business, being able to respond and treat your people right, both up and down.
But 25 rehired people aren't many compared with the 200 or so who lost their jobs.
I'd love to hire more of them back but it's a lot more competitive job market these days.
What happened to them?
For a lot of them, it was the first job. It was an exciting experience but it was traumatic when the industry changed. But we had some incredible people and incredible people do not stay unemployed real long. We did some stats shortly after and 80 per cent of them were employed within three months of being laid off. Is Radialpoint much different than Zero Knowledge?
At its core there are a lot of similarities. But what is different is more in relation to what the market demands.
Some of that is financial discipline and the way you go about making decisions. In the late nineties, there was a real appetite for investing in future-looking technology and owning a market before a market necessarily emerged. That was the appetite for risk that investors had.
But today is really about fundamentals, about being able to create a lot of value for your customers, about being able to defend that value creation in a sustainable way. That takes a lot more focus. At the peak of 2000, we had six different business units going - we were in a whole range of areas.
In 2002-2003, at the bottom of the turnaround, we started cutting off deals. We would do only certain deals with certain customers because we had to focus entirely on that place where we could create the most value and the most defensible value.
Are earnings more important now?
Ultimately if you are building enough value for your customers, you should be able to generate sufficient cash to grow the business.
Sometimes it makes sense to bring in outside investors to fund that growth, but ideally if you've got a business model that can self-funds itself, that gives you the freedom to invest and make the right choices ... We've been profitable since 2002, around the time of the turnaround. We've been able to fund our own growth.
Do you have lessons for people caught in the credit crunch?
We've had a number of opportunities to go public over the past two years. We really shied away from it. In the dot-com days, that was the panacea. You go public, your stock goes up 50 times and you buy a big boat.
Today is much more about building a sustainable business and if going public is part of doing that, fine, but it is not the end game.
Where did you learn to be an entrepreneur?
As a family, we've been interested in how businesses work. From my first lemonade stand, I was always thinking about it. Early on, we understood about the Alberta Stock Exchange and junior mining and we had all kinds of discussions at the dinner table. That entrepreneurial spark was always there.
Do you have Ayn Rand's Fountainhead and Atlas Shrugged on your bed table to read at night?
In the bookshelf, but not as close to the bed as in my 20s. I think for any young person with entrepreneurial, capitalistic visions, Ayn Rand's work is exciting stuff to grab onto. As you get older, you see some different perspectives but it certainly heavily influenced me in my early 20s.
Are you still a libertarian?
Very much but I've mellowed a lot as I've got into my 30s. Certainly, that is still the underpinning that helps me make decisions.
Montreal is not exactly the libertarian capital of the world. Why are you there?
In the mid 1990s, I just fell in love with the city. There is a unique perspective from living in Montreal. I am in Boston, New York, Toronto and Calgary very often, but Montreal is probably the place where you really get a really European feeling, a multilingual feeling. And it is an amazing place for talent, particularly technology talent. There are a lot of benefits that ultimately outweigh many of the challenges.
What are those challenges?
Certainly the tax rates. When executives, marketing staff, and sales people are evaluating places to work and live, these people can do the math and figure out the cost of living there ... We are able to compete in spite of that, which speaks a lot about Quebec and Montreal.
As a single guy, are you still bombing around Montreal on your Harley?
No, I'm off the Harleys of late. I think the key man insurance doesn't like the Harleys as much. I've got an old beater Porsche I drive through all four seasons. It's a fun car and I don't have to worry about getting scratches on it.
Hamnett Hill
Title: President and CEO,
Radialpoint Inc., Montreal
Born: In Ottawa, August, 1971
Education: Bachelor's degree in business and accounting, Montana State University
Career highlights
As college student, founded Pegasus, a multimedia presentation company.
Early 1990s: With brother, Austin, founded TotalNet, a Montreal Internet service provider, eventually sold to BCE Emergis.
1997: Co-founded family-owned security and encryption firm, Zero Knowledge Systems.
2005: After severe downsizing, Zero Knowledge reborn as Radialpoint.
Radialpoint, a private company, hit $40-million in revenue last year.
