XOJet’s Paul Touw
Interview by Jeff Burger - April 1, 2008
Paul Touw had barely finished high school when his entrepreneurial spirit started paying dividends. Enrolled at University of the Pacific in Stockton, Calif., and short on tuition funds, he noticed that the physics department lacked good lab books.
“So I wrote one on one of the first Macs and took it to a printer,” Touw recalled. “I sold it for $25, and 400 students bought it every semester because the physics department approved it. So I would net $7,000 or $8,000 every semester. I would walk from the book department to the tuition department and pay my tuition.”
Such ingenuity–and a bit of luck–help to explain Touw’s rapid rise in the business world. When he applied for his first job after college, Westinghouse apparently misread his résumé and hired him for a position that required 15 years’ experience. Then, after prospering there and at several other companies, he got the idea to create software to help businesses manage their purchasing processes internally and via the Internet. That idea became Ariba, Inc., which today employs 5,000 people and serves about 75 percent of Fortune 500 companies.
Touw, meanwhile, moved on to his next project, XOJet, which he founded at the beginning of 2006. He claims it is the world’s fastest-growing private jet company, based on revenues.
Why did you leave Ariba?
The company became huge and a very different animal and I wanted to do something in the more traditional industrial space. Aviation had always been an interest. And it was shocking to recognize that private aviation is a third of what U.S. consumers spend on travel. It’s huge.
Both XOJet and Ariba appear to be about eliminating inefficiencies.
Yeah. The fractional model just seemed like a great idea whose time had passed. Because, in any business, what’s critical is optimizing and managing pricing and availability of supply. And fractional was the only model in the world where the supply is fixed and the price is fixed. Just like the airlines were back in the ’50s when you had the Civil Aeronautics Board. I had to apply for a route and then I got approval to charge $575 every day for that route whether it’s Christmas or the middle of the summer and nobody’s flying. The fractional concept is identical: 800 hours of capacity [per aircraft per year] and the price is always the same. That just didn’t make sense to me. The fractional model also had 18 or 19 airplane types. It was a model designed to sell airplanes, not be the most efficient.
How would you describe XOJet’s model?
We’re optimizing all the parameters. It’s not limited to 800 hours. I charge the price I want to charge. I change my commitment levels. So it’s not locked down like the fractionals, where you’re really selling the equipment with a series of agreements.
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