Tuesday, April 12, 2011

My journey so far

The idea
Junjun and I came up with the idea of HouseTrip while in our 4th year of study at the École Hôtelière de Lausanne (EHL) – the world’s foremost hospitality management school – based in Switzerland. We both had strong entrepreneurial DNAs (our respective parents being entrepreneurs, hers in China and mine in France) and we were both full of energy and ambition. We knew that after graduation would be the perfect time to launch our company, we had nothing to loose: we had no money, no children, no possessions, literally nothing to loose. 
Al Gore serving coffee to Junjun and I in Lausanne :-)
At that point, we had also understood something else: we really didn't want to work in hotels. We found the hotel industry way too conservative for our tastes. This could be seen at EHL:
the strict dress code (suit & tie, short hear, no beard, etc.), the antiquated classes on "savoir vivre" and the generally stiff behaviour expected from luxury hotels workers. The hotel industry is incredibly static: the most exciting things that were happening were new hotel brands like W or Malmaison, really not that much to get excited about...
We stumbled upon the holiday rentals industry a bit randomly: we were both doing an internship in London and decided to travel to Scotland for Easter 2007. We had both heard about Scottish Bed & Breakfasts and decided to try and book one. To do so, I did what most modern travellers do: I typed "B&B Scotland" in Google. Used to booking hotels online, I naturally tried to find a website where I could do so for B&Bs. I looked for hours and just couldn't find one. I was puzzled. I researched a bit further and to my absolute astonishment I found out that, around the world, holiday rentals and bed & breakfasts could not be booked online!!! You know the Churchill sentence that says "pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty": naturally optimistic, I was faced with the difficulty of booking my holiday and I just saw the opportunity. 

Junjun and I in Edinburgh during the trip that sparked the HouseTrip idea
Obviously at EHL we had learned a lot on how hotels are distributed online: how each hotel keeps its availability up-to-date on a Property Management System that's connected with Global Distribution Systems on which travel booking websites like Expedia or eBookers connect to sell hotel inventory.
None of that existed in the holiday rentals industry! Availability was kept off-line and, when rentals were sold online, it was through classified ads websites; so the actual booking was never done online. Concretely in my case, I used visitscotland.com's classifieds, called the owners of about 10 B&Bs until I finally found one that was available for our dates. I had checked availability manually through the phone: so inefficient! I also had to go to a local Western Union agency to send my payment to the B&B: lost 2 hours for that when paying for a hotel is of course immediate online. It was also rather dangerous: who told me that the B&B actually existed or that the person who had received my Western Union money was its real owner? Sending money directly to the owner versus using an intermediate like Expedia or eBookers for hotels is actually very unsafe and the reason for so many scams every year in the holiday rentals industry. All in all, it had taken me 2 whole days to make an unsafe booking.
We had found our opportunity!!! We could not believe it: such a big industry (holiday rentals is a $85B industry in Europe and the US alone) that's so riddled with inefficiencies and problems, such a chance! And with what we had learned about hotels during our studies, we had a pretty good framework for solving a lot of it! Also, launching an internet startup was something extremely exciting for us, we were looking for an innovative field and we had it.

The early days
January 2009, graduation! And finally full time on HouseTrip! 
Our first big challenge was to actually synthesise the idea in a business plan. Getting the idea right is not easy. We only discovered it a few months later but Junjun and I had fallen in the most common (and dangerous) entrepreneurs' trap --> lack of focus. We thought the simple idea of bringing holiday rentals' bookings online was not clever enough, it was too simple, it sounded like there wasn't enough differentiation. We felt we had to add a little spice. And we did: we absolutely packed the initial - good - idea with uncalled-for additions. This was not Seth Godin's meatball sundae but rather an ice cream with meatball toppings. We had:
  • An auction system: we thought it'd be cool to allow holiday rentals owners to auction stays in their place
  • A "groups" feature: allowing anyone to create a group (for instance the "Golf lovers" group), interact within the group, attach or remove rentals from the group, etc.
  • Discussion boards on each property profile
  • A social layer: each HouseTrip user had a profile, could have friends, send private messages, etc.
  • And so on and so on...
A screenshot of the "Auctions" tab on the old HouseTrip property pages
So we did a business plan based on on all of the above and off we went trying to raise money and recruit a team. We were rapidly faced with our first chicken and egg question: we needed money to gather the team but no-one wanted to invest in us if we didn't have a team in place (let alone invest in us with that monster of a business plan). The way we solved the problem was as follow:
  1. We got verbal commitment from 3 investors that they would invest if we managed to get the right development team for the website. These 3 investors were 2 classmates/friends of ours and Uli Pillau, a hospitality industry insider whom we had met in a conference in Austin, Texas (yes we went all the way to Texas to raise money!). To be fair, I think the 3 of them were more convinced by us as people than by the actual idea (and this is actually the way one should invest at the very seed stage: always invest on people and not on ideas).
  2. With that commitment, we managed to get Stephan Wiesener on board who would act as the company's CTO to develop the website. Stephan had been co-founder & CTO of an VC-backed internet company before (Conject, about 170 employees) so he knew what he was doing. In addition to promising Stephan a salary from the investment, we also gave him some shares of the company. Finding Stephan was particularly difficult
  3. We won Swiss entrepreneurship competition VentureKick. That, combined with the fact that Stephan was onboard, gave us enough momentum to convince the investors to wire the money to our account.
On the 3rd of June 2009, the company was created! We had a total of CHF230'000 in our account, enough to pay Stephan, the developers and the designers to complete the website. The day of the creation of the company was probably one of the happiest days of my life.
The HouseTrip team at the time of the first launch. Startup life is not for everyone: 1 year after, only Junjun and I remain in the team.

First launch, first shock with reality
First time entrepreneurs are classically overpowered by their vision. I have met so many entrepreneurs who have a great vision but who find it impossible to plan the execution of that vision. Executing takes many steps and each steps needs to take into customer feedback into account - this means the vision needs to evolve as the project goes forward.
That was our mistake: we wanted the complete vision to be achieved at launch. A typical example was auctions: could have been a cool feature when you think about it but certainly not something that should have been included in the product at launch. It simply couldn't have worked: for an auction system to work for us, we needed at least 2 people willing to bid for a stay for the same dates at the same place at the same time... which means that we would have needed a massive amount of traffic... which of course no newly launched website ever has.
Needless to mention, when we launched our "mother of all websites" for the first time in September 2009, the public's response didn't meet our expectations. 3 months after having so cheered-up creating the company, we were having a very difficult time. 
Something to remember is that we were all working from our living room. This means that for Junjun and I, there was not much work-life balance. Whenever the mood was not good at work, it wasn't very good at home neither; because work was home :-)

We started HouseTrip in the living room of that house. We worked there during a whole year. 

Lesson well-learned: focus!
In November 2009, after a few weeks of poor performance of the website despite everything we were doing, I decided to take radical measures. The 3 main ones: 
  • I fired our design agency and I learned how to use Photoshop: I was finding it extremely frustrating to be dependent of an agency that was producing bad designs
  • Cut the fat: I decided to reduce the website to its strict minimum --> letting users search and book places. That's it.
  • Focusing on one-and-only-one acquisition method for each hosts and guests (simply chose the one that was working best for each)
It took me about a week to learn Photoshop and about 3 weeks to redesign every page of the website. It then took the developers another few weeks to implement the changes on the website. We re-launched the website on the 15th of January 2010.

The old design:

 After my re-design:

It works!
2010 was our shot at gathering our "proof of concept" with our newly re-designed website. We've always had in mind that we wanted to have a Venture Capital investment at some point and we knew that, if we wanted to have one, we needed a solid proof of concept, impressive growth, well defined metrics and a strong plan to scale. We had enough money to prove that in 2010 (since our original CHF230k investment, we had raised another CHF600k). And we did: 

  • We averaged about 25% growth month on month during the whole year, which means the concept clearly worked
  • We defined clearly core metrics such as costs per acquisition, conversion funnel, etc.
  • We had a very solid plan on how to sustain and even accelerate the growth

The evolution of our daily turnover from January to September 2010
VC investment, revolution-evolution
I kicked the search for a VC funding at the beginning of summer 2010. The way I approached it was very simple: I sent emails to contacts I had gathered at 10 interesting potential investors. Out of these I pitched to 8 and 6 made an offer.
We didn't take the best offer in terms of numbers but we took the offer from the investors which we thought would add the most value, Index Ventures. As Neil Rimer (now on our board) puts it, "Index doesn't compete on price, we compete on value"; the deal was still very good and we couldn't have been happier with it. 
In between the moment we signed the term sheet and the moment we had money on the account, it took about 3 months. As CEO, the process took about 50% of my time (due diligence, gathering signatures from shareholders, etc.) during that period. This was a somehow stressful period: not only because due diligence is inherently worrying but also because I had to keep doing everything that had made me work 15 hours a day for the past year. Namely: designing the website, managing the developers, all performance marketing, managing the team, all the legal stuff, PR, recruitment, helping on customer service, etc. I wasn't getting much sleep during that period :-)

Also rather stressful during that period: when I pitched to Index for the first time, the team was composed of the 5 people pictured above (although Stephan was only part-time). By the time we received the money on the account, we were still 5 people but only Junjun and I remained from the "initial 5". The reasons behind this desertion are different for each person and probably the subject of another blog post. The point is... it was stressful :)

November 2010: we have money on the account, now it's time to scale! We had 3 very short term goals at the end of last year:

  • Redo the HouseTrip branding
  • Recruit a great design team to re-design the website based on the new branding
  • Find an excellent COO
  • Delegate the customer service from the HouseTrip management team to dedicated customer service agents
In consideration of the above 3 goals, it looked increasingly difficult to justify doing everything from Lausanne. Not only Lausanne is not famous for being a hub for Internet/eCommerce talents (and it isn't) but also it probably has the world's highest salary levels. A customer service agent needs to be paid an astounding $6'000 a month there!
Our will to hire David Norris as our new COO finally convinced us that we had to open a London branch. David had the perfect profile: he used to run eCommerce Operations at Expedia and was COO of LiveBookings (a marketplace for restaurants bookings) when we started talking. Having a London office not only meant that we could get him onboard but also that we would have access to Europe's largest Internet talent pool. We decided to go for it and opened our branch in Wardour Street in Soho at the beginning of 2011.
Lisbon was also a no-brainer: we needed to hire customer service agents but we knew we could not sustainably do so in Lausanne. By the time we also had Vanessa onboard who was a Portuguese citizen heading our customer service from Lausanne. We offered her to run a newly constituted customer service team in Lisbon and she agreed.

Our 3 offices
We had kicked off the rebranding project with an agency in December and started in January to look hard for 2 designers who could re-design the website in-house from London. We eventually found them (Anders and Rachel) and they started work in mid-February.

A mere 5 months after Index came onboard, we now have 3 offices, a staff of 25, a re-designed website and have tripled the company's revenue since the investment. 
We are still far away from achieving our ultimate vision - holiday rentals, bookable online, everywhere - but are getting closer to it every single day.

The new HouseTrip homepage


  1. Dear Arnaud,

    that's not a post, but a manual/history of how never give up!
    How can I contact you directly?
    Best regards, Leandro

  2. Hey LEandro, sorry for late reply. I believe you're in touch with Guillaume so all's well ;-)