Show Notes

Ever since the emergence of Airbnb, short-term rentals have been unbelievably popular and easy to find in all corners of the world. But that doesn’t mean it’s been easy for the people in charge of managing all of those properties. Fortunately, tech startup Hostaway has created software to make that job easier, helping to create a better experience for guests and making the job a little easier for property managers.

Startup veteran Marcus Rader is the CEO and co-founder of Hostaway. He recently joined startup coach Roland Siebelink on the Midstage Startup Momentum Podcast to talk about all things startup-related, including Hostaway’s incredible journey thus far.

• Why founders should never treat their idea like a map.
• The consequences when startups don’t understand their category.
• How startups are able to partner with big companies that don’t want to work with small startups.
• Why some CEOs are good wartime CEOs and others thrive during periods of peace.
• How CEOs should spend their time once they free themselves of direct reports.
• What a startup can gain from tracking and mentioning key metrics on a weekly basis.

Transcript

Roland Siebelink:Hello and welcome to the Midstage Startup Momentum Podcast. My name is Roland Siebelink, and I'm a host and scaleup ally for so many fast growing companies around the world. One of which is in the studio with us today. It's Marcus Rader, the CEO and co-founder of Hostaway. Hello Marcus, thank you for joining.

Marcus Rader:Hello, Roland. Thank you very much for having me on the show.

Roland Siebelink:Of course, it's such an honor to have you here. Hostaway, tell us all about the company. What did you start it for? Who are you helping? And what impact are you making for them in the world?

Marcus Rader:All right, let's get straight to business. First of all, I've worked at a lot of different startups. In fact, I don't think I've ever worked for any non-startups. I was 16 when I quit my job at McDonald's, and that's pretty much the only non-tech-startup experience I've had. I grew up in Finland, so I've seen the rise of mobile games. I was working in mobile games in the early 2000s, 10 years before the iPhone. Seven years ago I moved to Canada, and I started looking around for jobs and didn't really feel attracted. The tech market here wasn't what it is today. Today, it's one of our largest tech markets in North America. And I thought this time I should start something on my own. Real estate investing, especially Airbnb short-term rentals, have always been very, very close to my heart. What I've learned from the previous startups is that an idea is good. It can be like a guiding star. But an idea is never a map because if you follow your idea like a map, you're going to end up stuck in a swamp. You're going to get eaten by alligators, fall off a cliff. Never do that. Have it as a guiding star of the general direction you're going. But then do thorough market research. I started doing market research very locally here in Toronto, and I found out that Airbnb or the concept of renting out your home to strangers for a shorter period of time was entirely different than I imagined. First of all, the ads on TV we're saying that it's a single single mom who is trying to get money for her son's soccer practice. But I didn't find any proof of that. But what I did find on the other hand was that there were so-called property managers - or they call themselves Airbnb hosts - who were managing between 20, sometimes 40, sometimes 150 properties on behalf of the owners. And they did so at a massive scale, and in many cases, even remotely. I got so fascinated by that, that I interviewed them unmasked. I just took everyone I could find and asked them, "Could you please spend 15 minutes with me? Could I please take you out for coffee?" I found out they all had the same problem, their lack of technology. The whole industry was lacking technology to do pretty much everything they needed to do. They had to combine spreadsheets and try to automate it with emails. They had to use mobile apps. Basically, their business could operate as a one man show, but if they ever wanted to get more employees or try to automate things, there wasn't the software available. This was back in 2015.

Roland Siebelink:Okay. So I'd like to dig into that a little bit. It sounds like - at least for me as a layperson in this area - that is the promise that Airbnb and similar platforms had to these property managers, that they would provide technology to find them booking. What was the gap that you discovered, Marcus?

Marcus Rader:Very, very good comment. When I'll be talking to investors throughout the years - in the beginning, in 2015 - that's exactly what they were saying. There's already Airbnb. But imagine if I was building software so that people could book their dentist appointment. A similar argument would be "Well, the location of the office, it's already rented. That already solves the problem. Why do you need someone else to make a booking there? You just walk on the street. There's a dentist. You go in and you say, 'Can I come next Tuesday?' Problem solved." That's exactly what Airbnb does. They just bring your stuff. But then, to get it all organized, to get the payments, to get the communication, to get your staff, to know who's working and to deliver a good guest experience,Airbnb doesn't do any of that. They just bring you the people from the street who want to stay and that's it.

Roland Siebelink:It's basically providing demand, but anything you need to do to get the supply in order is what you are focusing on.

Marcus Rader:Exactly. They are the marketplace. We are the CRM and the ERP.

Roland Siebelink:Excellent. Okay. Very good. How did you start building further on all that market research that you did?

Marcus Rader:We had a couple of very interesting choices. First of all, one thing that made us very lucky in the beginning is that - we didn't know it at the time but we later found out - that a lot of SaaS companies - and we sell 100% B2B SaaS, that's all we do - but a lot of SaaS companies struggle with finding their category or identifying their problem. As a result of that, they have very little inbound traffic. Before I even started defining the problem or making a solution, I did an ad on Facebook, and I said, "Are you looking for Airbnb management software for free? Click here." And then people clicked. I paid almost nothing. And I got hundreds of people who gave me their phone number. I called them and they told me, "Yes, I am indeed looking for Airbnb management software." And I asked them about what if it's not completely free? "Yeah, that's fine. I still need the software.

Roland Siebelink:Talk about a bait and switch, Marcus.

Marcus Rader:Yeah. The reason I'm saying this is that I meet a lot of starting companies and they struggle with this because they solve a very specific problem and they have a solution in mind, but nobody's looking for that problem. How to organize your emails or how to prioritize messages in Zendesk or how to provide better walkthrough guides for your mobile app. It's not a problem that people wake up on a Saturday morning and think, "Aha, today, I'm going to solve that." And if you start looking for it, you don't find it in a category. But for us, actually, we never had to deal with those issues because we had such a strong category, vacation rental software or Airbnb software. And the problem was actually the software in itself, which is very lucky when you think about it. People often ask what problem do you solve and what is your solution? But the problem is that these people need software to run their business. And the solution that we offer is software to run their business. One company that I'm mentioning a lot is Airbnb, and that's because to some extent, the entire category is called Airbnb. People, when they go on holiday, they even say, "I stayed at an Airbnb." But what that actually means is they stayed at a short-term rental. And even though it's not booked through airbnb.com, they can still call it an Airbnb. Back in 2015, they didn't want any partners. They wanted to own the whole thing.

Roland Siebelink:This was also still at the time when they were growing extremely fast and that probably caused quite a bit of hubris on their side.

Marcus Rader:Exactly. Running a property management space business and renting out properties, you need to be on all these channels. You need to be an Airbnb. You need to be Booking.com, Vrbo, Expedia, and smaller ones. These companies, including Airbnb, they actually didn't want - and they still don't want - to work with small tech startups. Because they're running billion dollar businesses. Airbnb has worked over a hundred billion. They don't want to work with some small tech startup that has unreliable technology and unsure prospects for growth.

Roland Siebelink:Does that mean you don't have an API or something that you can easily link into? Are they forcing people to work through the UIs and do everything manually?

Marcus Rader:Nope. These days, today is 2022, they all have a partner program. You are able to get access to their API, which is a necessity. However, the requirements to enter those programs get higher and higher and higher. And actually, we were probably at the best possible time in the world when we launched this because Airbnb said we don't want a single partner, nobody partners with us. And then it was only about two or three years ago when I'm guessing their lawyers forced them to change their mind ahead of the IPO. I'm just guessing. I wouldn't even know. But we are now a preferred partner of Airbnb. We're an elite partner of Vrbo. We're a premier partner of Booking.com. And we are one of the few companies that are connected to Homes & Villas by Marriott and Expedia. And when you start looking at this and then checking how many other companies in the entire world have these partnership statuses with these companies, you'll find it's less than five.

Roland Siebelink:Wow. That's already a small category then. The ones that have really gotten into all these partnerships. Tell us, Marcus, how did you actually close those partnerships? Especially, if initially, those companies seemed rather reluctant to start their partner programs.

Marcus Rader:It's about knocking on a million doors. All of them are closed. That's why you have to knock on them. But most of them don't have anyone behind them. And then there's the chicken and egg problem, because "I'm going to be big" is a nice argument. Then there's someone like Booking.com, they can say, "Well, that's great. Why don't we talk when you're big. See you in two years." What you really don't want to tell them is the truth that "I'm going to be big if you just allow me to be your partner; otherwise, I cannot be big."

Roland Siebelink:It's a serious chicken and the egg problem. What are some tricks to get through that?

Marcus Rader:First of all, you gotta be convincing. You gotta know your stuff. You got to talk to all the people. If someone opens the door and asks you who are, that person will open the door, you got to know their face, you got to know who are their colleagues, you gotta know who are their business partners, you've got to know their last place of work, and ideally, you know someone who they know and you can say, "Hey, do you remember John from Boston? What, you know John, that's amazing."

Roland Siebelink:The relationships are far more important than people tend to think, even in the tech world.

Marcus Rader:Absolutely. Of course, the most important relationships are those - and this is why we succeeded - are those that you didn't know happened. I went and knocked on Airbnb's a million times and their answer is the same, "Well, we don't do any partnerships with anyone." Eventually, whatever I tell Airbnb is irrelevant because they're not listening if they don't do a partnership. However, our customers and other partners and other people in the industry, if they're impressed with what we're doing, and Airbnb one day considers starting partnerships, which they did, they're not going to go and ask me and the thousands of others who are knocking on their door. Instead, they'll go to some industry expert and ask what would be a good company. And that industry expert, you got to be friends with them. But you never know who that is. That's the tricky part.

Roland Siebelink:Marcus, how do you force yourself to move towards decisions, even if you're not a hundred percent sure that this is correct or that this is the right approach?

Marcus Rader:I wish I would have some advice to give - I don't know who coined the term, but you can be a wartime CEO or a peacetime CEO. I can tell you, I'm very uncomfortable with peace time.

Roland Siebelink:You must love these times then?

Marcus Rader:It's peace time right now, but we're growing so fast, it feels like a rollercoaster. It's great. But I'm thrilled when there is a decision, when I see uncertainty and nobody knows what to do. That's what drives me. That's where I get excited. And especially if there's an outside force attacking us, whether it's a competitor, maybe a partner, maybe a technical challenge that can be solved, or in this case, maybe governments around the world restricting the one thing our company needs to survive, which is people traveling. Suddenly, governments are coming in and restricting it, which I fully support. But it still restricts our business. That's when I get motivation to get up in the morning.

Roland Siebelink:That's a real leadership profile when you see other people are facing uncertainty, to help them through that and give them enough guidance so that they can keep going.

Marcus Rader:Absolutely. But the downside is that normal stuff like running a day-to-day business is mostly recruiting the right people and helping them achieve the goals, approving budgets, and then overseeing legal and financial risks and giving compliments and feedback, and then talking to stakeholders, clients, partners, and so on. If you are a wartime CEO, you're going to need help with that.

Roland Siebelink:I was going to ask you. Do you have somebody next to you who's more the peacetime leader when there's no clouds at the horizon?

Marcus Rader:Yes. My co-founder, he's our COO. We do things very differently. I'm the one who's passionate. I can form an opinion and then gather data to support it. But I could never gather data to form an opinion. If that makes sense.

Roland Siebelink:Yes, you see this solution first and then you gather the data to prove it to yourself to some degree.

Marcus Rader:Yes. Or I see the solution, then I go out and create the problem so that people find the solution.

Roland Siebelink:Very different profiles, indeed. I get it up.

Marcus Rader:That's something that I wished we would have known before we started the company, that you actually need both of these skills on the founder level. If you have two people who are great at creating and documenting processes, you're never going to be able to sell anything to anyone. You're going to be able to create a beautiful spreadsheet but probably not sell it to anyone. Ideally, you would have someone who's a bit explosive, a bit controversial but also a visionary. But if you have only two visionary people, you're going to end up with great ideas and no execution at all.

Roland Siebelink:Talk a little bit more about the team, Marcus. What people have you hired? How does it distribute between product people versus more sales and marketing people? And where have you seen the most growth?

Marcus Rader:Right now, we're about 80 people. And we are at the point where we're transitioning away from founder-led. Actually, last year, I handed over my last team, so I currently have zero direct reports except for the executives. It opens up a universe of possibilities. It's absolutely amazing. It's like being taken back in time seven years ago when the company didn't exist yet and I had zero customers who gave us problems, zero employees who gave us problems. And all we had was a world of opportunity. That's what it's like when you finally give up your team.

Roland Siebelink:Excellent. Talk to me a little bit more. Where have you found more freedom? What can you do more of now that you have fewer direct reports? Where do you see an increase in activities?

Marcus Rader:I had a CEO mentor who said something - and this was many years ago - that I never quite understood. And I had been thinking about it and I never quite understood it until now. And he said, "What a CEO needs to do is go for a long walk alone without a phone, without internet, go for a long walk alone. No family. Just look at the sun or look at the sky, look at the trees. And that's when the ideas will come." That's one thing that I'm able to do now. I'm able to think about - operationally, when you're in the business, you're thinking about, "Okay, how do we solve this problem? How do we get to the next stage?" But the difference, the work that I can do now is I can think, "Okay, let's ignore all the operations. What are the questions that nobody's asking?" Operationally, everything goes to answering the questions people are asking. But when you get away from operational and go to strategic, you're suddenly able to come up with a question that nobody's asking and that they should be asking.

Roland Siebelink:Excellent. Yeah. I love that. It's very good. To some degree also, when we act as coaches, where we find ourselves adding value as well. People have all the answers, but they may not be asking themselves the right questions.

Marcus Rader:Yeah, exactly. And then also I was presented with a framework where the CEO needs to spend some time with customers, spend some time with suppliers, some time with investors, some time with key employees, and so on. That framework never made any sense to me when I was operational because it assumes that everything is stable. But when you suddenly have explosions; your biggest supplier tells you, "Oh, we're going to stop working with you." And a key member of the staff is facing a burnout or maybe is quitting. You don't have time to deal with all these other stakeholders. You got firefighting to do.

Roland Siebelink:How do you get rid of all those fires that you have to fight?

Marcus Rader:Well, that's actually something that also didn't make a lot of sense to me. I went to a lot of presentations by way more successful startup founders than me. And they always say, "You've got to have a strong culture and the right people in the company, so good recruitment and a strong culture. It made sense to me on a superficial level. It made sense to me in the sense that, "Okay. I can see that if you have a good culture and you hired the right people, then good stuff will happen." But it didn't exactly give me any path to solving the problems that we were facing right now. For example, if you want to hire for a position and nobody's applying for the job, you can't find proper talent. Where if a big customer is leaving, they love your product, but their business model is changing and your product is not needed anymore.

Roland Siebelink:You couldn't actually apply those general principles to your specific situation. Is that we're just saying.

Marcus Rader:Yeah. I think the people who say that a successful business is based on a good culture, and then having a good cultural fit with the staff you hire, I think that's actually the outcome of doing everything right.

Roland Siebelink:It's not their starting point, right. It's more what to strive for over time

Marcus Rader:Yeah, exactly. And that's the outcome. It's the chicken, not the egg.

Roland Siebelink:Yeah. You're striving for what would be called a lagging metric and you need to figure out first what's the leading metric.

Marcus Rader:Exactly. And it's very good that you mentioned metrics because I don't know if it works for all companies but it certainly worked for us. Getting those numbers on absolutely everything is a daunting task. Even if you have the numbers, being able to track them and mention them every week is something that you have to do. That is key.

Roland Siebelink:What difference does it make for you, Marcus, to have numbers on everything?

Marcus Rader:Night and day.

Roland Siebelink:Tell us about the different ways of operating the company. What behavior changes do you see? How does the team work together in a different way?

Marcus Rader:One thing that we quite often - and this is perhaps our own fault, lack of experience, and also investors - they were telling us this business is quite unique. One thing that tracking these numbers helped us realize is that "No, we're not unique at all." The only unique businesses are the ones that failed. Tesla is not unique. They're selling cars. That's what they do. It's not unique. They have the same problems as every other car manufacturer in the world. And it took us many years to find out that we are just a B2B SaaS company. That's all we are. Now the nice thing with admitting that to one's self is first of all, you can't blame things. When things go wrong, you can only blame yourself. It's pretty hard to do that. Someone will come and ask, "Well, why did you make this basic B2B SaaS mistake?" And then it would be nice to say, "Oh, because we're different, we're special." But the reality is, "Well, I made it because I screwed up. I'm sorry." That's what I do. But the nice thing is you can use benchmark numbers. When you have your customer satisfaction, maybe you have your churn rate. Maybe you have your attention metrics, maybe you have your return on investment on marketing. Maybe you have your cost per lead. You can all of a sudden use just standard benchmark. You can just Google and get the outcome.

Roland Siebelink:You can basically start finding facts about whether you're doing well or not doing well. Then it's not just opinions anymore.

Marcus Rader:Exactly.

Roland Siebelink:We're almost at the end of this interview, but I did want to ask you, Marcus, if people are listening to this podcast, what can they help Hostaway with? What are you looking for? And where should they go to find out more about you?

Marcus Rader:Good question. First of all, I usually don't promote Hostaway, but we do have the largest marketplace in the vacation rental industry. And I can imagine that a lot of startups here are either in the vacation rental space or looking to get into it. Please apply to be a partner of ours and see if we can do an integration together. You can go on hostaway.com and click on marketplace, and at the bottom there's a form you can fill in and get in touch with our partnership team. And maybe we can even get on a call and I can give you some advice now. I would love to connect to you on LinkedIn as well. If you google Marcus host away, LinkedIn, you'll find my profile on the top. What you can help me with is if you are beyond this stage, if you know anything about what's up next, cause we don't really know much. We know exactly where we're going to be six months from now, but we don't know what we're going to be two years from now. Feel free to reach out. I'd love to talk to you.

Roland Siebelink:You and I will have a follow-up conversation as well in that case. This has been an honor to have you on the podcast already, Marcus. Marcus Rader, CEO, and co-founder of Hostaway, dialing in from Toronto, Canada. It's been an honor.

Marcus Rader:Thank you very much for having me and I hope I can come again one day.

Roland Siebelink:Absolutely.

Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the world.