How this travel startup survived the coronavirus
It was a late evening on a rainy October day of 2017 when I shouted to the top of my lungs “We got it!!”
I had just won a bid to acquire Syncbnb.com, a domain name that was about to expire and go into auction. Although I had set aside a few thousand dollars to pay for it, it turns out I was the only bidder and got it for a measly $20. I was almost disappointed.
Syncbnb was born out of necessity. Besides working in the tech industry, I was also a vacation rental owner renting it out when we were not using it. Initially only on Airbnb, but then I realized that by listing it on multiple channels (Booking.com, Tripadvisor, Vrbo, Expedia and more) I could actually triple my revenue. I was so happy, until I wasn’t. Pretty soon I found out what an excruciating pain it is to get a double booking. You have to fight with 2 different guests to choose who will end up staying, cancel the other and find them a new place to stay, and then get penalized by the channel for cancelling the reservation. This penalty meant that our listing would start showing up lower in search results, thus losing valuable bookings.
There had to be a solution.
After the first few double bookings I started trying out various services that promised to solve this. Six months and dozens of services later it was clear: Whatever existed was either too expensive because it was targeting large management companies, and whatever was affordable enough for a single owner just didn’t work — I was getting one double booking after the other. It took a while to figure out why, but eventually we cracked it. Petros (my co-founder & CTO) and I discovered why all these affordable services didn’t work, and set out to find a solution. Well, we did — and in January 2017, Syncbnb was incorporated. The first semester was spent on research and fundraising, and Q3 & Q4 were spent designing and building our prototype (MVP in startup speak). January 2018 our product was live, and we had our first few hundred customers in the first 3 months. We grew at an astonishing rate of 12% month over month for the first 2 years, and grew the team to 17 people in no time. It was clear we were on to something.
And then it happened.
The pandemic came as a storm after a wonderful clear day. The first 2 months of 2020 saw our best growth yet, the team was thriving, the product was stable and robust, NPS scores where through the roof, life was good.
It was the 15th of March when the shit hit the proverbial fan. Until that day we were having our best month ever — already more than 8% higher than last month half way through March — and February was not a bad month at all! On that day though, the shutdown of Europe had just begun. One after another, countries started imposing strict lockdown rules, border closures, and anything else in their arsenal to try and contain the spread of the virus. Drastic — but necessary measures — to contain an invisible enemy. The world had begun it’s downward spiral. And as we all now know very well, one of the hardest hit industries was travel and hospitality. Restaurants and hotels shut down, flights were cancelled, airports closed, borders sealed. Short Term Rentals were not immune, unfortunately, and were heavily affected. Everyone was wondering when this would stop. What would happen next? When would there be light at the end of the tunnel?
It was time for action.
From day one we went into war mode. This was DEFCON 1. We needed to act, and we needed to act fast. Besides consulting friends, mentors and advisors, I was lucky enough to be a member of EO — an organization for entrepreneurs around the world that want to grow faster than the rest and rise above the pack. All these resources provided immensely valuable feedback and advice that Petros and I evaluated, laid down and discussed for hours at a time until we came back with our plan. However, despite popular wisdom and all of our advisors recommendations, there was one thing we did differently — and never regretted.
We decided to keep everyone on board.
With the exception of a couple of people that we had already decided to let go before the pandemic hit, everyone else stayed on the team. The reasoning, at least in our minds, was simple: It took us 3 years to build a world class team. It took countless hours to define our core values, lay out a growth strategy, build our culture. This was Syncbnb’s main asset. This was our strength. This was our legacy, and we were not about to throw everything out the window. Instead of going full monty and stripping down to the bare essentials, we decided to push ahead full force. If we were losing revenue on our main product, we would find other ways to cover for those losses.
New products, new services
When everyone else was scaling down, we decided to scale up. We designed and introduced 4 new products to our customers in record time. All of them were designed to help vacation rental owners and managers put a curb on their losses and help them recover critical revenue and expand their reach. It also meant that everyone on the team was kept 100% on the top of their game at all times — a very critical element in keeping morale high in times of crisis. Since most of these products required manual work and were not fully automated, we knew they would not be viable for the long term — at least not in the format we launched them. But they served their purpose well, providing invaluable extra revenue at a time of need, helping keep everyone on board and laying the building blocks for their next versions which would be much longer lasting. What little time was left was spent on training, more training, and preparing our systems and processes for the eventual rebound of our industry.
But that was still not enough
The pandemic hit us at the worst possible time — right when our VC money was running out. As expected, all fundraising talks were frozen and although we were on a clear path to profitability, all VCs were now too scared to touch ANYTHING in the travel industry. Apart from pivoting to online conferencing, there was not much more we could do to get new meetings with VCs. We needed to cut costs, and we needed to do it now. The first decision was for Petros and myself to stop getting paid. We knew this would put our reserves in serious strain, but it had to be done. We needed to get cashflow positive ASAP. Even with this radical measure, we still had a long way to go. Next on the table was reducing the salaries of our people. But then the question popped-up: Is it better to have many disappointed employees on board, or fewer but happier? This brought us back to square one — everyone stays. Luckily, the government offered various relief packages to companies that helped us drop our payroll costs significantly. This might actually work!
We had a lengthy debate with Petros about whether we should keep the office or not. I was a proponent of going full remote, but Petros insisted that for him and a few other people in the company, having a place away from home to go to work was vital, so the office stayed. I negotiated a good deal with our landlord and a few months later a law was passed that dropped rents across the country — that shaved even more off our expenses column. However, we were still shy of breaking even, and needed to find more cost cuts.
It was time to negotiate with everyone.
More than 20% of our monthly budget goes to hosting and various SaaS products. Azure, Intercom, Adobe, Atlassian, Cloudflare, Hotjar, and many more of the usual suspects — services vital to the smooth operation of most tech startups needed to get a haircut. I contacted everyone and requested emergency relief — any discount we could get would help us survive longer and bring us closer to profitability. Although some refused, we managed to get fair deals with most. You’d be surprised to see what a sincere request for help can get you in terms of discounts — the startup ecosystem thankfully rose up to the occasion and helped it’s peers, and I’m grateful for all the help we’ve got during those difficult times. But the largest cost cut came from switching hosting providers. We had spent our last free Azure credits a few months back and we were now spending 3–4K per month on hosting. A few emails later and we had offers to switch to Google cloud or AWS with 12–18 months worth of free hosting credits — Well, “Hello Google” 🙂
What about marketing?
Although most of our customers come from organic sources (SEO, blogging, review sites, webinars, affiliate and referral schemes and plain old word of mouth) there is still a significant portion coming from paid ads. Although a relatively small percentage of our total monthly expenses, it’s still an amount that can make a difference — and it sure did. By reducing our paid ads budget to an absolute minimum, we managed to finally reach our goal.
We were now cashflow positive.
It’s amazing what a sense of freedom and relief becoming cashflow positive can bring. No longer restrained by the fetters of “runway”, we could now take a much needed breather. It took some hard work and it took some luck, but we managed to do all these cost cuts in 30 days, so by April we were profitable and looking at an infinite runway.
But was it infinite?
SaaS (Software as a Service) companies are predominantly subscription based. The good thing -strike that, the *great* thing — about recurring revenue is that it is largely dependable. Based on your monthly churn (how many people cancel their subscriptions) every month and your ARPU (average monthly revenue per user) you can calculate each customer’s lifetime value (LTV). That means that if you know how much it costs to bring on a new customer (Customer Acquisition Cost or CAC) you can safely calculate what your ROI (Return On Investment) is. If you have an LTV/CAC ratio above 3 or 4, you’re good. If it’s above 6, it’s great. If you’re a 10, you’re stellar. Syncbnb was at 11.
But could we maintain those numbers? How hard would the pandemic hit our industry? How much would it cost to bring on a new customer and how much money would each bring in? No-one had the answers, and neither did we. All we could do was make sure every dollar spent on marketing was well spent, and keep our fingers crossed. We ran webinars and wrote blog posts to help hosts navigate through these treacherous waters, we squeezed every last lead we could out of all our marketing channels, and optimized all our flows to improve conversion rates as much as possible. But was it enough?
It was largely an issue of where the few remaining travelers would choose to stay: Hotels or STRs? Hotels had the advantage of more officially approved cleaning and disinfection processes but Short Term Rentals offered isolation and minimum contact with other people. The great travel debate of the first few months of Covid was exactly that: What will people choose?
The great travel debate of the first few months of Covid was exactly that: What will people choose? Hotels or STRs?
By late summer it was obvious. Reports kept coming in from all over the world that hotels had lost more than 80% of their traffic on average compared to the same months in 2019. Although there was no official source for the same figures for vacation rentals, we could see in our database that traffic had dropped an average of 40–50% for our customer base — and there was even one segment that was actually growing : luxury villas. That got us thinking: Could there be other categories that are growing? Could there be regions that are coping better than others?
Hidden pockets of hope
It didn’t take too much digging to find out that there were some clear winners through all this mess. Homes and cottages a few hours drive from main metropolitan cities were thriving, and so were luxury villas. Additionally, there were a few countries, including the United States, that never went into full country-wide lockdown — just local restrictions in specific areas. That meant that people were allowed to move with their families to rural places close to their cities and work from there — since everyone was going remote anyhow. If you can work from home, why not do it from a new home next to a pond, or near the sea? This new trend kept a large portion of the STR industry alive and kicking. US customers that used to amount to around 25% of new customers every month (Syncbnb has customers in 78 countries) now comprised more than 50% of all new customers. This helped us redirect our (limited) marketing budget and all other organic efforts better, and make top dollar for our spend.
It took some awe inspiring work from the team and a healthy portion of some good old fashioned luck but we finally did it: After an initial drop during the first 2 months of the pandemic we have since been either flat or slowly growing again. Although still some distance behind our February all time high, we are now more confident than ever that we can reach that pretty soon — maybe even in the next few months. The fact that Syncbnb is a service that can actually help hosts recover parts of their lost revenue has helped replenish our customer base from people abandoning short term renting altogether. Being a relatively low cost service means we are not the first thing that owners and managers that stayed in the business wanted to cancel, and offering world class support since day one (just google “syncbnb reviews”) meant that hosts around the world saw us as a precious partner that could actually help them survive.
It all comes down to team
All of the above would not be possible if we heard the voice of logic and the popular wisdom of the time and laid off 60% of our team. It would also not be possible if we were not as picky as we were during our hiring processes during the past few years, eventually getting together a stellar team of like minded individuals, top level professionals, and high output war machines that our team at Syncbnb is today. I cannot stress enough how much they contributed to our success and how fucking proud I am of them. And last but not least, how important it is to have a world class co-founder by my side — someone I can count on during difficult times, and someone I can share thoughts, fears and aspirations looking forward.
This was a story of survival. Our next story will be a story of triumph.
To our customers, my co-founder and our team,
Alexander Caravitis
Syncbnb
