Interview Preparation

Tourism and travel have made a strong return to business after the pandemic, and today a startup called host which is building technology for a segment of that market, those who own and/or manage vacation rentals, is announcing a major funding round to seize the opportunity.

The startup, which provides software used to help manage vacation rentals through the many channels they can appear online (Airbnb, Expedia, Booking.com, directly on their own websites, Google, and more) has raised $175 million, a total of $175 million. round of capital that it will use to continue developing its business on all fronts: boosting its platform; expand its client base beyond the 100,000 properties currently managed through it; recruit more talent; and make acquisitions.

PSG Equity leads the round; Other investors and the company’s valuation are not disclosed.

Financing is a notable change for Hostaway. In a landscape of startups that have optimized for scale and growth by burning investment cash at the expense of profitability, Hostaway has made it to today’s profitable business, largely through startup and with significant scale already in its infancy. to have. It has taken in less than $3 million in outside funding since it was first founded in 2015 and launched its first products in 2016, and today some 100,000 properties in 100 counties are managed through its platform, with revenue growing. 10 times since 2021.

The company is based in Toronto, but was founded by three Finns: Marcus Rader (CEO), Saber Kordestanchi (COO) and Mikko Nurminen (CFO), and previous investors have included several companies outside their home country, including Leap. , Vendep Capital and Business Finland.

Hostaway’s ambition is to be a one-stop-shop for all the different kinds of tools property managers may need to run their businesses, and it’s already made significant strides on that front, with nearly 40 different features including a property control panel property management, marketing and communication tools, channel management for listing and updating across different sites, accounting and payment software, tools for managing smart locks and communicating/paying maintenance teams, analytics and more, usable through mobile applications and a web interface. It also offers a marketplace with integrations for 100 other apps that it doesn’t provide directly.

The lodging world has gone digital with over 80% of the world’s hotels, motels, self-catering rentals and other places to stay bypassing agents and booking directly online these days. That has created fertile ground for the world of technology, with a number of companies creating software to help the owners and managers of those places. Hostaway’s many competitors include the likes of Guesty (who in turn has grossed nearly $300 million), Lodgify, Hostfully, and others.

Rader said that he and his co-founders came up with the idea to build Hostaway not because of their previous hospitality experience (none of them had been involved in that industry), but because they actually all had previous experience in startups raising money and making outlets in areas consumer markets like gaming, where they saw a lot of employee dissatisfaction and few strong financial returns. “That story never ends well,” he recalled.

They focused on vacation rentals and hospitality because, in 2015, the landscape in that market seemed pretty open. Airbnb was on a massive growth streak, but there were many, many other platforms to list properties on, and yet there were no obvious leaders in the software market to manage that, and even the biggest players weren’t even capturing 10% of the market.

But things weren’t much easier for a different reason.

“The odds were against us, as most of our peers were founded by people active in the vacation rental space,” he said. So it got into their heads that the best place to start would not be building software, but running a couple of vacation rentals “as a side job”, to get a feel for the state of affairs and to understand the issues from their point of view. view. -Be the point of view of customers.

The fact that Hostaway boots was not entirely by design. Airbnb was growing, but it wasn’t the giant it is today, and that meant many investors were skeptical of the idea of ​​technology being built to run businesses on it and other similar platforms.

“One investor, after talking to us for an hour, just said, ‘I don’t believe in Airbnb and I’m leaving,’” Rader recalled.

However, Hostaway persisted, saying that ironically, Covid-19 was the catalyst for things to really take off.

“We could see global macroeconomic trends taking shape,” he said, highlighting the trend of working from home, rising real estate prices and digital nomads (as he and his founders were and are) and people just moving. during the pandemic. , as all the reasons why the vacation rental market would continue to grow.

So while business definitely tanked at the start of the pandemic, leading Hostaway to lay off 1/3 of their staff when revenue dropped 60%, they stuck with business and everything gradually came back and has gone growing steadily. from.

“We are impressed with the quality of the Hostaway team, their vision and execution in building what is, in our view, a highly differentiated category leader with multiple levers of value creation,” said Edward Hughes, MD at PSG. “We believe the company has a great opportunity to lead this industry as it continues to scale its integrated platform, expand globally, and help customers meet growing demand in the short-term rental market. We look forward to partnering with Hostaway in this exciting new chapter.”