AirDNA Revenue & Valuation (2020)

hello everyone my guest today is scott shatford he is the founder of air dna uh which is basically a leading source of vacation rental data looking on obviously scaling that he's got 15 years of experience as a data analyst which is obviously leveraging in the new company uh scott you ready to take us to the top let's do it all right so you came on the show well gosh it must have been about a year and a half ago now at this point right yeah i think which is about just about a year ago yeah maybe it's a little bit over yeah i remember my big thing with you as i love the product because i own air airbnb properties but from a company perspective your churn was through the roof um talk to me well first off update everyone so what does air dna do and then talk to me about churn have you been able to get that down sure yeah so air dna we are the you know largest provider of short-term rental data airbnb data vrbo home away whatever it is we track every vacation rental around the world every day and try to analyze it like a hotel property trying to figure out how much revenue is generating what its occupancy rates are what its average daily rate is charging is and so uh you know we just built built out a lot of technology to understand how to do that at scale and so we provide that data to vacation rental managers or real estate investors or hotels trying to figure out who's eating their lunch in their in their backyard uh hedge funds and a bunch of other folks that are interested in how sort of uh short-term rentals are disrupting uh real estate and hospitality and what opportunities it's creating and are they still paying on average call it 75 bucks a month yeah somewhere around that probably you know we have a sort of a flagship product market minder which is our sas product you know we've got you know over 6 000 subscribers that product yeah paying in that range 60 to 70 bucks a month um yeah like like you mentioned you know churn is uh it isn't an issue for any sort of real estate product we've found because because a lot of people in real estate they're making a one-time decision right they're trying to say hey should i buy this property or that property should i buy in breckenridge or bail like and so a lot of it is sort of a one-time big decision that they're willing to spend a bit of money in to make sure they get that decision right once uh but keeping them around you know for the next year or two is the tricky part like how are you helping them set up that property how are you helping them price that property how are you helping them benchmark their performance versus their peers right and so you really got to take them on a journey uh and so you know what we've been trying to solve for the last year is how do we make sure we can solve you know the entire journey for our customers which is not just buying the property but setting it up pricing it monitoring it and optimizing it over time so when you look at over the past 12 months uh churn what what is it what is it at now man we don't even look at turning on a scary uh it our monthly churn is is a little under 20 right now um and so that annualizes into something that's probably you know close is around 60 percent uh annually when we're looking at sort of our our annual return you know once we hit sort of a three month mark you know people stick around right and so we know this is sort of the use case we want somebody that's actually operating properties is monitoring competition making daily pricing changes to their to their listings and so that's the customer that sticks around for a while yeah give me give me that story though real quick let's actually break this down because you you see this pattern you know if people stay past month three their churn drops significantly so it's unfair for me to ask you like a weighted average turn number so let's break this down first 30 days you know all your signups on the sas product churn is what probably pretty high right about 40 yeah and then if they make it past day 30 the churn between days 30 and 60 drops to about what yeah so we're hitting about the average turn of about 20 at that point in time okay and then if they make it past month four how low like five percent yeah see so that's actually not i mean it's it's not bad it's good that you know that though so you can make smart decisions about getting more customers right right yeah yeah you know and we've been fortunate that we can uh you know we can replenish our the people we're losing every month and more right we're getting uh you know 16 1700 people a month coming in to subscribe and we're you know losing whatever it is 13 1400 people out the back door but you know over time we're still sort of able to add net new subscribers each month but you know there's two ways to solve it either you're throwing more people in the top of the funnel you're trying to close the bottom of it and then not letting them escape and so you're trying to do both at the same time but uh we know there's a lot of consumers out there there's over three million airbnb hosts there's a lot of other people kicking the tires on getting into the game a little bit so you know a lot of our efforts are around sort of just marketing and freezer acquisition yeah so okay tell me more about that so today when you look at your total expenses on marketing and things like that what are you spending fully weighted to get a 75 a month or 70 a month customer uh it's it's uh it's good we don't spend much on on on right so we might spend 100 bucks a day on adwords and we don't spend much else right it all comes through uh direct traffic seo and free um referral sort of traffic tell me about an seo term that you rank really well for that brings in a lot of your organic traffic sure yeah just like uh occupancy rate fill in 80 000 cities around the world right airbnb occupancy in nashville and surprisingly like all of those long tail terms that have sort of a geographical component along with occupancy revenue whatever it is i mean that is sort of the long tail that we dominate right so we have uh maybe yeah maybe it's 80 000 visitors a month that are coming in on pretty you know unique you know really um targeted sort of seo keywords yeah now you are auto generating these and i can tell because when i put in airbnb occupancy rate austin um the metadata under the headline it says like 66.666666 percent like it's clear there's a formula that's driving this thing um have i mean have you figured out a way to put human touch on these things to you know maybe get up above patch.com and inside airbnb.com uh that's a good that's a good question you know it all depends on the search term you're right we have dynamically generated 80 000 unique sort of uh keywords or meta descriptions right um and we thought that that you know is more about a click-through play and it's not really as much as a sort of a you know moving up in the ranks uh play uh we are continually working on technical seo you know for in-app experiences for things that are built in like you know javascript or or react is what we're built in you know google it's a bit of a mystery i don't know like exactly how google is tracking that how they're rendering the page how you can sort of make sure that they don't they don't ding you for duplicate content and so you know we've got a full-time guy who's just trying to work through how do we make sure we're getting these uh um crawled correctly and that we have it you know ranking as high as possible yeah what's his name and did he come from real estate or did he come from like marketing and seo i can't give you that oh you don't know where he came from uh no he's really just more of a front-end developer that sort of has landed in this sort of uh in this niche the talent is just really hard to find for this technical seo town we've looked oh really yeah we looked all around town of people that specialize in seo and nobody's been able to sort of do what we've done with sort of the in-house talent so what are you what tools are you using there's a lot of tools that will help you dynamically launch thousands of landing pages for long tail keywords do you know what you use um i think it's all a built-in house i don't think there's any sort of tool we're using okay but uh i could be wrong on that so that's okay that's technical okay but that kind of search term combination of kind of you know city name occupancy rate airbnb that drives about 80 000 uniques per month into the site yep that's right that's great okay what's the team size today how many people uh we're pushing about 50 people now okay five zero and how many are engineers uh a dozen okay so how many sales people with quota good questions uh with quota we've got about seven uh what we would call sort of our closers and we've got about five outbounders how do you i mean actually i'm asking you feel good about the model on the sales folks do you feel like you have the right ratios of kind of quote a target to you know full ote you know comp etc i would say you know so that that team is based out of barcelona and so i try not to think too hard about how that structure is and try to defer that to kind of our cheaper uh revenue officer uh you know there's always room for improvement and as you're scaling this thing you know you're always trying to figure out the right balance of who's the account managers and the closers and you know how are you thinking about nurturing customer success like it's con i mean it gets really complicated when you're we're supporting 500 subs you know uh enterprise customers and you've got you know 50 to 100 inquiries coming in every day you know what's the right way to do that you know i think we've over indexed to closing deals and getting stuff done and now that everything's up for renewal and you know that churn is high you sort of reassess right is it easier to sort of get people to sign up for year or two or is it easier to get that person to sign up for their first installment and i think we're quickly realizing that uh renewals are is an easier way to make money and obviously make your your turn numbers go down um so is it is it optimal i think everybody's always tweaking with what optimal is is it good enough uh yeah probably for yeah are you so have you raised capital or are you still bootstrapped still bootstrapped still be strapped and um yeah i mean don't really plan on changing that no no real reason to at this point in time so i mean you'd only change it if you saw a direct path to spending more money to make more money right and if you don't unders if you don't know what that is then you wouldn't raise money yeah no you're right yeah there's sort of a lot of different you know you know competition whether it's sort of an acquisition whether it's sort of a new business line there's always things that we're thinking about but growing our core business there's not really a need for additional capital right now yeah um if you did buy another company would it be one like inside airbnb.com oh they're a free service right so i wouldn't get much value out of buying a free service but um no it would be somebody that would be it's a bit complicated for people not in the industry but it's sort of sort of more of a not a vertical acquisition to be more you know expanding our services into more more options right which is more connectivity to uh airbnb and booking.com and uh it would be more of a how do we do more for an end user than just do market intelligence and pricing what else are they doing right are they monitoring check-ins are they scheduling services like what can we add in auxiliary auxiliary services that could be uh so we could be sort of a one-stop shop for people yep so again your bootstrap so unless you're putting in your own money to cover some gap you guys are casual profitable correct we are we are yeah you hesitated there and looked deep into your desk what does that mean because i figured what's coming next from you i remember our last conversation what i asked last time i think you got all the goods from me right you got the revenues you got the turn you got you got all the secrets out of me no no i mean by the way it's so fun for me when ceos do open that up because then what i do is i run like pattern recognition across the thousands of other interviews and i'm like oh man if you did this it would do this and then we brainstorm and it's sometimes fun that's why i'm pretty transparent you know you're good and so uh yeah i mean we're we're we're highly profitable running over a 30 margin you know uh and uh you know close about 700k and sort of uh revenue last month that's good where's the so where is the extra juice coming from on the 700 so if i take 6 000 customers times 75 bucks a month that's 450 grand a month where are you getting up to 700 from yeah so that's our enterprise sales team right so all of that sort of six thousand subscribers is is falling in our lap there's no sales process they're coming into a tool there's a freemium component and uh we email the hell out of them until they uh they buy the product right the other revenue is much more of a traditional enterprise sale right so maybe they start in the cheap tool we see what they're doing and then we sort of offer package deals right that'd be like more raw data api access you know allowing them to get more granular information or information they can delay into other data sources to create you know additional value from it so you know we work with a lot of different types of customers like dmos destination marketing organizations that have a different need it's more of an excel sheet with a bunch of summarized information and so you know we have a sort of a product suite that sort of speaks to real estate investors a dmo or you know a really massive vacation rental management company that has their own data science team and just wants the fire hose of data sent over every day so there's some things that the enterprise team sell so last month over 700 thousand dollars in mrr and that is true sticky revenue correct no big one-time purchases in there that's right yeah that's good and then six thousand that fall on your lap and you mentioned earlier casually about 500 enterprise clients correct yeah that's about right so it's fair to say i mean those 500 enterprise clients are making up call it 250 to 300 grand a month of your revenue about 30 40 of your total revenue yep you got it yeah it's great it's a good i mean look it's a good business model makes a lot of sense i the thing i love about your space even though don't be a fan of this but you're like your churn sucks you're in a really great space right because like as long as you understand the churn and as long as you i mean the thing is you're not paying a bunch to get customers so as long as you get some portion of these guys to stick right especially in an enterprise level i mean it works for you there's nothing wrong with it it works i mean that's exactly right right if your cost of acquisition is you know basically zero but it might be like three dollars per user and we're getting two 250 out of them you know it's it's fine right yeah so let me ask you if someone wanted to compete with you why wouldn't they just go buy inside airbnb.com hire designer because it's trash right now looks disgusting put a better skin on it and add a pricing page yeah the science behind it is a bit more complicated than maybe you can first see right the the real the real what we provide is um we have a lot of data scientists that are really good so when you can uh aggregate the data like inside airbnb does anybody can look at a calendar on airbnb and say hey it's available on this day and it's unavailable on that day but actually deciphering is that unavailable day is that because the owner's staying there for the six months or is that because it was actually booked for you know two thousand dollars right and so we have built out algorithms that understand how every property operates how different markets operate so we can get a high level of accuracy on what properties are earning inside airbnb only focuses on the supply of the properties so there's a property over here somewhere and we actually figure out exactly how much that property is earning so there's a lot of sophistication sort of bridging the gap between what is on the market and actually what is the revenue generated by those properties interesting all right north of 700 grand a month today where were you a year ago uh i don't know you you have the podcast uh yeah we're about a percent growth year every year sort of a company yeah back in september of last year so a little less than a year ago uh you said you were at about uh what was it 450 4.5 in terms of run rate yeah so i mean doubling you every year yep that's great um okay good growth so i mean let me ask you a question as a smart business guy right anytime a company like this bootstrap great company you're spitting off cash flow you have the tough question about the end of the month i mean what do you do with the extra 200 grand that sits in your bank account like do you pay it out as a employee a rev share or a dividend or how do you reinvest it oh you pay yourself in the five years of hard work you put into it to get to this point right uh there's nothing wrong with that either but then you personally have it you pay taxes on it then you have to figure out how to reinvest it anyway yeah that's true i mean you don't really want to be running a massive profit right we want to be reinvesting if you're not reinvesting in sort of your r d and your future product road map then you know eventually it's going to catch up to you and your competitors going to catch up so there's not like uh a massive amount of capital and all that you know we aren't thinking about how to put to work for your dna itself right and so um yeah you know i think we you know we were playing a little catch up because you're running at a pretty uh negative pace for a couple years and so it's nice to make a little bit of a extra cash put in your pocket but you know we're planning to make you know a million dollars a property a year that just pays our bills and then you're trying to figure out how to reinvest the rest of it into the business yep that's good and our bills if i remember correctly it's a family operation right it's like you and your dad or something yeah i mean my dad are the co-founders of the business and he's still involved in the business as a sort of vp of engineering uh and there's sort of another partner in the company as as well so you're smarter you're your dad in different ways my dad is definitely way smarter than me smart answer smart answer all right good stuff man um last question here i mean are you in right now i mean if you're generating cash flow and you're trying to expand tech stack faster you go buy companies are you close i mean do you have a are you in due diligence with any companies to buy them i i would say we are in the courting relationship with people to see if there there's an interest on there on there and uh but there's no nothing like actively sort of getting drafted at the moment how do you like make sure that like they don't know because you just told the world on this podcast that you're not making so much money so that they ask for a higher price like how do you make sure you appear smaller or less resourceful than than what you actually are well you know i i think there's a there's a gluttony of providers in this space which plays to our advantage right there's 50 people that potential you know acquires for us and not very many of them are are doing well and so i think you know we would be looking for sort of a fire sale rather than so you know you know buying an up-and-up company for the technology and the connectivity that they've built fire style code for less than 1x revenues i would think that would be yeah that would be accurate yeah guys there you have it if you have some unique data in this space and you'll sell for fire sale prices you can give me five percent i will give you scott's phone number and you go from there scott let's wrap up with the famous five number one what's your favorite business book uh my favorite business book i forgot about these man you always put me on the spot the one that comes to mind in mind is the first one i read that i really liked was the hard thing about hard things i guess by then horowitz yeah you got it number two is there a ceo you're following or studying no that's okay number three what's your favorite online tool for building the company uh favorite tool for building the company right now what is in my tech stack man i'm a nerd i'm a nerd so everything is analytical amplitude right now so i can track users and figure out exactly what they're doing and how to replicate uh good users good choice number four how many hours i'll speak every night uh i mean i got two young kids it's pretty minimal i'd say probably five okay not horrible so two kiddos are married single uh married yeah married for five years and uh two and a four-year-old oh that's a busy man how old are you uh 39 39 last question what was your 20 year old self knew good question uh take more risk and add value so yeah i don't know i was always focused on success but then when i started focusing on adding value success quickly followed scott guys there you have it air dna this is a great example of where churn can be through the roof but if you keep your cac at basically zero you can still build a 700 000 a month business up from 350 000 a month just a year ago and pulling 20 to 30 percent in ebitda margin of the bottom line every month for call it north of a million bucks in profit annually they're currently got about uh let's see they're serving 6 500 customers again giving them data related to airbnb a firehose relay of data launched in 2012. now today 50 people on the team boostraft which i love 12 engineers seven folks uh quota carrying sales reps as they look to continue to scale scott thanks for taking us to the top pleasure to be here man thanks a lot