How Thehotelsnetwork CEO Juanjo Rodriguez grew Thehotelsnetwork to $24.8M revenue and 3K customers in 2024.

hello everyone my guest today is juan rodriguez he's a third time entrepreneur now building his first two SAS company he's from Spain between Barcelona and San Fran goes between Barcelona and San Francisco he's training business always working with technology one eye ready to take it to the top yeah all right so you're building hotels network.com tell us what the company does and how you make money okay so it's an industry specific SAS company for we do software for hotels specifically to help them with their direct booking and that means for all the business they make directly with the end-user the doubler and they sell directly versus the booking they do through third party like lines of all agencies through operators whole servers and we charge a fee dogecion outside fee for using our product and then they install on their websites to improve performance both personalize and increase conversions and what what is the average customer pay per month so we our current price is 200 US dollars per month per property for the full package okay something I imagine a lot of your customers they have many locations so I don't want to go down every cohort but on average with the customer pay per month it's a bit but that would say that about 50 to 200 if you do it an average depends on on the dollars towards us yeah 150 work if they have to pay 300 a month for each location well because then 300 is for the full package and there are some other verses in which you can get a more limited there okay so you're saying the average hotel chain is paying about 150 to 2 in our box per month correct okay and give me more your back story here when did you launch the company so the companies have a bit old over three years now but you see that's a bit old a bit older good yeah so I've been an entrepreneur for quite a bit of time so I started my first company back in 2000 then I spent some time in running an advertising agency and then I moved into the tech space again five years ago I tried a couple of things in trouble and while you know we were looking for some similar ideas then this idea came up as something that immediately resonated with the clients so we moved from exploring ideas in b2c with in hospitality to b2b and then suddenly clicked and and okay so 20 let's see there's 2015 was start date what have you scaled to today in terms of total customers we have over 3,000 hotels that we work with now okay yeah but are those I imagine those are probably free how many arcs or customers no no those are customers they're all things we don't have a free we don't have a free product okay got it so 3,000 and then revenue today what are you guys doing it per month about so we don't I don't like to share let's like numbers but we are in a few million per in ARR okay an error I mean if I take if I take the 3,000 customer number you just gave me and multiply by 150 bucks a month it puts you at 450 thousand bucks a month or about 5.4 my year is that accurate we are a little less than that because we have some legacy clients that they would have started panelists one of the things that we discover is that since we are in a category that is pretty new then the price and the value of the products is unclear for many customers so we are we are our probably more expensive because we are the more value today that it was at the beginning okay you can we say though it's between four and five nine and ARR is that fair yeah okay and the reason I asked is I want to get a sense of growth so where were you a year ago in July of 2017 how much were you doing per month we've grown the last year we've grown over a hundred percent okay overall this is good it's a I think it's about if you see your year it's probably I haven't had a fifty percent less yeah so if right now you're doing 360 grand a month or about four point three million bucks and ARR if I go back a year you're saying you're doing about a hundred and maybe 160 hundred seventy grand a month mmm yeah about half a word today yeah a half okay and where we driven on this growth from I mean how are you know hotels typically it's a tough sale so you you're you have thousands of them how are you selling hmm so this is a very self driven industry versus marketing so it's basically through I mean inside system we have a team that is specialized by market so we have they take country managers that are responsive or for certain specific videography and we are we are covering the major to read some countries in the world and one else how many people on that team so today I think we have about 15 people in the South team one five one five yes and how many are in your total team the total team today 39 people oh wow ok so a little we're call it 30 40 percent are all sales mm-hmm so back it let's let's okay so those are that's a big cost associated with selling right the salaries of your net sales people I imagine you probably runs the marketing tests now and then what have you figured out is your fully weighted cost to acquire a customer if we do it per property which is more it's much more consistent we work mainly with chains it's really different if you work with a chain of five persons of 10 or 15 or or a hundred so if you do it their property our cost of acquisition is probably around six hundred dollars six to eight hundred maybe yes and it'll be it is a bit different per market there are some much cheaper markets and we are selling in many countries the US is obviously much more sensitive but then how you know Thai lamb is much cheaper and how do you model your payback period on that six hundred how quickly do you get it back we get it pretty quickly because we have a very very low term like hello than that like below 1% and that's one percent logo churn per month yeah okay yeah it's actually not blog about the location okay one percent revenue turn per month and that's a net or gross that's that's net net so that includes expansion revenue yes okay it depends because on some Monty 16 mega turn when weekend expansion yeah in some cases we are actually in the process of adding new products to the pipeline so we can sell more than more than one and whenever we sell at the second one is Kleenex if you consider the expansion is go over a bit yes so to finish your thought there you said churn is really low you're gonna talk about payback period so what is your payback period in terms of months I would say about nine months maybe an average and how are you getting that number so we are seeing how much the average fee is compared to the number we have spent and it is P to six and nine months sorry so your I don't understand I say that again differently that if we look at the fees that we get from the customers and then see how many months of fees we need in order to overcome the cost of acquisition we are not using there they turn in that calculation because there is too low and then the companies to junk in order to have a key a lifetime value yeah well the churn doesn't really I think I don't think term impacts pay that period much and maybe increasing it affects obviously retention but if so if you're paying if he G's customers were paying a hundred twenty 150 bucks a month right that's what you said on average monthly was and you're spending six hundred acquire them you're getting them you're getting that money back in about six to nine months what you're saying yeah yeah that's great and and walk me through some of the other economics right lifetime value is a tricky economic because it can lie to you very easily you know what I mean yeah what do you assume your lifetime value is in terms of months in dollars we don't even use it you never at all no okay that's great now do you raise capital we raised in February we we were a bit of strange in that sense because we raised a very small amount live probably around to less than 300 K from the founders ourselves and then from a small around from NSX in in San Francisco and then we became profitable on that and then we raise money in February 3.7 million u.s. to drive growth away when we were really profitable and then because the opportunity is clearly very large and we are trying to take advantage of it so so four million total in the company you raise three point seven in February yet what was the market like when you raised like did you raise in the States or did you raise it in Spain we raised mainly Europe Eurostar from Europe yes and the main investor is from mr. Montaine okay and I wanna I mean I'm gonna I want to ask some more questions about like some trace what the ecosystem is like over there versus the state so so I mean you might be asking pretty money evaluation what were you able to raise that what was your goal I cannot because of the investor side I don't share the stock valuation but I can tell you environment I actually think that for the travel space in which we are it might be easier to race in Europe today that it is in the u.s. because there the hospitality market in Europe is very dynamic very large and there are many people who really know the market well and they understand the opportunity probably better than the people who only know tech so in general what we found is that the conversations with people with experts in the industry were better than their whatsoever more financial so let me ask the question would be a different way that you would become Pro answering or one multiple on your revenues were you able to negotiate we were let's say we were working between Tiffany okay that's pretty healthy so six and eight time you got a pretty money valuation somewhere between six and eight times your current your ARR in February correct okay well when we play we pay to dump nothing the we were what's how many - how many months did it take you it took us to fight it been 22 and a half months - okay then yeah so you maybe sign a term sheet before Christmas in December correct yeah that's great Christmas holidays are a great forcing there and sign the term sheet before you go on holiday alright good so look you know back then again you're doing somewhere between three and four million bucks in ARR and you're saying multiplied between six and eight that's a healthy valuation there unless you can service your series a right mm-hmm yeah all right good so what's the plan with the money so basically we are investing in product itself it's like is it pretty straightforward from the product perspective we want to we are in a in a category we seem that take a stack that is pretty new we are basically creating it together with a couple other companies so we want to stay as the leaders of this small category by adding new any products and the thing is the more time we spend with the clients and talking to them the more opportunities with you it's pretty clear where you can build support to add value and then you'll think it's yeah I know and we're apart itself hospitalities have burned Russian industry so you really have to be in multiple markets around the world enable in order to be able to talk to the clients close to them yeah that makes good sense so 39 today on your team what do you think you'll be about in the year yeah 5050 something maybe and what do you what do we would we want to hire but that's not we don't want to over hire yeah look I just because you hire people doesn't mean your company is healthier it just means you have more expenses so I get it right you're doing it for 4.5 million air right now what do you hope to grow to by the end of the year so we want to maintain the a hundred percent growth or this year on that's the M being the idea so that would put you up at like six and a half seven million in ARR by December optimistic but made but yeah let's let's just go yeah all right one very good let's wrap up with the famous five number one what's your favorite business book [Music] this book there's someone I really realized that the products of choice paradox of choice it's ooh yeah that's number two is their CEO you're falling or studying right now CEO hmm like someone who's currently running the company yes hmm interesting I never thought of that no no one really I'm not looking at anyone in particular number three what's your favorite online tool I really like a stripe I mean you see the for quite a few years and I've been pretty big fan and a number of for how many hours of sleep one do you get every night aha 6 mi yeah my partner attracted not my situation married single you have kiddos I have I'm married then I have two kids two kids two kids they are nine and six three oh well and how are you I'm 44 44 last question what are you what's your 20 year old self new hmm [Music] so I pretty happy with how things turned out it's not about something yeah yeah just what you new think you can I think that you can start things so that working smarter you see it's more important and working more and by that I mean that you have to know where you're putting your efforts in the sense that there's some things that bring in value some others and it has to compound in a way yeah fine fine things in which you can really build toward zero guys work hard not smart he got involved with the hotels Network back in 2015 that's when they launched a company today 39 people they basically get installed on websites of these different hotel locations they help with booking they're now working with over 3,000 customers paying a hundred 150 a month they're doing about fear and 60 grand per month right now in revenue about four point three million air are that's up 100 percent year-over-year from 170 grand in July of 2017 in monthly recurring revenue it raised about four million bucks they just raised about 3.7 million in February of 2018 at a six to eight X a are multiple and at the time they were doing about 3.5 million in ARR that's a pretty money evaluation spending about six hundred bucks to acquire these customers optimizing for a six to nine month payback period Juan thank you for taking us to the top yeah you're welcome to you