How Cloudbeds Reached $50M+ Revenue and 27,000 Paying Customers by 2023 (Interview with CEO Adam Harris)

Introduction and Company Overview

Nathan Latka

00:00Guys, Cloudbeds launched many years ago, broke 10,000,000 of revenue back in 2018. Today, over 2,500,000 beds across 27,000 paying customers use them, not just to manage the bed and the check ins, but now getting into FinTech. He's got 75% CAGR over the last three years, north of $50,000,000 of revenue. He says, easily a $100,000,000 next year. We'll see what happens. Hey folks, my guest today is Adam Harris. He's the co founder and CEO of Cloudbeds, a

00:24global leader in technology that unifies hospitality with one platform. They raised $250,000,000 of venture capital and earned numerous awards, including America's Best Startup Employers Inc. Best Workplaces and Entrepreneur of the Year.

Adam Harris

00:38>> Adam, you ready to

Nathan Latka

00:39take us to the top?

Adam Harris

00:40>> I love it. Thanks for having me. It's good to

Nathan Latka

00:42be back. I know we had a we had a nice conversation back in 2021. What is a what's what's the big update sense and none of us obviously predicted the market would do what it's doing interest rates up 7%. How's this impacting cloud beds?

Impact of Market Trends and Revenge Travel

Adam Harris

00:57>> You know, fortunately enough, travel has been pretty much revenge travel ever since lockdown. So we've seen tremendous amount of surge for individuals wanting to take that once in a lifetime trip. Unfortunately, I think the economy is catching up a little bit, and 2024 will be a really telling time, especially during the winter period for all those in the Northern Hemisphere. But, look, it it has been one of those one of those couple years for the records

01:25>> in many different cape capabilities. But the thing that I think I'm more most most excited about is the digitalization curve is starting to catch up in favor, and the industry is starting to catch up to what the consumer is looking for. And and and that's a good thing for our industry. And more importantly, that's really good for the the consumer like us traveling around.

Cloudbeds History and What the Company Does

Nathan Latka

01:45Well, look, for folks that that didn't catch and I forget the history, we actually talked in 2018 and 2021. And now today, but for folks that missed those first two episodes, feel like, I feel like our 2018 conversation was I can't really say this, but back when you were a baby at only quote only $10,000,000 of ARR. But for folks that misses episodes, who is Cloudbed selling to today? What do guys do?

Adam Harris

02:08>> Yes, absolutely. So the best way to think about it is hoteliers around the world run their entire businesses on software. And that tech stack predominantly has been 18 different systems that are entered to join. Back in the day, was serialized cables on premise. Now it's all in the cloud, but it's still disjointed and too many different systems connecting to one another. Cloudbed slides a box the table and say, hey. Everything in that runs your business more

02:34>> effectively. And so we take the the day to day operational side of running a hotel, in a much more modern, capability. We do in a 157 markets across two and a half million beds in this world now. We're the category leader for independent hoteliers. And, man, that's been a long time ago when we were 10,000,000 in ARR, and we've definitely grown since. We're 757 people in 41 countries around the world now. It's been quite the journey.

Team Size and Engineering Investment

Nathan Latka

03:05Seven fifty seven. How many people I imagine my heroes and go,

03:08is this like how much engineering is work

03:10is really needed here? But seven fifty seven people, how many are engineers?

Adam Harris

03:14>> Almost a third of them are. Product and engineering. Yeah. So we spend a lot of time and energy on r and d. Nathan, just to bring us back to 2018, we were only 40 people then.

Nathan Latka

03:27Oh, what's going on there, YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders. But imagine if we took all of the valuation data out from over 2,807 interviews I've done manually Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founder Path. Check this out. I'll show you how you can access this in a second. But you log in, you

03:50connect your Stripe account, you see your valuation real time, you can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founder Path dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company,

04:14you're gonna get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is

04:36this is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders share with us on the show. So traction, 1,200,000 seed round, 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired, the valuation and the multiple.

05:02Maybe you're going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founder Path. And we're thrilled to bring it to you. All right, We're gonna go back to the YouTube video here in

05:24a second, but if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's

05:50jump

05:50back into the interview. That's no, that's it's incredible. It's incredible. The growth curve there. So July, February engineers. Now, I guess when you say 2,500,000 beds, what's the, like, I'm not quite sure the right way to ask this question, but if you talk about like a building, right? And there's 20 beds in one building. My question I'm trying to ask is how many buildings do you serve today? Right? What's the right way to ask that question?

Beds, Buildings, and Growth Rate

Adam Harris

06:15>> Yeah, you know, it's different because sometimes you'll have a one unit, Right? I might have a short term rental that I'm I'm powering, and that short term rental might be in a building of many short term rentals. But the way I look at it is, you know, we have roughly 20,000 building entities around the world that are powered off our software, give or take every single day. Some of that seasonal, but yeah, it's quite the story

06:42>> for sure.

Nathan Latka

06:43So what is that up from? So if you're doing 2,500,000 beds today, where were you call it a year ago?

Adam Harris

06:49>> Oh man, that's a great question. I don't know that off the top of my head.

Nathan Latka

06:55Or what would you, maybe

06:56you don't use that, maybe it's not number of bed, but what would you say growth rate has been at Cloudbeds the past twelve months?

Adam Harris

07:01>> We've grown over 75% CAGR in the last three years. So really, really top quartile growth rates and that's continued to sort of maintain. Knowing what the publicly traded SaaS analogs are, we're better and faster than all of them. And we're doing that at scale. So no slowing down from our our our business, but we also have a, a dark night in that story. We are a fintech company just as much as we're a SaaS company. We've

07:26>> seen tremendous amount of acceleration in the ability for us to bring in financial products into our capabilities. So imagine every reservation that runs through a hotel, we can also do all the the the capturing of that revenue through credit cards and wallet type, transactions, and we handle all that.

Fintech Introduction and Expansion

Nathan Latka

07:45So What year was fintech introduced officially?

Adam Harris

07:48>> Fintech was introduced

07:51>> in our first market eighteen months ago, now in 30 markets within the last three weeks. So big rapid expansion this past six months.

Nathan Latka

08:02And what's the opportunity that you see there? If you process 5,000,000,000 of GMV, you're keeping 1% or what's the revenue upside or potential?

GMV and Payment Processing Opportunity

Adam Harris

08:09>> It's really hard to look at the take rate because every jurisdiction is governed by different rules, but it's a big Nevertheless, it's one of those things where if you look at Toast as a publicly traded company or Shopify as another, you know, 50% of their revenue is coming from fintech solutions. I look at it as probably something similar. Right now, it's less than 20% of our overall revenue, but it's fast growing. It's multiple 100% year over

08:34>> year growth rates in that sector. The thing that I like about it is it's incredibly sticky. Right? Every hotel in the world needs to capture revenue on behalf of their, guest. And if we can do that in a much more efficient way, pre arrival, during stay, create microtransaction opportunities, it actually drives more revenue for our hotel. Increase a lot of opportunity for them. And so we're we're just pleased that we're part of that storyline. And the

09:01>> more and more we do, the more and more we're gonna get back to the hotel over time. But, yeah, we are we we do over $10,000,000,000 in GMV just in reservations within the the key markets that we serve. Obviously, it's a much bigger number as you think about all the markets we serve, but, you know, that's a big opportunity for us to take a little little sliver of of value.

Nathan Latka

09:22Now when you say you sit on 10,000,000,000 of GMV, does that mean you're so close to it, you can count it up and add it or that's the GMV that you're also taking some economics on? In other words, that they've installed your flow, your fintech products.

Adam Harris

09:34>> No. So we see it, we touch We see those reservations flowing through us. It might be in a jurisdiction that introducing a payment processing capability is limited to a local entity. So I'll give you an example. In Costa Rica, for example, you need to be a licensed business to take processing. You can't be a third party. So there's there's ramifications of different jurisdictions around the world. And so we partner in some markets and then we underwrite

Fintech Revenue and Stickiness

Adam Harris

10:01>> in others in in The US, Canada, Europe, Australia, New Zealand. We actually underwrite it and now we've expanded that underwriting ability into other markets as well. I'm very excited about that.

Nathan Latka

10:11Yeah. No, it's extremely interesting. I mean, so 10,000,000,000 of GMV across 2,500,000 beds. I mean, each bed average annualized GMV is something like $4,000, something like that. Is that right?

Adam Harris

10:23>> Yeah. It's a great it's a great way of thinking about it. It doesn't necessarily always equate to something that simple because not every hotel takes a lot of credit cards. Sometimes it's cash. So there's actually different sort of money flow. Part of the world is only wallet specific. Asia would be one of those examples. Some of them are doing it on installment like Latin America. That's super popular. Now we see Klarna and Affirm becoming popular in

10:49>> The US. So even though it's really, really big, it never sort of works out to be, let's just do the 1% number and feel really good about. I would love to be part of that 1% magic number, but I don't think that's gonna be the case. But, nevertheless, there is money there, but, really, there's money to serve our customer with. We can bring value back. And in the reality the or the reality of this is there's

11:14>> too many intermediaries with their hands out. You know, our property opportunity so the the TAM that we service today, or I guess a SAM that we service today, spends about $87,000,000,000 a year in intermediary fees. $87,000,000,000 a year is our what our SAMs hand over to someone else for providing value in this industry. I wanna find out percent of that

Nathan Latka

11:37is total g of that is that a total Sam GMV?

Adam Harris

11:41>> Oh, I mean, it is it is probably 15 to 20% of the total Sam Okay. GMV. Right? So Got it.

Nathan Latka

11:48So 80.

Adam Harris

11:49>> Yeah. So it's it's a big so the the the travel industry is a trillion and $0.5 for lodging. It's massive. Right? But if booking.com is doing a 100,000,000,000 of that, Airbnb, Expedia doing roughly a 100,000,000,000, you have this whole wholesaler travel agent intermediary. I mean, you can just keep adding adding it up. Now Google's in that foray. So what we're trying to do is really fight back to bring more direct connection with our customer and that

12:17>> guest at the end of the day, shave some of that 15 to 20% commissionable rate and put that back in the properties.

Nathan Latka

12:24So I think, I mean, there's a lot of ways to make money on FinTech when you say close to payment flows. The one example you just gave was travel folks or Expedia, which, you know, obviously if Expedia helps you find hotel, they're going to take something from the hotel in exchange for giving the hotel that lead. Just to be clear, you're helping a short term rental in Austin, Texas potentially find a lead to rent their house

12:42for next Thursday and Friday. Is that what you're saying?

Adam Harris

12:45>> Yeah. Less short term rental, more hotel, but let's say a hotel has an open bed. We're trying to find that guest directly and bring them to the property owner.

Nathan Latka

12:53How do you do that? Because like if I go to cloudbeds.com, I just see software, what's your equivalent of expedia.com?

Adam Harris

12:59>> We don't have the equivalent. So what we do is we feed it into various sources. So for example, 62 of all origination of travel these days is happening through social media influence. So using ads, very targeted ads that are automated using generative AI, we can place an advertisement in front of a search population that's looking for a property that could be event specific, that could be, I'm just looking for a property in Costa Rica. It's called

Direct Booking Engine and Amplify Solution

Adam Harris

13:25>> our Amplify solution. So we're not at we're not a brand. We're not a place that you go. We are just originating the way to reach the guest and then sending them right back to our our booking engine experiences or landing pages we create on behalf of the property to help them transact. And we take a very tiny tiny sliver of that in comparison to what Google or excuse me, what Expedia or booking.com would charge at 20%.

Nathan Latka

13:50What what's tie? I'm sure you don't want give an exact number. What's the range like under 5%?

Adam Harris

13:55>> Under 5%, yeah. So we're

13:57>> not trying to nickel and dime. We believe that there's value there. The best part about it is the ROAS on all of that dollar spent with us is in the teens in terms of multiple return on on on their money spent. So, like, giving a 13 x return on every dollar they spend with us is beautiful. We wanna do more of that. I would love to find a money manager who I give could them a dollar

14:19>> and they could give me $13 back consistently. But so we figured that out. We have various ways that we're doing that in an automated manner. We're going to expand that. So that's our new product that's out.

Sequencing Fintech Products

Nathan Latka

14:30What dollar volume of hotel bookings will you drive through that funnel? You just articulated the ad to the landing page. I mean, that be a million this year, 500,000,000, a billion?

Adam Harris

14:39>> Our hope is to do a billion next year through that. Okay. But we're doing millions of dollars a day now. So it's, it's really Okay.

Nathan Latka

14:47So billion next year, if you want that to grow 200% year over year, that means you think this year maybe you'll do $152,100,000,000 in bookings to your clients through this engine platform.

Adam Harris

14:56>> That would be the hope. Probably won't be that total because we're testing some things out, and we're also giving away the software for free in certain certain scenarios. But nevertheless, you know, just in our direct booking capability,

Nathan Latka

15:09we have

Adam Harris

15:10>> we were the launch partner with Google, which was really exciting. We're doing some really cool things with Google in that area. And and we're starting to see the proof in the pudding. Now it's expanding it further. I mean, we have one of the largest populations of hotels in the world in all markets. And so the data that we're sitting on is really getting us sophisticated to try to find those little sweet spots. It won't work for

15:32>> all properties, but it definitely works for most. And so that's what we're trying to dial in.

Nathan Latka

15:36Yeah. No. There's, when you sit close to payment flows, there's so many ways you can help the end customer. So you've, this is one thing you're testing. I mean, but I think, I think to something that, I mean, you read squares, right? 10 Ks and 10 Qs and you read about how much they're doing on their lending platform. You're uniquely positioned to protect future cash flows on any short term rental Why not launch a lending company

15:55and make a, you know, 10 points of spread? It's a great question.

Adam Harris

16:00>> And it's something that we definitely have on the roadmap to explore. It's one of those things where that is one example of maybe 10 to 20 different sort of layers that you can continue. The fact that we're looking at both sides of the ledger and we're fully understanding what the business operational needs are, it gets really excited really quickly. We should probably talk about the lending. I know you know a few things about lending. Well, think

16:26>> that the reason and the thing

Nathan Latka

16:27that I struggle with the most at Founder Path is actually sequencing. When you sit on so much data, the hard problem is not, I didn't just give you some brand new idea you never thought of, you know about that idea, but the hard part and who wins marketplaces, it's actually what do you decide to launch first, second, third. It sounds like you launched this direct booking capability first. There's a reason you did that. Like, I'm curious

16:45how you think about sequencing. What's number two, what's number three and why the order?

Adam Harris

16:49>> Yeah, so when payments first so that we could capture the actual transaction on the micro level, then went, can we drive more to those same channels? Now it is That's direct booking? That's direct booking. Can we now further that and bring more micro transactions during the stay to enrich the opportunity to build more revenue capacity for the

Nathan Latka

17:12What does that mean? Like, buy this I buy the Snickers bar in the lobby?

Adam Harris

17:16>> Yeah. Exactly. And to get you to go buy the Snickers bar in the lobby or to upsell you during your originating of during your pre arrival flow or to say, hey, how are we doing? Oh, by the way, Nathan, what are some entrance in interests that you have around the area? So think about think about the side of a business. Right? You have the business side of a hotel, and then you have the art. The art

17:39>> is the experience that you feel when you're staying at a hotel. The business side is just the check-in, the collection, the payments, doing the accounting, and all that fiscalization. So what we believe is there's two sides that we have to do incredibly well. Now what I wanna do is bring you to the product of a market, And a product of the market is all the things that sit around the property. Mhmm. And that is very, very

18:02>> micro transaction heavy. There are many events where you're like, damn it. I wish I could just get a Snickers bar right now. Yeah. Well, hey. If I can just text the application, which I power, and go, hey, front desk. I'd love a Snickers bar. Can you run into Room 10108? They'll be like, hey, Nathan. No problem. Let me run you Snickers. Do you want a Pepsi also? And you're like, yeah. Yeah. No. That sounds good. Plus,

18:24>> you know, why don't you send up two bottles of water? They just create transactions, whereas most times, the guest is actually leaving property to go get those things. Yep. And so they're losing it on the seven Eleven down the street is taking that transaction value. So we're trying to bring that, full circle in, but I agree with you. Fintech loans, payroll capability, like, I have employees logging in and logging out of our application. We're time tracking

18:48>> them every single day, extending that into the ability to just, hey. Do you want us to do their payroll? Now I'm not trying to be a payroll company. However, I sit on a lot of data to enable that payroll capacity. Now doing that in 41 different markets around the world is incredibly challenging. So this always begins to be, let's look at the tip of the spear, where's markets that we can make sense of it, slowly roll

19:12>> things out. But right now we're just trying to rule out universal products that benefit the largest population of hotels.

Customer Count Growth Over Time

Nathan Latka

19:18Yep, 2018 you told me 9,000 customers, twenty twenty one I think you got up to 22,000 is what you told me. How would you define it? How many customers would you say you serve today?

Adam Harris

19:27>> Yeah, North 27000. So really good growth curve. We've changed our customer. Our customers got a lot bigger, which we're really excited about.

Nathan Latka

19:35So you had a $93 ARPU in 2021. Would you say that's more than doubled? $93 per month per customer on average. Significantly. And that's doubled because all the, I mean, I'm looking now at your dropdown, have, you offer way more products than you used to.

Adam Harris

19:51>> That's right. We we are we are a full platform. The platform is incredibly extendable. We have upsell capability these days, then we also have a marketplace of 400 different partners that can be introduced into the equation. So this is a, this is a best in class platform these days. It's, it's quite fun to see

Revenue Today and $100M Goal

Nathan Latka

20:08what year, what year do you think you think you'll break a $100,000,000 run rate? Can it be next year?

Adam Harris

20:13>> Very much so.

Nathan Latka

20:14Is that feel that feels like a comfortable goal or a stretch goal for next year?

Adam Harris

20:18>> Easy.

Nathan Latka

20:19Interesting. And where are you guys at today?

Adam Harris

20:21>> Oh, I can't say that right now for a couple reasons, but we're we're very close to that magic number that you just talked about.

Nathan Latka

20:27Can can you say your north? You told me this via email, but I don't wanna say it because you didn't give me permission. Can you say what you're north of today?

Adam Harris

20:33>> Why don't you give me some ranges and I'll nod.

Nathan Latka

20:36Are you north of 50,000,000 today?

20:38>> Very much so.

20:38There we go.

Famous Five Rapid Fire Questions

Nathan Latka

20:39Okay. So we'll see what happens as we move into next year. Adam, let's wrap up here with The Famous Five. Number one favorite book.

Adam Harris

20:46>> Atomic Habits.

Nathan Latka

20:47Number two, is there a CEO you're following or studying?

Adam Harris

20:52>> Oh, right now, yikes. Jeff Weiner still, but he's not a CEO anymore.

Nathan Latka

20:57That's okay. Still a good leader. Number three, favorite online tool for going cloud beds.

Adam Harris

21:02>> Favorite online tool for building cloud beds? It's something you use a lot just to run the business. You know, I'm really having a blast with ChatGPT and OpenAI.

Nathan Latka

21:11Yep. Number four, how many hours of sleep do get every night?

Adam Harris

21:15>> Seven.

Nathan Latka

21:16And situation married, single kids?

Adam Harris

21:18>> Married, two kids under four. So brutal, Busy brutal period of guy. I'm a teenager clown vet.

Nathan Latka

21:25How old are you?

Adam Harris

21:27>> I'm 42.

Nathan Latka

21:28Last question, something you wish knew when you were 20.

Adam Harris

21:31>> Oh my god. There's two sides of the coin. Yeah. So either do or you don't either way, you're right. And so it's better to be doing.

Nathan Latka

21:40I love that guys cloud beds launched many years ago, broke 10,000,000 of revenue back in 2018. Today, over two. 5,000,000 beds across 27,000 paying customers use them, not just to manage the bed and the check ins, but now getting into FinTech, he's got 75% CAGR over the last three years, north of $50,000,000 of revenue. He says quote easily a $100,000,000 next year. We'll see what happens. Adam, thank you for taking us to the top.

22:02One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on three hungry buyers. They try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

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