Ep. #947 - Vacation Rental Industry Startups
In today’s Startup Hustle episode, we’re exploring the world of vacation rental industry startups. Matt Watson welcomes serial entrepreneur Jason Sprenkle, CEO of Key Data, to the show. Listen to how the guest bridged the market gap in property management through tech. Learn how to build a business in the vacation rental scene and how to make sure it grows.
Covered In This Episode
What’s up with the vacation rental industry? How does technology fit into the market? Find out more details through Matt and Jason’s conversation.
First, they look back at our guest’s journey—from a law firm to a real estate brokerage to a tech startup. Then the duo transitions to a discussion about the vacation rental industry. And they tackle how tech plays a crucial role in scaling a business in the market.
What are you waiting for? Listen to this Startup Hustle episode now!
- Jason Sprenkle’s pre-entrepreneurial journey (02:10)
- How Jason raised funding for the condo project in Blue Mountain (04:13)
- How far financing development projects changed over time (11:14)
- On transitioning from real estate broker to tech company owner (12:31)
- All about setting a standard of good customer service (13:24)
- On market valuation and competition (17:15)
- Things about property management logistics (19:04)
- Using mobile apps and other techs for faster communication with guests and property managers (20:06)
- On wanting to build a scalable business (23:33)
- The impact of honest feedback on people you work with (24:47)
- Why are margins important in scaling your business? (27:46)
- On working with a great team (30:10)
- The value of building a core team to help grow your business (33:05)
- Competition in the vacation rental space (34:21)
- Challenges in bookings and reservations in Airbnb and VRBA, and the value of market insights (37:33)
- What’s next for Key Data? (40:25)
- The hard part about technology and building software (41:48)
- About rental properties across the world (44:42)
- The growing industry of vacation rental spaces (46:18)
The law background provided an excellent way to get around obstacles as they came up, and it provided me just enough unwarranted confidence probably to not be overly concerned about the risks that we’re headed our way.– Jason Sprenkle
People who are growing that you’re mentoring or are part of your business want you to be honest with them. They want to get better. They need you to tell them what they’re doing wrong so they can grow or that they can find the company that’s a better fit for them. It’s an important lesson to tell people what they need to hear rather than what they want to hear.– Jason Sprenkle
That’s the hard part about technology. You’re gonna have people say, hey, we could take this data analytics, use it, and sell it back to each individual municipality . . . Then you have somebody else that has a totally different kind of direction to go with it. And it’s very difficult to do both.– Matt Watson
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Following is an auto-generated text transcript of this episode. Apologies for any errors!
Matt Watson 00:00
And we’re back for another episode of the Startup Hustle. This is Matt Watson, your host. Today, I am joined by Jason Sprenkle from Key Data Dashboard. We’re going to talk about being an entrepreneur in the vacation rental space. He’s done a lot of amazing things, and we’re excited to learn a few things from him today. Before we get started, I do want to remind you that today’s episode of Startup Hustle is powered by FullScale.io. Hiring software developers is difficult. But Full Scale can help you build a software team quickly and affordably. And has the platform to help you manage that team. Visit FullScale.io to learn more. Jason, welcome to the show.
Jason Sprenkle 00:36
Great to be with you, man. Excited to be here.
Matt Watson 00:39
I’m excited to be graced by your presence. It sounds like you’ve done a lot of amazing things, and I’m hoping that our listeners today will be able to learn a few things from you. We don’t have all day, but we’d love to, you know, start with some of your backstories. Maybe how you became an entrepreneur. The first time you’ve been a serial entrepreneur. So maybe we should start with how did you become an entrepreneur the first time?
Jason Sprenkle 01:04
Yeah, really. But by chance, I guess, to some extent. I came out of school and practiced law with a big defense firm out of the Carolinas, representing a combination of software companies and pharmaceutical companies. So kind of a small lawyer with a big firm background. I had an opportunity through a family member who was doing some smaller-scale development to advise her on the legal side of those deals. And just kind of got the itch as I watched her business grow and become very profitable. What was a reasonably unsophisticated manner, meaning three-quarters of a single page for a pro forma and make a million or two bucks back in kind of real estate development, one-on-one land? So I just kind of got attracted to the ability of some verticals. To produce a ton of money fast, you know, real estate being the first one. So I had an opportunity when a deal came up to go take the lead on it. I didn’t have any idea what I was doing. So I immediately went and looked for somebody who could teach me. And the only people I knew at the time were lawyers. And so I found a lawyer who had done a lot.
Matt Watson 02:21
That’s expensive by the hour, I think.
Jason Sprenkle 02:26
That’s right, but it’s to do a real estate venture and get it wrong. So I hired a really great lawyer who had a lot of background and development and said, Can I just pay you to sit down with me for two days and kindly talk me through the process? Tell me what you know. You know, as a young lawyer, you learn how to depose people. And he was kind enough to say, like, look, I’m happy to help answer questions and point you in the right direction. You don’t have to hire him. And he was a great mentor out of the gate. And like everything in life, when you’re starting something new and have a ton of hubris and not a lot of skills, luck is a big component of it. And so we hit the market on our first of three big development projects down in Northwest Florida, right at the time, where condos just took off in the early 2000s, where everybody started flipping things right before the big crash, if you will, when things get frenzy and learned a lot of the skills that, you know, carried me through my other entrepreneurial ventures from those first projects, how to raise money, how to work with banks.
Matt Watson 03:31
So was this the first development you did? Was this just like a big condo building or a timeshare kind of thing?
Jason Sprenkle 03:40
We’re like, what kind of development was a condo project in Blue Mountain on 30. A, just outside of my destination in Northwest Florida. It’s 130 high-end units. And it was right on the Gulf and needed about $6 million off of our simple performance to put up our 20% and needed the rest from the bank. And so kind of began there with this idea of a really overly simplistic and just not fully aware of the risks would probably jump into it right. Yun and I worked in my favor with the timing of the market.
Matt Watson 04:24
And so we had to raise, so you had to raise $6 million? We did. Yes. So we’re so what was that? Like? How did you go about raising that $6 million? You’re like, Hey, I’m gonna go buy this building for what is a $120 million project, but I need to find $6 million from somebody that believes in me to build this thing.
Jason Sprenkle 04:44
Yeah, I mean, embarrassingly, yes, they’re in a very scrappy way. So a family member who was in the, you know, space, said, look, go around and introduce yourself to all the nice doctors. Are there some dentists and business people in town that have had success? You know, they’re the medical professionals, the quickest to come off of the pocketbook and believe in something, go talk to them and, you know, walk in the door and tell them what your plans are. And so, again, a lot of being young and having a lot of hubris, but it’s exactly what we did. We walked into dermatologist stores and anchor stores and real estate broker stores and said, hey, you know, the property around the corner, here’s what we plan to do with it. You know, the pro forma says that we’re going to do great, we’d like you to be a part of it, and laid it out for him and told him to believe in us and, you know, slowly, one, by one put together, you know, long cap table about 20 Plus investors.
Matt Watson 05:46
So do you guys still own that property today? Or you sold it after a while?
Jason Sprenkle 05:51
We built it and flipped it in a little over two year period.
Matt Watson 05:56
Okay, so how did it come out?
Jason Sprenkle 05:59
It came out great. We gave, you know, we took their six, and we gave them 36 packs.
Matt Watson 06:03
Wow. Holy moly, the exact sign it was Dang.
Jason Sprenkle 06:08
Yeah, it was a remarkable project. And really the beginning of everything for me, right? Came in on the benefit of the introduction from the family member, and then, you know, the benefit of the mentor and the space on the real estate side, and then really just learning our way. You know, through the hurt hurdles and obstacles that came up, the law background provided an excellent way to get around obstacles as they came up. And it provided me just enough unwarranted confidence, probably to not be overly concerned about the risks that were headed our way. And so it was kind of the first learning venture, and just how to find the finish line is the best way I like to think as a business is typically right.
Matt Watson 06:53
So after that point, did you hang up the legal career and just start focusing on going down this other path?
Jason Sprenkle 07:00
Yeah, we cheated, and to mitigate our risk took a leave of absence from the law firm to go and try to raise the money for two months. I was able to put the money together. But the plan was always when we didn’t put the money together, to go back to the full-time job. And it worked out. We were able to get the money. We lost one of our largest investors the night before closing and had to get real scrappy with some real estate agents in town. But we went and struck a deal. And, you know, the first of many hurdles we ran into but got through it. And you know, the market was beautiful to us. The timing was beautiful to us.
Matt Watson 07:34
And so did you spend a couple years walking around a construction site, then two, two years sitting up on a beach with a hard hat on sale?
Jason Sprenkle 07:39
In learning, you know, hire great people when you don’t know what you do? And what’s the first lesson, right? Go get a great big contractor to build it. So we had Brasfield. And Gorrie was given a big contract at Birmingham. They had a stellar reputation, but they were not the cheapest. But we said look, we’ve been very fortunate with the timing and with the fundraising and with the opportunity, like it’s not the time to say pennies, it’s the time to cut risks at this point. So let’s get a great partner who can get us over the hurdle. So that was the choice that they paid off. And we did two more projects, after that we knew time was in our, you know, gonna be in our favor forever. And so we rush through a second project. For the most part, the same group of investors followed us over, built really the same thing on a smaller scale, and destined about 40 miles away, and turned that into yours, same, you know, very profitable. And then started a third. And the third was really our first big challenge, kind of in our entrepreneurial run, which was, you know, the market turn we ran into, to legal problems with titles that were distracting. So we had to completely shift our design a year into it, but we were built into it. And so we found ourselves, you know, heavy into a project at a time where the market was falling apart. And we, you know, we ended up negotiating our way back to break even with all the people, you know, fortunately, it’s sold all the units, but none of them have closed. And so everybody is your recall, people were back in real estate at the time, everybody was defaulting on their letters of credit and their deposits and walking away with it because the value of the real estate had fallen so much.
Matt Watson 09:29
Sounds like all of China right now, from what I understand. Yeah.
Jason Sprenkle 09:33
And so, you know, we did what we’re to do when you get in a bind, we tried to negotiate our way into a good result for our investors. And, you know, there’s some litigation that was involved to get buyers over the hurdle on the deals that they committed to, and there were some settling for lower prices to get people to close but worked our way through it. It took quite a while but we got the investor back all their money and it was our first So and then like, it doesn’t always go well for you. Yeah, you know, sometimes you can do everything right. And if the market just completely falls out of you, on you, and you’re in a, you know, a narrow project, like a real estate, condo market, and that market does, you know, you got to, you got to make a rookie.
Matt Watson 10:19
So when you’re building a condo building like that, are you able to start selling some of the condos before you have built all of them? And so you have to, you’re kind of counting on that to bankroll completing the rest of the project.
Jason Sprenkle 10:33
As a developer, the financing behind those development projects has changed dramatically and gotten more constrained over the many years since we did it. But at the time, you could do just that, you could essentially go get pre-construction, contracts sold you broke ground, you get a buyer to commit to buying it, right, they’re counting on the increase in price, while during the construction period. Nowadays, they at least have to put down a deposit which you can use for security with your loan with the bank, right? Use their cash at the time, you could use letters of credit. So they literally would just sign a piece of paper saying my banks are good for this. What we learned back then is letters of credit, aren’t that great cash is better. So people typically don’t take those construction deals now. But yeah, you can still go in and pre-sell a condo, if the markets, you know, good enough, and use the deposits from the buyers to then go leverage your portion of the deposit from the bank that they didn’t lend you the other 80% or 70%, or whatever the case may be.
Matt Watson 11:36
So I would love to now hear how you went from, you know, a real estate developer, to then eventually starting a tech company in the vacation rental space. So tell us about that. I’m really intrigued how you go from property developers. So you understand the space, understand the industry to see, look, there’s a problem I need to solve, a technology, which is common. That’s what a lot of us do. Right? We see the problem because we understand the industry. So tell us how it went down?
Jason Sprenkle 12:05
Yes, it really lead into kind of a necessity is the mother of invention service play first before the tech play. But it began this important lesson of, you know, the best businesses for me had been built on trying to solve a problem that I personally had. Yeah, absolutely. Scratch your own itch, whatever euphemism not trying to think of an idea to fix something for somebody else, like, you know, to say like my kids would say, it’s something that sucks about your current job environment to whatever you fix that for yourself in a really authentic way. And chances are, you’re fixing it for other people as well. And so we ended up with several of our own condos, when the market crashed, we still had to buy our own inventory, so to speak. And we put them for rent with a variety of different rental vacation rental companies. And we went and started running into charity for a little while. But hands have those properties over to professional managers to manage. And what we learned back then is the management companies were very unsophisticated, they had virtually no tech. And they were very non customer friendly, right? Their service just wasn’t part of the vernacular in the industry at the time, in our opinion, we had three or four of them that we were using for our different properties. And they were setting all the rules, right? Like if something breaks in your unit, it goes offline, if you don’t do this within a certain number of days, you know, we’re not going to rent your property. And we thought, Man, what a bad experience for how much they’re charging. Right? And so my brother was in the restaurant business at the time, and he was, you know, making breakfast in the morning and pouring drinks at night and cleaning up after that, you know, the hard hustle side of restaurant businesses, right? And he said, Look, I understand service and people, and you know what, he let me come up and manage your units for myself, I can do it for cheaper, and I can provide way better service to you. And I said, come on. And the neighbor started to say, man, we love you brother is so friendly, you think he’d rent our unit. And before you knew it, we had 10 or 15 units in the building that my brother was managing and additional hours. And we decided to, you know, we started to lean into that. We said why don’t we? Why don’t we take a shot at growing a business out of this. So yeah, the piece I’ve kept with me kind of on the, you know, entrepreneurial side of this, how do you get going as you know, we kind of took one step at a time, and it’s really been the way that I’ve started all my businesses and ideas and not started a lot of my businesses and ideas which is when you got something that feels like a good idea feels like an opportunity like take that first step forward and test it out. Don’t spend your entire savings and quit your job and leap all the way in like having a backstop. You know Have a test with the people around you, test it out with a few, you know a few folks. And so we did, we kind of leaned into it a little bit as we grew up, but we didn’t throw a ton of money behind it. And once we found like, hey, that we’re not hearing any bad ideas like, nobody’s telling us we’re crazy. It seems like this is a, you know, a viable business. And we started to lean in more and more and more. And we did it our own way. We said, you know, we got into this business because we didn’t like the way other people were providing services. When it came time to start and look at simple things like customer contracts and marketing and all that. We said rather than copying the people around us that we don’t like, why don’t we not pay attention to what the other players in the space are doing? And why don’t we just sit down and think about how it should be done? Like yeah, we want to be treated just back to base so this was a service where if I owned some Airbnb properties or whatever, and I wanted to use Airbnb but like I don’t want the hassle of managing all of it and figure how to market them and all that you are the property manager just like those a rental home except for rental home.
Matt Watson 15:48
This is the vacation version of it right of like, how do I manage this property? Clean it, deal with all the customers, deal with all the crap like I just want to own the house and rent it on Airbnb, but I don’t want to talk to anybody. I want to go golfing every day or whatever I want to do. Do you guys deal with all the bullshit, right?
Jason Sprenkle 16:19
That’s exactly right. You’re a radiologist, you got a house down at the beach, you want to come use it every now and then with your wife. But you do not want to be the person answering the Airbnb phone calls and inquiries and cleaning the house and taking care of the maintenance, you want to hire dutiful, I’m in. So find me. Companies were charging people 40% of their revenue to do that at the time. And we said golly, we could charge 20% and still make a great living and still provide over the top service. So we came in at the cheapest to get some critical mass. But as it evolved, and it evolved over 15 years, you know, we switched midway to being the most expensive, like we realized that we were providing a better value than the other players and demonstrably better value. We said, you know, we should just increase our prices, people appreciate the best as a service option. So why don’t we price like we’re the best and didn’t have any churn at all, you know, what was this company called, is a company called 360 Blue, which was a property management company in Northwest Florida, mostly destined in a place called 30 days.
Matt Watson 17:23
All your customers were primarily in the Florida area.
Jason Sprenkle 17:28
Then in the Panhandle about a 30 to 40 mile route east to west.
Matt Watson 17:34
Because that would have been a hard business to scale like all across the country, right? Because it is very service oriented, it is very hard to scale.
Jason Sprenkle 17:39
And we started that process. But there was just so much opportunity here. Florida is a huge market for this. So it was a massive market, the particular market we’re in was luxury, I have always believed weather service or product or whatever. You have to have an ESP, after whatever you do. And so you have to be the cheapest or the biggest or the fastest or the best, you know, you have to have something that differentiates you. And the margins, you know, are clearly better on high end luxury products. And so we went after high end luxury products with luxury service, it seems like no matter what vertical you’re looking at, and whether it’s a product or service, like there’s always room for somebody at the top to deliver a little bit something better for hiring.
Matt Watson 18:24
So you must have had dozens of people like house cleaners and stuff that worked for you and people to handle all that.
Jason Sprenkle 18:30
I ended up with 150 employees without counting the housekeepers which was a gigantic outsource crew. Okay. And about 750 properties. We sold it.
Matt Watson 18:46
Properties that you owned? Or are they just other people’s property?
Jason Sprenkle 18:48
Manage for others, okay. But 100 million worth of revenue that the owners made, that we were taking roughly a 25% cut of that. So roughly 25 million and in serviceable revenue.
Matt Watson 19:03
That’s awesome. So did you say you sold that to VRBO?
Jason Sprenkle 19:06
No, we sold that to a national company who’s trying to do what you just mentioned, which is insane. Yeah, roll it up. And you know, segwaying into the software side and kind of scratch your own itch moniker. We got four or five years into that 15 year journey. And we had a need for a mobile app. It was cool. It was sexy. People wanted their vacation rental companies to have mobile apps, guests wanted to know how to get to your property. And you know how to use the VCR and how to ask for more towels and where to take the trash out with all that stuff. Right? You knew the easier way to communicate with guests. It was right when mobile apps were brand new, and you were cool if you had one as a business. And they didn’t really exist in the hospitality space. And so we had the idea to build a mobile app for our own business and guests but to do So in a way that we could also provide if it worked out that same functionality for all the other companies like so we said, you know, we can’t justify the cost of building a really great mobile app, we figured for ourselves, that if we built a really great mobile app for ourselves and sold everybody else like us, we could build it the way we wanted to build it. And so that was the beginning of the business idea to get into the software side of vacation rentals and to build a tool for ourselves that we could then scale kind of into a SaaS company.
Matt Watson 20:31
Then what was that called?
Jason Sprenkle 20:32
Here’s a company called Glad to have you. Okay. And that was the one that we sold to VRBO that became VRBO as a mobile app now for their, you know, their global properties. If you check into VRBO. Now you use the GLAAD have, you have to know how to get to your property. And we combined our piece of it with subject matter expertise, right, we knew what vacation rental companies needed. We knew what our problem was that we were trying to really understand what our guests needed. And so we went out, and we looked for technologists who could build us the app. And back to the love category. The second company, we call, turned out to be these incredible technologists out of Atlanta, who understood what we were doing. They really valued the idea that you could be a subject matter expert. And you could combine that with a technology team and build really cool stuff. So we said, Look, why don’t we partner and split it up? We’ll put up the money. You guys put up the technology effort, and we’ll build something and take a crack at selling it together? Yeah, split it 5050. And it began a beautiful partnership that resulted in the same team we have today. So I kind of peeled off of the 360 blue business midway and started to work on the glad to have you project. I was really enthralled with this idea of mailbox money. And I’d seen other businesses where they have things over and over and over again. Yeah, that sounds amazing. Ah, get up there’s a check in your mail.
Matt Watson 22:02
Every software is a lot easier than the maid quit today. And now somebody’s got to go clean this house before the guests show up. And nobody’s to do it. So I guess the CEOs got to do it today or something like that.
Jason Sprenkle 22:18
That’s a whole different, older, you’re dead on, you know, the lure of the ability to make exponential amounts of money in real estate, obviously, was really clear to us with the luck we had on those first couple of meals to Yeah. And juxtaposing that against the grind of building a service base.
Matt Watson 22:36
Yeah, very operational, heavy operational brain damage, felt slow and painful.
Jason Sprenkle 22:40
And yet we were building something really amazing that in truth, I wasn’t giving enough credit to right like, it turned out to be an incredible business and incredible floors. But I wanted something sexier that could skate our intensive. Yeah. And so. So we were blessed with a young lady who came to work for us as a reservationist. And when I turned around to work on the software project, and came back for a minute, she had effectively stepped into cleaning up all the departments and it made herself CEO really, for lack of a better explanation, just her talent started to shine through, it’s clear, she was running the company, at least as well as my brother, and I couldn’t run it. And so we got out of our way, and we let her run. It turned out to be one of the great things we did. My brother and I were very much people, pleasers, leaders, we told people what they needed, you know, they wanted to hear and he wanted to raise we’d give you on, we weren’t really good at being, you know, squeezing the most of employees. And she had a better knack for still being kind of a cherished CEO, but being able to talk straight to people and tell them what they well, and that and you hit on something that is really important.
Matt Watson 23:48
And I’ve seen that in other places where you have a great CEO or a great leadership that they care a lot about their employees. And sometimes they care too much, right? They care so much that it’s hard for them to go back to the employees and tell them what to do even, like they care. They listened so much about what the employees want to do or think they need to do and all of these things, that they struggled to build a system and follow a system, right where at some point in time, like, Hey, we’ve got a lot of people that do this thing. This is the way we do it, go do it. Like, we don’t need more ideas, we need you to just execute, right where.
Jason Sprenkle 24:23
Yes, leadership lessons I learned from somebody else that I still struggle with, which is, you know, people that are growing and you’re mentoring or that a part of your business, like they want you to be honest with them they want, they want to get better, you know, they need you to tell them what they’re doing wrong so that they can grow or that they can find the company that’s a better fit for them. And so it’s an important lesson to kind of be able to tell people what they need to hear rather than what you want. Yeah.
Matt Watson 24:51
So I want to talk more about what you’re doing today. But before we do that, I do want to remind everybody that if you’re finding expert software Developers is difficult for you, it doesn’t have to be you mentioned, Jason, you found a great team that helped you build your business. Full Scale can help you do the same thing, especially if you visit FullScale.io, where you can build a software team quickly and affordably. Use the Full Scale platform to define your technical needs, and then see what developers are available to join your team right away. Visit FullScale.io to learn more. We have 300, almost 300 software developers in the workforce. So we help a lot of people do a lot of things. So Jason, tell me more about how we met. I love that you’re like, hey, we were doing property management for people, we understood what the guests needed. We understood all of this, we built a SaaS application that helps solve all these problems and makes it easier for the guests. I love it. And those are the best kinds of businesses like you, like you described. So at some point along this journey, you also started Key Data Dashboard. And that’s, you know, your primary focus today. So tell us more about Key Data Dashboard. You know, how did you start that? How did you know what were you doing that led you to that idea?
Jason Sprenkle 26:08
Yeah, I was back. Wait, so glad to have you. So I was back working with the CEO at 360. BLU, I realized that wasn’t adding a lot of value, she realized that, you know, we were coming to the same conclusions. And I was sitting in the meetings really getting in our way. And so we were looking for, for something else, I was very aware of the potential that real estate and software add in terms of the ability to, you know, to build value very, very quickly, right, still blown away by the ability of software to build value quickly. Saska is anything that kind of has that repeatable monthly revenue, right? Whole world switching you got to pay for everything, $10 a month, and it sounds good.
Matt Watson 26:48
It sounds like it’s a lot harder to do it, I think you’re gonna tell us why.
Jason Sprenkle 26:56
I tried small ventures that were not under the heading of scratch your own itch and do what you’re great at. One is I tried to help my nanny who was in the honey business. She said, Oh, I know how to scale businesses, let me help you. And so I jumped in and tried to help her grow her honey business, all you need is good marketing, a little bit of, you know, legal and business sense and financial sense. And you could pull it. So we scaled that business. What I learned from that one very quickly, which was a failure from my end, was that things like margins are important. Like, you need to make sure that before you scale your business, that it’s going to be profitable once it’s scaled, and I didn’t understand retail well enough. And I didn’t understand margins well enough, if I wouldn’t have the benefit of knowing what I know. Now, if I would have had a mentor kind of in the VC or private equity space that has that bird’s eye view of businesses, I think they would have immediately seen like, hey, great idea you very well, my scale it. But your margins are in terrible shape, right?
Matt Watson 27:57
Things you can’t you can’t lose $1 per unit and make it up in scale. Lose $1 for you.
Jason Sprenkle 28:04
Same lesson, I could not find a great appliance company for servers, 360 Blue. So I found the best appliance company in town, it was doing our business. And I said you should scale your business. We need you. He said I don’t know anything about business. I said I do. Too much hubris, not enough knowledge. on the service side, I said, Look, you just need a ton of trucks, you need to get all the business. And I didn’t take time to really understand the financial side. You know what, what you think it was kind of the unit economics of the appliances. So we scaled it, we got all the work. And it turns out like it’s very hard to make money doing that no matter what size you are, the margins are very, very thin. And there’s not really a scale that grows you out of that and reason why, again, shouldn’t so, so went back to the opportunity that had done me well, which was software, we had a lady in the industry who came into 361 day and she said, you know, would you like to buy our software, I knew who she was I said, What’s your software? And she said, we aggregate data from all the other vacation rental companies around. And we provide it back to you to help you run your business. But we give you data dashboards, we give you benchmarking business analytics for vacation rental companies. And I said that’s amazing. We’ll take it, you know, $200 a month. And I said, it is really an incredible idea. Where are you at? And she said, I’m at the very beginning, I said, you know, you gotta go get a ton of customers. If you’re going to do benchmarking, right, everybody’s got to participate. You have to integrate with all the software platforms, like who’s your tech team, what’s your financing, I’ve been down this path before, and she didn’t have it set up. And so I said I would love to, you know, come into this business and explore it with you. Right? A little more cautious. Now. I’ve had things that didn’t go right. But I knew what we had done on the software side. I knew I’d been fortunate and had an incredible team working really well together and building great software. And I knew that if we could go back and build software with that same team, for the same set of customers doing the same things we did before that our risks would be much lower, it’d be like doing the second condo project over the first, right. So I called the band and I said, so to speak, y’all want to put the group back together and go chase this opportunity. And I socialized it around all the people on the team that I trusted. And, you know, we thought hard about them all quitting their jobs, and coming out and going after this. And I spent a lot more time kind of in due diligence than I had in the past, and went into laws wide open. And we got a month or two into it, partnering with the lady whose idea it was, and we said, we really think this is a massive opportunity, we want to buy you out. And so we negotiated a deal to buy out pretty quickly, in conjunction with doing a Series A round back to friends and family and went back to the people who had been kind enough to trust us on our real estate projects that we’d make good returns for and today, we’re trying something else. And we’d appreciate your faith in us again. And so we did a series of friends and family rounds, that was what we thought was enough to do kind of what we did with the last company. And we thought oh, well, it’s as easy, right? You’ll pop up a SaaS company, and we’ll sell it in two years, again, to a publicly traded company. Well, I’ll make a good, good check again, and you learn each venture. And in this one, we learned that building a data company is really what we’re growing into, as opposed to a SAAS company is a much longer venture, right? If you’re gonna go get, you know, a world of vacation rental partners to join you in this venture and contribute their data like, it’s going to take a minute. And so it’s turned out to be a much bigger venture than we expected. No easy off ramps, but it’s also turned into a much bigger Tam, or a much bigger overall opportunity, right. And so we’re four years in now, we got partners worldwide, we’re up to 50 employees, we’re kind of at that 5 million arr. Mark, if you’re in the SAS world, it’s kind of your first meaningful, you know, out of the risk world, rather risk mark.
Matt Watson 32:14
And we still took four years to get there. So four years to get there.
Jason Sprenkle 32:18
Yeah. But still, I mean, if you throw some multiples on it, even in this declining, you know, market that we’ve got, it’s still unbelievable to me how fast you can build value. In a company in the software side, or the real estate side, compared to the services side, you know, I think about my dad and granddad and people who used to work for the man and one city for 30 years, and what a $100 million company looks like, right? It would take 100 years to build and it would take factories and 1000s of employees. And it’s certainly not easy money, right? Like building, building businesses in the software, space, service space, real estate space, and it still comes down to, you know, surrounding yourself with an incredible team of really bright people who get up in are deeply passionate about what you’re building and work really hard and grind it out every day. And so but if you’re going to do all that, anyway, it’s a great vertical to be in.
Matt Watson 33:16
So you’re taking all of this data from places like Airbnb and VRBO. And all this kind of stuff, right? And providing analytics that you can sell probably back to them or back to investors or banks or whoever, which makes a ton of sense. So are there other competitions that are in this? So when did you go into this? Did you see a lot of competition, there’s a lot of competition kind of came into this space over the last four years?
Jason Sprenkle 33:42
Yeah, great question. So there’s, there’s two legacy players in the space who are providing data around vacation rentals, right? They were providing it by scraping data off of what we call the OTAs, which is Airbnb, VRBO, and booking.com. Right, so they go get the data off to that website, scrape it all each night, and then sell it back to people. And what we saw with their businesses was that there was a massive demand for the product and the data that they were putting out. But the deal was a general level of dissatisfaction with the quality of the data because you just can’t get a high level of quality from scraping off the other side. You just don’t have the real data, you’re doing a whole lot of guesswork.
Matt Watson 34:28
They don’t know if the property was rented or if the owner stayed there and didn’t want to rent it or if it’s under maintenance or whatever. Right.
Jason Sprenkle 34:35
Yeah, that’s precisely the problem. They can see the number of units and you know, Jackson, Mississippi, but they can’t tell what rented the night before. And so we said look, people are people who are really relying upon this data, you’re relying on it to make investment decisions for themselves and their businesses. And if you really wanted to do it, right, you know, kind of the luxury end of it. You would have to go to all other different property management companies like 360, blue all around the globe, and you’d have to get the data out of their reservation system, right? It’s so distributed. There, the 360 blues, the only one who has 360 blues data. So they’re the only ones other than the owner of the home that they manage. Who knows what that house was rented for? And knows whether it ran it or whether it was discounted or whether the owner stayed there. But we said, look, these are the people that we had relationships with from our last venture, we sold them software already, they trusted us. We did them, right, we built good tools for them. What if we could go back to all of them worldwide, and effectively create this Co-Op, where they gave us their data? In return, we aggregated it all together. And then we gave them all back, you know, the aggregated version. So if there were 25, property managers in Destin, instead of them getting up every morning and looking at each other’s websites, and kind of guessing what was happening in the marketing and calling each other and saying, Hey, Bob, are you busy? Next week, we’re looking at our rates. What if we just kind of dumped it into a bucket, we made it look pretty, and we gave it back to you guys. And that was that the ethos of the business is just, we believe in data driven businesses, and there was a need for better data. So we saw a gap in what was being provided to the market from the two competitors. And we said, if we could, you know, we get to do this, we really got to do it, right.
Matt Watson 36:24
But it’s going to take a minute, you have to go build integrations with 60 reservation systems so you couldn’t get that data directly from Airbnb or VRBO, or something like that.
Jason Sprenkle 36:29
Now, ladies don’t give it out. So, you know, they use a really fragmented group of software platforms for their reservations, like 60 Plus. First, we said we’re gonna spend two or three years just building integrations into those platforms.
Matt Watson 36:44
So if I go to Airbnb and rent a property, Airbnb isn’t really like the reservation system of record. It’s actually some other third party that it kind of kicks it out to.
Jason Sprenkle 36:54
Yeah, great question. So if you take the 10 million give or take at any point in time vacation rental units around the globe, that half of them are managed by professionals, and about half of them are managed by individuals, that professionals use software platforms to make all their reservations, individuals just handle the bookings through the OTA platforms or offer platforms. But so we were able to go out and get all the data from the pros and supplement it. So we can see full supply by scraping the OTAs as well. So we can see the full supply, but we can see real good, you know, daily accuracy, if not hourly accuracy around what was happening. What is this?
Matt Watson 37:37
This is really cool. And so I worked in the automotive industry. And we did some similar things in the automotive industry, and I’m an investor in one that does that today. And it’s a similar kind of thing, right? They firstname.lastname@example.org cars.com. All these things and see what vehicles are available for sale? Are the prices going up? Are they going down? How long were they sold, they’re no longer for sale, we assume they’re sold, like all the sort of same stuff. And, those insights for car dealers are another example. Right? Understanding like, if I take this car on a trade, how many other ones are available for sale? And how fast are they selling? Am I gonna get stuck with this thing? Or is it a hot commodity, right? Like that sort of market insight in any kind of market is super, super valuable, really, really valuable.
Jason Sprenkle 38:18
A perfect example. And you know that the beauty of the business is, it’s incredibly hard to build, right? You have to go build all these tunnels to get the data flowing. Right. So yeah, so the amount of investment into building the business, but it creates a big moat, which you want from a SaaS company or a data company is like, it creates this incredible disincentive for somebody else to go do it all, once you’ve done it, it doesn’t mean you’re ever protected. But it does build a kind of unique offering. It’s hard to replicate. And then once you have it in a data store is like a copy machine, you can take a piece of data and you can sell it to 100 Different people without increasing your costs to you know, within reason. Right?
Matt Watson 39:01
So this is the business that you’ve built, huge success, congratulations on getting this far if you said it’s a lot harder than it sounds right. And you think, Oh, we’re gonna hire this development team in like, 90 days, a lot of this thing knocked out and you’re like, shit, two years later, we’re still trying to get this thing to market. And I spent three times more than I thought, that’s the reality of it. As somebody as a software developer, myself, I just know, that’s the reality of it. And there was a lot of banging your head on the wall and changing direction. It’s also kind of like painting, you always paint like two or three times because you never can get the right color. It’s the same sort of thing.
Jason Sprenkle 39:36
You know what the painting is going to be till you get into it? Yeah.
Matt Watson 39:39
So what is next? I mean, you’ve been really successful getting to this point. Do you see this as a business that has a lot more total addressable market as you mentioned earlier? Or, or you know, do you think you’re kind of hitting the sweet spot of where this is going to be? And now it’s a cash machine and you just collect that check or where do you see this going?
Jason Sprenkle 40:00
You know, it’s definitely the beginning of the journey still, you know, we’re still in, in by every measure as a software company, we’re still very early in the journey. And as a data company it was even earlier, right? We’ve got really good critical mass in the US leisure markets, you know, the places you go to ski or go to the beach. But there’s a whole other world out there that we’re just breaking into, there’s a ton of tools that we haven’t built for our space. And there’s a long long list of enterprise tech clients who could benefit from the data that we haven’t even broken into. So I think we’re still in the real early stages of the TAM, for sure. And I’m still learning a tremendous amount every day, like this business taught me everything I needed to know or not everything. And, you know, it taught me the first things about, you know, raising money from private equity groups, and what that looks like to have a big board. And, you know, what SAS Analytics really look like when you start to measure them. And, and then the learning ahead, which is what I’m most excited about is, you know, taking a business and really scaling it internationally. It’s a whole new level. Yeah, the lessons that are yet to come.
Matt Watson 41:11
That’s the hard part about technology, right? You’re gonna have people come to you and like, hey, we could take this data analytics and use it and sell it back to each individual municipality. So they know how many of these properties there are and what they want to know. And should they change? I don’t know, property taxes based off of that, like all these 1000s of things, right? Then you have somebody else that has a totally different kind of direction to go with it. And it’s very difficult to do both. And you go back to your development team, you’re like, how long is this going to take and you’re like, oh, shit, it’s gonna take six months or 12 months to do this thing. And like, you can’t move as quickly as you think you can move. And especially once you’re at this place, you’re, you know, four years into this, it gets harder to move, the bigger you get. And the longer you’ve done this, the harder it gets to change things. And so you have to be very strategic as a product team, deciding, you know, what is the direction of the product, because you can’t, you can’t go four different directions at a time very easily. And it’s very, it becomes harder and harder to make those changes incredibly well.
Jason Sprenkle 42:12
So we could have benefited from having you come give us that speech.
Matt Watson 42:18
What I do all day long. I’m in charge of the product. I’m a product guy. So I get it. I want to move fast. And I want to do all the things but I’ve learned I can’t do them.
Jason Sprenkle 42:27
It’s hard. I mean, we’re at the stage where I think a lot of companies are early on. Were you switching from kind of personalities to processes? Yeah. Jim wants to do 15 things it wants to kind of have in that. Yeah. Any shiny objects. Let’s align. Yeah.
Matt Watson 42:45
And you and it’s one of those things that nine pregnant women don’t make a baby either. You can’t just throw a lot of talent at it either. Because, I mean, much like a lot of things in life, like building a house, remodeling all this stuff. At the end of the day, like, you can only pick the color of the paint so fast, and then test it and do it. Like, you can’t get nine different people to pick the different colors of the paint and do it like you’ve one person making the decisions, right? Like, just some things don’t scale that way. Like it doesn’t even matter if you throw people or money at it. You only move so fast.
Jason Sprenkle 43:18
You get constraints and dependencies, and you start throwing those on a Gantt chart, and you realize what you think. Three weeks takes six months for sure.
Matt Watson 43:27
Absolutely. Well, as we wrap up this episode today, I do want to say thanks again to everybody and remind you that today’s episode of Startup Hustle is brought to you by FullScale.io Finding expert software developers doesn’t have to be difficult, especially when you visit FullScale.io where you can build a software team quickly and affordably. Jason sounds like you’ve had a lot of success hiring teams like Full Scale in the past, so congrats on finding a good partner. You know we have our companies primarily based in the Philippines, and you mentioned Airbnb, and I’ve rented Airbnb rentals in the Philippines several times, actually. And like little condo units right by our office might be as cheap as like $30 a night, which is crazy sometimes even lower, and then they’re like, you know, a 400 square foot like astute studio room in a high-rise building. But I’ve also rented some of the most amazing rental properties, like overlooking the ocean and the mountains and like all of its infinity pools like in the Philippines. So, you know, as a consumer of vacation rental properties like I definitely think there’s a huge, you know, future in this market, and they’re definitely given hotels or run for the money. How do you foresee how the Hotels of the World evolve to continue to compete in this market. I mean, you’re deep in the deep end of this. How do you see the future of this playing out?
Jason Sprenkle 45:02
Yeah, space has really exploded, you know, been in roughly 20 years and call it 17 years of moderate growth steady, but moderate growth. And then three years of just explosive growth that real exponential term COVID really changes the game, right? The hospitality part of vacation rentals was occupied in a massive way, right? It introduced a ton of new people to the space for obvious reasons. Like when everybody had COVID, he didn’t want to go stay in a hotel with 1000 other people. Yeah, be by yourself. He absolutely didn’t want to fly on a cruise. So the places that people went were homes that they could rent, that they could drive to, and be with their loved ones to take care of. And so it kind of bolstered this desire for us all to get together and do what’s most important in life, spend time with the people you care about. And it bolstered the introduction of this whole other way to stay right.
Matt Watson 46:03
If you travel with a couple of kids, you rent two hotel rooms in Europe, or you have to get adjoining suites. You like hotels to start making hotels suck for somebody with a lot of kids.
Jason Sprenkle 46:05
They go out of town on a business trip, you know. And so a whole world of new folks are getting introduced to it. And the businesses are still principally Mom and Pop, but the money is coming in, and the sophistication is coming in, in a really amazing way, a lot of m&a activity. And so, you know, it’s, it’s been incredible to watch the space grow up. I think there’s a ton of opportunity in space still. And the date is just getting to where you can really make incredible use of it with real estate investing, you know, the REITs are coming into it, the banks are underwriting it. So we’re at the beginning of something that feels like a really long tail for the industry.
Matt Watson 46:49
It’s exciting. I have a friend that owns an Airbnb-type property here in the Kansas City area that’s right next to a hospital, and he primarily rents one room at a time to like doctors that are in their residency or whatever. And so it’s like its own little, little segment of this, you know.
Jason Sprenkle 47:08
There are some amazing cap rates out there. And that people are seeing it as a, you know, as a side hustle. Yeah, it’s a side hustle for him. Big institutional play on a large scale. So it’s fun, fun to be a part of.
Matt Watson 47:22
Well, thank you so much for being on the show today. Definitely, you have an amazing background. And, you know, I think a great example of, you know, the type of entrepreneurs that, you know, learn a certain, you know, industry and then are able to, you know, build a service company, and then build a tech company and all based on that industry knowledge that you have. So your excellent example of, I think, what a lot of people aspire to do?
Jason Sprenkle 47:51
Well, I appreciate your help and what you do, and for folks out there, I can tell that if I were to listen to some of the wisdom you’ve got early on, it would have saved me some trips around the box.
Matt Watson 48:01
Oh, thank you. So once again, this was Jason Sprenkle from Key Data Dashboard and a whole bunch of other things. So thanks again, Jason, for being on the show today.
Jason Sprenkle 48:12
Yeah. Thanks for having me, Matt.
Matt Watson 48:14
All right. Take care.