Helping You Book Vacation Rentals: FlipKey CEO T. J. Mahoney (Part 2)

SM: What roles did you hold at Compete?

TM: Initially I was their founding consultant. Compete has a dedicated consulting practice, which is how they make the majority of their money. I was one of the first consultants who helped to develop some of their vertical categories. In 2005, I helped launch Compete.com as a separate business.I launched that with a small team, one member of which was Carl Query. Today Carl is the CTO of FlipKey.

SM: Tell me about the beginning of FlipKey. You said you had experience with a vacation rental site by renting out your own property. Which site was that?

TM: I had listed with VRBO. It served my needs, but like I mentioned earlier I felt that there were some trust issues that needed to be dealt with first.

SM: How big was VRBO?

TM: At that time they were an independent company and they had 70,000 listings at $200 per listing. They were the largest site in the category. HomeAway had raised $120 million at the time and had began acquiring other smaller vacation rental sites. Shortly after we entered the market, HomeAway raised an additional $125 million and purchased VRBO. HomeAway became far and away the largest vacation rental website in the world.

SM: Is this business really big enough to support raising close to $250 million?

TM: Absolutely. They ultimately raised close to $450 million and has acquired over 10 companies throughout the world. The vacation rental category is a $20 billion-plus business.

SM: Isn’t the business model just advertising properties?

TM: It is just listing properties.

SM: Is it just a listing fee model, or is there commission on the rental price?

TM: It is a listing fee model.

SM: A listing fee model does not sound like a $20 billion market. The vacation rental market could be $20 billion.

TM: True.

SM: Then how do they justify raising $450 million?

TM: They have 450,000 listings all paying an average of 300 listings per year. That is an attractive business.

SM: Let’s continue with your entrance into the market.

TM: As we entered the market, HomeAway had established a tremendous and powerful marketing presence in the vacation rental industry. By this time I had moved out of my house and turned it into a full-time vacation rental. We raised about $300,ooo in cash via convertible debt from some private financiers. We then raised an additional $100,000 through services in kind. We provided some convertible debt in exchange for free services from strategic vendors that we worked with.

We worked out of one of our investor’s homes and we began building a site. The idea was that it was not going to just be a listing site. Our goal was to create a centralized reputation platform for the industry. We wanted to create and easy way for people to collect verified reviews of people who had stayed in the homes they were interested in. We had to be able to verify the companies and owners who represented those homes and then allow that content to work as a marketing asset in order for consumers to feel more confident and trust the experience.

This segment is part 2 in the series : Helping You Book Vacation Rentals: FlipKey CEO T. J. Mahoney
1 2 3 4 5 6 7