Bootstrapping to $100 Million: Vacasa Co-Founder Cliff Johnson (Part 3)

Sramana Mitra: Let’s go back to the beginning. In maybe 2010, how did you get the business off the ground? Did you guys use your own funds? How did you launch the company?

Cliff Johnson: We started with funds that Eric had saved in order to launch the business. We started with a relatively modest amount of funds, to be honest. Eric was still working full-time when we launched the company. I took a couple of other jobs to start this company with Eric. We were both working other jobs at that time. Soon after we started, we saw the opportunity. We were generating revenue shortly after we launched the site in March 2010. We just focused on reinvesting the revenue we had back into growth. Also, we were taking excellent care of the homes that we were bringing on.

We were fortunate that we’re in an industry where there’s not a high cost of goods sold. The barrier to entry is really what kind of system you can set up to manage this. Initially, the biggest obstacle was getting people to believe that we were real. When we started, we launched the company with one property. It was in Long Beach. We started with the idea of being a distributed model. We’re based in Portland, Oregon but Portland didn’t allow vacation rentals. They had a ban on anything that wasn’t commercially zoned. We knew from the onset that we couldn’t do business where we were headquartered. We did business on the Oregon Coast, which is about an hour’s drive and then in Central Oregon, which is about three and a half hours from Portland. We set the business up in multiple markets with different challenges.

Early on, our biggest expense were setting up the system and the drive time associated with that. We had to drive out to the coast. We would invest in the properties and in the advertisements for the properties that we brought on. It was something that was very methodical in that we would bring in a new home but rather than celebrate, we would reinvest in making that home succeed.

Sramana Mitra: I’d like a bit more granular description on how things happened on a chronological basis. What did you do? What strategic moves did you make? Did you start the company in Oregon?

Cliff Johnson: That’s correct.

Sramana Mitra: Did you start the business with local properties mostly? How did you go to market in terms of acquiring properties to take care of, and where to put in place the service team that would take care of the properties?

Cliff Johnson: We did start locally. As I mentioned, we couldn’t do business in proper Portland itself. We chose markets near Portland because of their proximity to Portland. They were all an easy day’s drive time for Eric and me to go and do the necessary work. The second piece is that we really had to focus on building a contractor network. We couldn’t be in all three places at once. There were only a few of us at that time. It was essentially me going into the market meeting with global contractors, finding a quality housekeeping contractor, finding a quality go-to-maintenance contractor, and learning who the best plumbers and electricians were. We also made sure that we established relationships with those providers so that we could offer the homeowner a complete package and confidence that we could manage from afar.

One of the things that we were able to do better than our competition right away was marketing the properties. Eric had a background in marketing. Both of us would get together and look at how we can analyze the rate and provide a rates-on-demand model, which later became our rate algorithm that automatically adjusts rates up to four times a day. We treated the homes completely different than our competition. They might put up some pictures and some novel description, and then it stays the same forever. There was no variance based on demand and the performance of the property. We were able to deliver superior economic results right away just by disrupting the way that homes were typically treated. That was a big advantage for us early on. On the operation side, we really over delivered on a personal level. Eric and I were out in the homes fixing things for free for home owners. Eric did the installation for a cabin in Mount Hood while I was out installing toilets. We were adding value through our own labor.

This segment is part 3 in the series : Bootstrapping to $100 Million: Vacasa Co-Founder Cliff Johnson
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