SaaS Interviews with CEOs, Startups, Founders
966 "We'll Process $1b in Corporate Travel Expenses Over Next 24 Months" Says RocketTrip CEO
17 Mar 2018
Chapter 1: What is Rocketrip and how does it help companies reduce travel costs?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Dan Ruch.
He's the founder and CEO of Rocket Trip, the leading tech platform for reducing corporate travel costs. The company motivates below-policy spending by giving employee database trip budgets and letting them keep half of what they save. They're venture-backed by Bessemer, Kanan, Ganacast, and Y Combinator.
They're helping clients like GE Edmonds and Twitter create a positive culture around spend management. Dan, are you ready to take us to the top? I am. Thanks for having me. So this is tough, right? Somebody has an expense account and they're going, okay, Four Seasons Penthouse or like Holiday Inn. Oh, I'll just do the Four Seasons. No one will ever know.
How do you get people to like go with the cheaper option, which is better for the business? Yeah. So it's not a travel problem. It's a human problem, right? Companies employ human beings and human beings, by definition, biologically, we're lazy and selfish. And this isn't a good or a bad thing. This is self-preservation.
We always optimize for comfort and convenience within the limits of policy because that's how we operate. I'm going to use that, by the way, the next time somebody calls me lazy, I'm going to say I'm just being self, I'm just self-preserving. I just wrote a post about this, why it's actually good to be selfish. This is how we survive as a species.
Now, governments respond to that problem with laws in terms of what you're allowed and not allowed to do. And companies respond to that problem with policies in terms of what you are allowed and not allowed. And that's not a problem, it's just a sub-optimized equation, right?
With these policies, as long as we operate within the boundaries of policy, nobody really cares what we do and nobody asks any questions and we're free to optimize for ourselves, for our own flexibility, for our own comfort, for our own convenience. within the limits of the policy.
What that means by definition is if I'm flying from London to New York and I'm allowed to fly business class, biologically, I'm going to be motivated to fly business class. I'm going to choose the most comfortable, convenient option that's available to me, even though there are much more
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Chapter 2: How does Rocketrip incentivize employees to choose cost-effective travel options?
No, because you can have very few employees that travel very, very often. Thousands of employees that never travel at all. It depends on what kind of organization you are. Are you in professional services where there's frequent travel? If you're in manufacturing, there's not much travel. It really depends on the industry.
Generally speaking, though, as a rule of thumb, there's about a million dollars worth of travel for every 500 employees. But that can move around quite a bit. It's much more likely that total travel volume is tied to top line revenues. Got it. And what is the average customer paying you per month on the SaaS side of things? Every customer pays us 2% of travel spend on a management.
Oh, so there isn't an actual SaaS product. There's not a flat fixed fee to use the software. It's all in the 2% model. 2% of total spend. So it's all SaaS. It's a subscription. So if you spend $5 million a year, you're paying us $100,000 a year to run the platform. If you spend $10 million a year, you're paying us 200,000 and so on.
So every customer pays the same amount they pay based on the volume of spend that they put through the platform. Yeah, but so let me give an example. I'm signing up for you right now. I say I'm gonna put 10 million through you this year. Here's your 2% now. And then I only end up putting 4 million through you. Do you give me a refund? Yeah. Yeah. So that's part of my question, right?
Is like, how do you I mean, typically, when you talk about a SaaS business, it's like a fixed monthly fee and people are upselling based off seats or unit economics or contacts or some other unit metric for you. How do you help people? Did you just use the trailing 12 month travel spend and you just anchor it to that? You're talking about different types of SaaS contracts.
Our SaaS contracts are all annual. Some of them are multi-year. A customer will tell us how many seats they plan or how much volume they plan to put through the platform. Typically, we advise customers to anchor low.
If a company spends $100 million a year in travel and they're with us for year one, don't buy $100 million worth of travel because you probably won't use it because it's going to take us time to onboard your employees and train them, get them excited about the platform, teach them how to use it. and so on and so forth. So don't purchase the full hundred, purchase 75 million.
So purchase a little less. Now, if you exhaust that total volume six months into the year, it would expire the contract. We'd start a new contract, but that's fine. That's just paperwork. So we encourage clients to aim a little bit below what their total capacity is, especially in year one. And are they paying that forward based on the projection?
They're paying it at the start of the contract or after the money is spent? At the start of the contract. Off forward. How do you keep a client? That went through what I just articulated to you. They say $10 million. They only end up spending half of that. You don't refund it, so there's bad feelings at the end, but they still like you. They still put $5 million through your platform.
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Chapter 3: What is the business model of Rocketrip and how do they generate revenue?
So I encourage you to try prosper works or sponsoring the show. Check them out at prosperworks.com forward slash love your CRM folks. That's again, prosperworks.com forward slash love your CRM. Now, you've raised capital. How much total have you raised to date? $17 million. And why did you decide to raise capital? Why not bootstrap this thing? Why did you need the influx?
Because companies globally spend $1.25 trillion every year on flights, hotels, cars, and trains. And it's all being spent by people who don't care how much they spend. And that's a massive, massive problem. It's a massive opportunity. But it's going to take a lot of resources to build a product and get it out to market in a meaningful way because it's such a big industry.
My background is in a decade worth of startups that have all been venture backed. It's what I know how to do well. It's what I'm good at. And so we decided to go that route. There's nothing wrong with bootstrapping. It's much harder to get platforms off the ground quickly, especially in software as a service in enterprise sales.
So for us, going the venture back route was the way to go, but there's a lot of ways to skin that. Specifically though, so what I heard you say is scaling a platform like this in this big market, you need that capital.
But specifically, is that money, like is it hard to acquire customers on these kinds of keywords or most of it's going towards engineering team because the tech is actually difficult? Like where did that money actually go? Most of it's going to headcount. It's human capital. It's engineers, it's salespeople, it's marketers, customer success, customer service.
There's tons of work to be done to get this platform off the ground. It's not just about the technology. It's not just about the sales. It's about all of the support around it. And what's team size today? 70 people. All up there in New York or are you spread out? Pretty much all here in New York.
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Chapter 4: What types of companies benefit most from Rocketrip's services?
We've got some distributed sales folks, but generally speaking, everyone's here. And then walk me. So you mentioned you did this. You've done this over the past decade, kind of startups and businesses like this. Where was your kind of head at in 2013 when you got into this? I mean, had you just had a financial windfall? You had no risk.
You could put it all towards this and not worry about, you know, being on the street if it failed. Like, where was your brain? Wish. No. So I was in. So I just wrapped up my time at the second startup. I was a part of the first one. We sold the AOL back in 2008. Then I moved over to Tremor Media, which became Tremor Video, which is now Talaria. I was running our European businesses in London.
So I had two P&Ls. And I just always wanted to start my own thing. And it was more for me an equation of, you know, if not now, when? I think I just turned 30 or close to it. And I had to go see if I could do it. Wait, what do you mean? Either you just turned 30 or you haven't yet. Are you 30 yet or you're close to it? No, now I'm 36. So this was in 2013. Oh, got it.
I guess I just turned 30 or like a little bit ahead. Got it. Got it. No, I wish I hadn't turned 30 yet. So it was around my 30th birthday where I said, look, at some point I've got to go and see if I can do this. And I'm passionate about a lot of ideas. I just left my startup. I said, look, I was whiteboarding at nights and on the weekends and really wasn't giving my ideas justice.
I wasn't giving my company justice. It was just too muddled. I really needed time just to think and iterate and ideate. And I just left my company. I quit my job. I moved back to New York. I joined a venture fund as an entrepreneur in residence. Which one? Genicast, the company that put the first round of funding in.
As an EIR, and that's sort of a fancy title for you've got no job here other than here's a business card, go meet with people, find us deal flow, think about what you want to do next. The guy who founded that fund was a colleague of mine. He was the co-founder of Takoda, the company we sold AOL, so that was a relationship that had existed. And Gil Betas is still heavily involved in the company.
So we came up with Rocketrip together. The original concept was why isn't there the same kind of predictable irrationality that exists in the loyalty programs that the consumer airline and hospitality space have gotten so good at, right? Think about your Starwood program, your United program, your Hilton, your Hyatt. Someone's a Delta guy, a United person.
You're so fiercely loyal to these programs for no reason, right? The aspirational value of points, of status, of what could be. And I might get the upgrade. I might get the Wi-Fi. I might get something of value. Can we inject that same kind of loyalty into corporates and create like a Starwood program for corporates? So then HR has another arrow in the quiver.
It's not just about, here's your salary and vacation days and types and equity and bonus. We also have this points program that's going to reward you for incredible behavior. And incredible behavior can, again, go across a variety of different areas.
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