William Leonard
Hey everyone, welcome to the Atlanta StartUp podcast. My name is William Leonard, your host for today. I’ve got Andrew Bate, who is the CEO of Safely.com joining me. Andrew, welcome to the podcast.
Andrew Bate
Oh, thank you, William. Happy to be here.
William Leonard
Safely is an Atlanta-based insurer tech and guest screening solution for the vacation and short-term rental market. We’ll dive into what that practically means a little bit later in the conversation, but we have a lot to unpack during our time today, Andrew, so I want to go back a bit and talk about some of your experiences. You did some early things and management consulting, you were an entrepreneur before building Safely, worked in a couple of strategy roles, talk to us about your journey into tech and entrepreneurship and ultimately, what led you to start Safely back in 2013.
Andrew Bate
Wow, that’s a loaded question. But you know, I’ve always been entrepreneurial. My parents thought it was really weird. When I thought I’d be pre-med like every freshman is pre-med, especially at Emory, they didn’t understand it. But I thought, in my hometown, the most successful person was the doctor, and because they ran a good business and I want to run a good business. I think I should be a doctor and definitely organic chemistry. I did fine but it was not nearly as fun as accounting. That’s when I knew business is where I need to be. I’m a founder of some sort. In 1998, as a student at Emory, I started a company called Lunches.net. We send out an email every morning listening to local lunch specials. You had a field guide of where to eat, and remember, this was 1998. This is before Google started. This was innovative at the time, I know it sounds like it’s spam email, but at the time, this was unique. 2001 happened in a downturn. We took on some investment from an angel investor in Atlanta but that didn’t kick off. But then I started the SwimAtlanta Masters Team, the Adult Swim Team with SwimAtlanta at the Sugarloaf pool. Ran that and started from zero people. Ended up with a good group of swimmers who are still going today. That was the next thing I started, and then I realized I wanted to get a little bit more business experience. I went to McKinsey, the management consulting firm in the travel practice here in Atlanta, and got two and a half years of working with big companies, which I think was really valuable. Because big companies are who we want to partner with as founders and who we want to be like, in certain ways, who we’re competing with. In other ways, when we started a company, so really great experience to get kind of rapid exposure to big companies, but also knew that unless I wanted to be a partner at a consulting firm, or professional services firm, which I don’t, that I needed to take what I learned, but then go back and like build from there. I went to business school, and spent two years trying to figure out what I wanted to do next, but interviewed hundreds of homeowners to see how can you have a second home, but leave it empty, and not monetize your family’s most valuable or second-most valuable asset. How can you do that? And so I just learned about some of the challenges in this short-term rental space. And that’s how I got into this.
William Leonard
You started off with customer discovery before you even really had an idea. That’s awesome.
Andrew Bate
It changed a lot. I talked to so many smart people and just pressure-tested this. Nothing secret. I talked to anyone. There’s probably a little annoying, but I just wanted to learn.
William Leonard
Let’s keep that going a bit. You started talking to homeowners who had second homes, oftentimes they sat vacant and idle when they weren’t there on vacation. Probably underinsured, maybe as well. You talked to them, you got feedback, what was the moment for you when you said, alright, I need to go out and solve this problem and ultimately, build a company around this problem.
Andrew Bate
Certainly, I was overconfident, like, every founder has to be otherwise, if you knew how hard it would be, I never would do it. I was like, this will take three months. I’m ready to launch and everything’s fine. There’s kind of a connection that happened as I was interviewing these homeowners. I asked them, do you rent your house when you’re not there? And they said, no, of course not. Who would do that? That’s silly. But then I would ask a little further and ask, what happens when you’re not there? Does anyone stay there? And they’re like, oh, well, friends of friends can stay, and then people from the church can come. And I list something in my school’s alumni magazine. I find with alums from my university, and then I donate a week to my kids’ Little League auction. So these are random people coming into my house. They’re not optimizing for money. They’re optimizing for trust, comfort, or safety. As I went a little further, I was like, we can reproduce this. You have this feeling of trust by answering the question of who’s staying in my house and what happens when something goes wrong? If we can answer those questions, will all of a sudden this asset that sits empty, can be monetized and someone could pay the carrying cost for this very nice second home that they bought? This can be done, it’s not just impossible for these homes to be rented under certain conditions, which I think we can create. This house can be rented.
William Leonard
You found that they were really over-indexing on trust and optimizing for the trust networks that they had with close friends, fellow churchgoers, and family members. But obviously, there’s a huge market outside of those connections. Tell us a little bit more about Safely today in its current state in 2023 and how you practically serve this market and serve your clients.
Andrew Bate
Today, Safely, we’re 40 people. We’re on the third floor of the ATDC or Centergy building at Fifth Street. About half of our team is in Atlanta, half is outside of Atlanta. We just opened an Amsterdam office. We have two people over there and we’re working on our European UK Swiss expansion. Fast forwarding, we’ve insured about 3.2 million nights so far, with 700,000 more nights around the books where we have an insurance policy that protects homes with no deductible up to a million dollars. It works in every single state in the territory of the US. And again, we’re shooting for September 1 to have it working in the EU. That’s where we are today.
William Leonard
I love it. You’re serving all short-term rental and vacation homes or is there a certain segment that you all have on the roadmap and aren’t targeting yet? Tell us a little bit more about who’s right to be using Safely these products.
Andrew Bate
I think like with anything in insurance, we love average customers. Average customers like average price point, like average length of stay, everything average claims, and they’re predictable. We know what to do with that. Our typical reservation is five nights long, a mix between the long weekend and a week. Our average rental price is around $450. It feels like a lot of money, but at the same time, it’s two bedrooms, three bedrooms, or four bedrooms. Compared to a hotel, these are still very well priced. Our focus is on vacation destinations at the lake, the ocean, and in the mountains. A little bit less than the urban only because in the last two and a half years, that’s been a little slower. Due to COVID, people were getting out of the cities versus going into the cities. We do stay away from sub-luxury homes. It’s not that we can’t put together the right policy but luxury homes have fancy things. They have carpets that cost $20,000 and tables that are $10,000. These are legitimate expenses if someone ruins them, but it’s hard to create a premium that can really, really recover on that spend. Another area we’re starting to figure out is shared rooms within a home. If the owner is there at the same time a guest is there, where do you draw personal liability versus commercial liability? It is hard to do that. But we’re working on getting those lines drawn really well so we can service the shared home as well. But all this is short-term rentals. There’s a vibrant ecosystem for annual rentals and multifamily units that have been taken care of before but that infrastructure needs to come to the short-term rental world and it’s not there with the sophistication that’s there into long-term rentals.
William Leonard
You talk about this hyper-focus on the short-term rental market. Before Safely came into the space, how was this problem of short-term rental insurance and guest screening practically being solved? It sounds like it was solved in a very piecemeal, one-off fashion. Tell us more about how it was being solved before and where you really saw the opportunity for innovation.
Andrew Bate
The way you would enter your home, and you still can, if the typical way of insuring your home that you’re going to rent it and create a business in your home, is you need a commercial writer on your homeowners’ policy. You’ll get your homeowners policy from State Farm, Lemonade, or whomever. But if you’re going to run a business, you need to get that commercial writer. You’re gonna rent it, which is a business. And in that commercial route, it will work well. It’s written by a good insurance policy, but it’s going to cover all 365 days of the year. It’s going to have a high deductible because anytime you buy insurance, the higher the deductible, the less your premium is, and you figure out kind of where’s your price point and you make that work. Is it a $1,500 deductible? And if that works, that said, agents who aren’t as educated about that, you tell them that you’re renting your home out and they say, well, I’m sorry, William, we’re gonna drop your coverage because this isn’t written for an Airbnb. No, help me find a solution. They’ll say, I’m sorry, we’re gonna drop you. And then you’re like, well, okay, then you can’t insure my car either and my other things. It’s not an easy process. Buying insurance is never easy but it’s especially difficult in this kind of use case. Where our program is better is we’ll ensure each night, each reservation, so if you have high occupancy, you use us a lot. But if you have low occupancy, dark season, you use us a little and that’s okay. This is a dynamic that the sharing economy is bringing to the world. If you have an asset, but you’re not using it for business reasons all the time. Whereas an office is used for business all the time, all of a sudden, we’re at this place where sometimes it’s business, sometimes it’s not so you need this policy that’s on and off really regularly. You also need a low deductible because our typical claims are our sheets that get destroyed, or a chair that gets destroyed like this is bad stuff, we’ll pay for it, but it’s not very expensive. It’s all going to fall under your deductible if you’re using this as a way to keep yourself whole during the whole rental process. We cover the first dollar of damage and that works for this use case.
William Leonard
That’s so fascinating. I want to take the conversation in a bit more tactical direction and maybe you can describe a little bit more about what you’ve learned in your time as a founder that has now raised multiple rounds of capital. You are likely to allude to building products for new markets that have relatively no shape or form to them, because you talk about your early trials of customer discovery, sharing your house with a guest, someone that you didn’t know, was a foreign concept 10 years ago. People might have thought you were crazy if you were building products for this market that is so nascent, so young, and nobody’s really adopting yet. How did you think about building a company in sort of an ambiguous market?
Andrew Bate
One challenge we had is we are early and so it’s hard to convince investors that this is anything more than just a niche. They didn’t even know that people would do short-term rentals. Now, why do you need insurance? Why do you need a whole ecosystem of service providers around something like short-term rentals that I don’t even believe in yet? It was really hard to get the early traction. I think what helped is the opportunity was always there. I knew if we built the next thing, we get closer to the next thing, and competitors didn’t come in, the use case didn’t change, so it took longer than it should’ve, but I could see how each step got us closer. I knew what to do next. If I didn’t know what to do next, the opportunity was no longer there. There’s no way I would have kept going but it just continued to be theirs and it’s like okay, let’s keep going and you want to add a little bit more money, a little bit more traction, a little bit more data. We could get to the next level. It’s kind of like a massive, massive video game where you’re just a little bit here, and then you’re at the next level, and that’s how it was. It wasn’t an overnight success that you read about in TechCrunch with the smartest founders in the world. Let’s build a little bit more every single day.
William Leonard
How did you, as a founder, address the investor concerns of the market being so young? Obviously, you probably have to have an incredible vision while you’re talking to that investor about the company and where it can be. We have a lot of founders listening to the podcast today who want insights on storytelling when talking to investors. You have to paint a picture and you have to articulate the vision. What insights can you share that worked for you early on while pitching investors who may have not seen the vision of Safely.com in the first innings of the company’s lifecycle?
Andrew Bate
If investors don’t have a thesis around what you’re doing already, it’s really hard to convince them. It’s just a numbers game. Some people do believe they stayed in vacation rentals, they bought one themselves, and even though it’s not their vision yet, they can see it taking place. But others think Airbnb is the only player in this market, which is not true. 15% of our reservations are coming from Airbnb, but the rest are coming from direct booking channels like Vrbo, booking.com, and more variety of booking sites. If an investor comes in thinking you either get a partnership with Airbnb or you don’t, it’s just not going to happen. It’s impossible. I can explain. I can do diagrams, but it doesn’t work. Enough people have the thesis that, yes, I can see how this plays out and those are the ones you have to gravitate towards. Others might change. One thing that surprised me is the investors we end up getting, I’ve probably been talking to them for some time, and they’ve said no. And then they’re like, let me look at this again, maybe this is playing out in a way I didn’t anticipate. Investors are curious people and they’ll change their minds all the time. They’re dealing with fast-growing trends. Maybe the second tip is just to build relationships with investors and see how you’re doing. And then all of a sudden, your data’s gonna show that maybe you are right, or maybe they were right, but you’ve found a way to address those constraints.
William Leonard
Now, that’s a unique insight there. You’re right. I mean, this is a relationship-oriented business from day one. You’ve got to build relationships, but I think what’s more important than building the relationship is cultivating the relationship over time. That’s done oftentimes through investor updates and that’s one of my favorite ways to stay in touch with founders who may be a bit early for us. Or we just didn’t see the traction that we needed at that particular point in time to get the conviction to investors. It sounds like you can kind of double-click on that as well as a founder.
Andrew Bate
I agree. At the same time, I’m gonna stand up for the founders who don’t send investor updates. I’ve been horrible at that because there’s just this long list of buyers or revenue events, finally, I think I’m at the place where we’re sending out regular investor updates again, but that is not our strength. And I agree, so important that these people are there to support you, whether it’s your own investors or external investors. Investors are very helpful people, as you know, so you want to get them excited, even if they don’t invest.
William Leonard
Andrew, you’ve raised more than $10 million in funding. I know you recently raised some capital last year. I would love for you to talk about how you raised that capital during a bear market—obviously, the highs of 2020 and 2021. We’re no longer in 2022. Did you have to re-strategize and reformulate your messaging in your fundraising strategy last year? Tell us more about that.
Andrew Bate
It took some time to close the round. It actually took us a year to close the round. We took the first bit of investment almost two years ago now and that included some venture debt from a firm called Lago in Chicago. And then, we closed and they did some equity as well. It took a year to finally close that round. The next lead was called Highgate. Highgate is a large hotel operator. We went kind of slowly because the economy was so fragile and hospitality companies, which is their experience, take the brunt. Minimum economies do so well, but bad economies, they’re just destroyed as we just saw with COVID. We’re just kind of playing it slowly, testing the market, and eventually, it worked. They changed the investment terms a little bit, they lowered the amount they put in initially, but then they had the option of doing a second tranche if we hit certain milestones. It looks like that second tranche is going to come through, and then we’re growing, so that ends up being a good investment, but it took time because of just our industry and then the economy which has been rough for a time now.
William Leonard
It sounds like you had to get pretty creative with your financing and how you were going to take on venture debt-equity funding from strategic players. Is that something that you would, say, play this success and getting that capital in ultimately is getting creative and sort of being flexible on how the capital is coming in and when it’s coming in?
Andrew Bate
Fortunately, sometimes you just do a round and it’s binary. You either get it or not. Fortunately, we got the benefit of having some money so we could continue the growth and continue making those immediate investments. And then as more came in, we could make the next round of investment. That was fortunate so we weren’t desperate as we went through that path. I can’t imagine there are many rounds right now that are not at a level of compromise, sacrifice, or creativity these days.
William Leonard
Thinking bigger picture here about Safely and the broader short-term rental industry, we hear a lot about what’s going on with Airbnb, read the headlines, and the narrative is that their business model is collapsing and the sector is as overinflated. How did we get here to this point? And in the midst of this, do you see any potential opportunities that remain for technological innovation that allows founders to sort of solve some of the problems and pain points that are relevant in the industry right now?
Andrew Bate
I mean, there’s been some news about Airbnb collapsing. Their stock price hasn’t reflected that and their competitor stock price hasn’t reflected that, so there’s overall strength in the industry. What’s happened is home supply has increased by about 20% in the last couple of years. Not many industries have 20% more supply join. What’s happened is, there are just more homes now. It might have been 1.4 million a year and a half ago, but now 1.8 million almost homes are on Airbnb and Vrbo in the US. So with more supply, demand is increasing just as much. We’re still in the equilibrium, but it’s a shift. Some property managers and some homeowners are taking the brunt of that. For others, it’s an opportunity but in general the industry was rolling, more demand more supply, but it’s not evenly distributed. Some are not faring as well. But net, it’s working. In terms of opportunity, I think in general everything’s good. It’s a growing industry where some people are feeling pain, which means there’s an opportunity. What does that mean? Well, we have insurance to help with some of the pain but I want revenue management. How about all the hospitality tools that a hotel uses? It is a very sophisticated mature industry. Hotels and Hotel Management, let’s look at best practices and hospitality to understand what’s really unique about a short-term rental and Airbnb rental. Let’s bring those two together or best practices from other industries and really elevate your home rental versus the Airbnb rental, or versus hotel rental. Do I think it’s a big opportunity and a fast-growing fragmented industry? And then the last trend is changing as well as people are returning to normal travel trends. Before when we didn’t have to go over work, we could take the extra trip. Let’s pretend you had the money to take six trips. You go six times like you do your normal summer vacation, but then you go on another five-day trip and another five-day trip. You go to the Blue Ridge Mountains, you go anywhere around here. You can work for two days and you’re not even taking vacation time. Now people are getting a little closer to the office, kids have to go back to school, and so we’re seeing some markets hit really hard where it was really easy to go there. You could work from there. Now, people are being a little bit more intentional about their travel, which means maybe they’re going a little bit farther, and maybe they’re flying again. Sunday’s drive locations are getting hit. Things return to normal.
William Leonard
I think that’d be a trend that does propel a lot of innovation in the space. You talked about this return to normal, return to the office, we’re seeing traffic back at Hartsfield-Jackson. I mean, it probably surpassed pre-COVID levels, I’d say. I think that’s just a key indicator right there of all the airport travel that is seen in the delays that were being impacted as well. But Andrew, you grew up here and you went to Emory. Why did you ultimately decide to stay here in Atlanta and build Safely versus going to the coast and build? I think that was the popular thing to do in the mid-2010s era. You see innovation hubs like Austin, Atlanta, Raleigh, Durham, and Nashville now popping up in this region. I think Atlanta is probably leading the way there. Why is Atlanta been so special to you and Safely?
Andrew Bate
I actually launched the company in London, when I was in business school at London Business School when I started there. I had to get a visa if I was gonna stay. I would have gotten the visa, but it’s just like $3,000. And then, I have to figure out if I’m gonna stay. I was just getting more traction back in Atlanta, because I lived here before business school, and I knew people. I knew I could live affordably. I knew I could pick up side jobs more easily. So I came back and my brother was helping me with the technology. He’s our CTO, but he was helping me with that. It just felt like home. In hindsight, though, I wish I would have gotten to Silicon Valley to start in 2009 exactly as you said, that’s where the early-stage money was. It wasn’t here. I don’t know how it would have played out, but I think I could have gotten some of that early capital, and maybe found a co-founder who had the experience of scaling your company or things like that. I think that would have happened more easily there. We’ve gotten over that hump. And of course, things have changed since our board was distributed, but now I’m loving that we’re in Atlanta, we can scale the company, we can pay normal salaries, and our team can have grown up lives. They don’t need three roommates like if we’re in New York or San Francisco. They can have a regular life, maybe a little yard, a car, and things like that. They can have a good life here. I love being in Atlanta now, but I think it’s actually in that era. It did slow. It was an early category, but I think this early-stage capital or no revenue companies was more available in Silicon Valley than it was here.
William Leonard
That’s interesting, but glad you’re here now. It sounds like the company has really found its footing in a market that was once so nascent and young and now that is mature and has taken the world, the globe by storm. Andrew, I really appreciate you coming on this afternoon and sharing insights around customer discovery, fundraising during a bear market, opportunities for innovation in the short-term rental space, and how you can build products in this hospitality space. I think our listeners probably extracted a lot of insights from this dialogue today.
Andrew Bate
Thank you, William. This was great.
William Leonard
Awesome. Andrew, take care.
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