Helllooo TWIF Readers - Been a little bit since the last interview, but I am happy to be back. It’s Fall, New York City is buzzing, and it’s never been a better time to be working in fintech. Today’s interview is a special one. It’s with Roman Pedan, the CEO and founder of Kasa, who is building the company that you would get if “Airbnb and Marriott had a lovechild that brings the best of both into the world.” Now I’m not really into celebrity couples (I do love Love Island though, specifically Season 5), but the combo of Airbnb & Marriott??? Sounds fantastic to me. In all seriousness though, Kasa, in my mind is the future of travel and the future of hospitality. Kasa currently manages or owns properties in 45 cities, 24 states, with ambitions to go global.
That all being said though, the reason why I am pumped about sharing this interview is because of how much insight Roman provides into what it’s like to build a business. What it’s like to self-fund your business on a JP Morgan Credit Card, what it’s like to cut your teeth building a business to $100 million of GMV, what it’s like to have an idea, see an opportunity, and be so obsessed with it that you can’t let it go. This interview, Roman’s interview in my mind is really what entrepreneurship is all about. It’s about following your interests and passions (yeah I said it), it’s about swinging for the absolute fences, and it’s about paying your insights forward. I hope you all enjoy (and be forewarned this article is a weeeee bit long, but ultimately a weeeeee bit really freaking good).
Alright! Roman, could you please tell us a little bit about your background, and what is Kasa?
You got it. Perfect. So Kasa is building a global accommodations brand for the modern traveler. Think of it as Airbnb and Marriott had a lovechild that brings the best of both into the world. My background very deeply intersects with what we're building and I feel profoundly fortunate to be building Kasa for three reasons. First, because I was born in Ukraine. My family came over when I was one years old, to the United States as refugees, and especially in this moment when Ukraine is going through the conflict that it's going through, I feel a responsibility to that heritage. Second, I also feel fortunate to be in the US where we can build something and bring it into the world. Third, I also feel fortunate because I'm building at the intersection of three things I really love that historically haven't combined very well: Real estate, hospitality, and technology. I learned to code when I was four. I studied computer science in undergrad, I built a technology company called Bookly. Bookly was the Kayak.com of textbooks. We sold $15 million of books. It was profitable. And I have always really loved the power of a line of code. I think software allows you to make a future impact on the world, forever. It’s incredible.
Could you tell us about the earliest days of Kasa? And how your background as a real estate investor at Kasa played a role in making you want to go after this opportunity?
So, I studied real estate and I worked in real estate investing at two very large private equity funds; one in Chicago called Walton Street, and then I helped start the real estate fund at KKR. I was the sixth member and I helped that grow to 40 people. And now it's, I believe, 140 people. And while at both firms, we invested significant capital, billions of dollars in hotels. All the while I was staying in Airbnbs and hosting an Airbnb and there was a cognitive dissonance that started to build for me. We were pouring immense capital into the old world of hospitality and the new world of hospitality, Airbnb, clearly was onto something, but was missing key elements of what Hilton, Marriott and Hyatt offered, namely the confidence in the kind of stay folks would experience. Often folks love Airbnb for the wide selection of locations, the reasonable prices, but crave knowing that the stay will be good. And since 4 million individual hosts are responsible for the stay on Airbnb, you don't often know with confidence it will be a quality stay. And so that cognitive dissonance of staying in Airbnb and traveling and investing in hotels led to founding Kasa as a way to bridge the gap between bringing the best of Airbnb and Marriott into the world and creating a brand that's fit for the way people live and travel today.
And so if Kasa is the best of Airbnb and Marriott together, or as you term the love child, who is Kasa serving today, who is your ideal customer out there in the world?
Yeah. So our ideal customer, we frame in a few different ways but three come to mind. So very often, we serve a family that is traveling with their kids and wants more space for their accommodations. They want a kitchen and a living room, but don't want to buy three hotel rooms in order to get that space and also don't want to take a risk of an Airbnb that may not work as promised for the one or two family trips they take a year. Business travelers who are going for a longer trip are also a key, key cohort. So a longer trip means five plus days, perhaps traveling with a coworker, often on a budget, not a low budget, but a budget that they have to adhere to. And as a result of that, they want something nicer for their budget and they want to make sure they have the space and comfort of a property that might have a kitchen and living room versus a hotel room that they're in for seven days and doesn't feel like home. We also cater to dual-income-no-kids exploring the world with significant others. Often those folks are taking the extra weekend, extra day after a weekend. And because they're more remote than ever before, staying in our properties for that experiential effect as well.
Across all of those customer segments. The family stays, the extended business traveler, dual-income-no-kids. Why should any of them who haven't heard of Kasa today stay with you? And why not stay at an Airbnb or go to Marriott and maybe probably only specific for the dual-income-no-kids - why not just couch surf with their friends?
Yeah, I think what we offer is a Goldilocks of better quality, but still reasonable price and high variety of locations that often is the closest to where they're traveling to. So for the family that otherwise may stay in an Airbnb, we can deliver a stay with more for them, with more confidence. When someone stays with us, they will know that there is a company that operates across 45 cities and has its reputation with every stay on the line behind their booking. And they know that if they reach us, if they reach out to us 24/7 at any point during their trip, they'll get a swift response that solves their issue in their Kasa. They might be worried the Wi-Fi won't work and they need to make some work calls. They might be worried their AC or their HVAC system won't be working, and what if the person they booked from is out of town and non-responsive. There certainly are issues that happen when people stay at Kasa, but there's a team responsible for resolving them quickly. And our goal is to solve them with a very high reliability, an ever growing reliability, and deliver on the stay with confidence. So that's why a family, or anyone really, might stay with us. In addition to that, all of our customer segments are getting a reasonable price because what we've done is remove a lot of the costs that typical hotel brands have incurred in delivering on the stay. For example, we require 87% fewer people per room versus a typical hotel brand. And as a result, we can offer a better price for the customer and more profit for the owner. So they [the customer] get that increased level of confidence, the product that they want, more space and a reasonable price.
The other thing that I think is very unique to Kasa that causes people to stay with us is we have a lot of locations that are unique and we're able to operate in unique locations for some structural reasons that are advantages to Kasa.
Is it fair to say, you know, part of what Kasa is in some respects is a Millennial version of Marriott, but with the uniqueness, the connection to the city and the experiential factors of an Airbnb?
That's right. That's exactly right. And we're highly focused on making it super functional so that things just work. We kind of have this company ethos, “It's hospitality that is always felt but rarely seen. And it's everything you need and nothing you don't.” So it's kind of like that's the reason it immerses you in the city is because you have everything for the great hospitality experience, but then if you want to go out and explore, our properties make it very easy for you to do so.
Let’s come back to and narrow in on the founding story of Kasa. You talked about it a little bit, you're at KKR, part of the founding real estate team, one of the first six people deploying billions of dollars into real estate. Was there a light bulb moment for you? Was there a crucible moment where you're like, I’ve got to leave KKR and go start Kasa?
You know, I don't think there was one. But there were recurring situations where I kept coming back to this idea. I kept spending time on it in my spare time while at KKR, and I was hoping KKR could invest in something that looked more like a Kasa than a Marriott or a Hilton. The reality was though, at the time, there was no operator or technology solution that could support it, so it was functionally impossible for an investor to deploy capital into the world without that kind of operation in existence. I remember though, while I was at KKR, I wrote a very short business plan that I shared with a small set of the team, I refined it over time and then kind of put that away when I realized it wasn't feasible. I went off to business school because I felt at that point in time there was a broader opportunity of combining the worlds that I really love, technology and real estate into one. Historically, it's been two lanes of a highway that didn't combine, and all of a sudden in 2010 through 2020, you know, in the last decade, we've seen massive momentum behind what's been increasingly obvious, which is that real estate is wildly behind the times in technology investments and hospitality is even more behind the times than real estate. I went to Stanford with the idea that I would combine my two passions with the needs of the world of real estate and technology coming together. I remember looking at the whole universe that I could find of real estate technology companies. I even interned at one called Juniper Square when there were four people, a great company in the Bay. But I kept coming back to this idea of Kasa, like on a recurring basis. It kept coming up as the thing that I spent my spare time working on, and that was a good signal. It was like I tried to go through it analytically, and model out on a spreadsheet what I should do. And it was like on a long bike ride where I realized I should work on the thing that's right in front of me.
Wow. Incredible. Let’s talk about that intersection of real estate, technology, and hospitality. I view real estate/proptech as a subset of fintech, and the world’s come a long way. In Q1 of 2022, around $4 billion worth of venture capital went into proptech alone. With the amount of capital flowing into the space, how do you think about the classic question of building versus buying software?
So the default, in my view, should be to buy the software, not to build the software. That should be what you need to disprove. In order to build it, you need to disprove that buying it would be as good, if not better, for the business. And the reason why is it's enormously expensive to build software. If you'd still be better off buying the software, then you don't gain a particular competitive advantage over anyone else who could just buy it, versus spending enormous capital and time to build it. Our mental model for building is that we will build where the thing that we're building is not available elsewhere or not to the specifications that are necessary for Kasa to be successful over time. Basically, anything we’re building we question, “Is it is core to our competitive advantage, meaning does it give us an advantage in generating revenue over time, in being more efficient on expenses, or doing something that no one else can structurally do?”
Let’s zoom out to 2030. What does that world look like to you in terms of the intersections of hospitality and technology?
What the world looks like for me is through the Kasa lens because we’re on a 100 year journey, which is one of our values. We work very hard not to take shortcuts, or to eat the “junk food” of startups which are processes and projects that are good today, but bad tomorrow. But to come back to your question - in ten years, we expect to be global. We expect to be ubiquitous in a wide set of cities, a much wider set than we’re in today in the US, and within those cities, we expect to have a very high selection of locations that you can be in. We expect to be in hotels, homes, and apartments, and we expect for people to live in Kasa’s as their 12 month lease option, but also travel within the network of Kasa’s as their primary destination and start their search with us for life and for travel. We also expect there to be other folks who are serving these kinds of customers over time, because this is such a large need - how and where people live is one of the most important problems globally that brands and operators can serve. I also expect, in terms of your question on technology, for there to be a continued acceleration in delivering software for accommodation, but these solutions will bridge accommodations and living. So, for both accommodations and long term living - there will be software solutions that make owners more efficient, and make the experience for the customer (i.e the person) who is using the accommodation higher quality.
Alright Roman. This has been wonderful, so let’s do a lightning round. 3 last questions, short and sweet answers. First question. What role has serendipity played in your journey as a founder?
A massive role. I try to keep 25% of my time for magical moments in the direction of where I’m going, but not obviously necessary for executing on the plan. I’ve found that the 25% has actually had a 70% impact on outcomes. “Try not to over-plan,” is my advice.
Second question, let’s rewind the clock to your first fundraise for Kasa. With what you know now, what would you do differently?
I wouldn’t do anything differently, which is maybe a cop-out, but I’ll share two anecdotes that come to mind that could be helpful. One, we took a while to fundraise. We were operating off a JP Morgan Chase Credit Card that I personally guaranteed for two years, got to a few million dollars of revenue, proved out product/market fit and operations, and the need to actually invest in technology. We had a team of 15 by the time we raised money and were profitable, we had to be otherwise I would be bankrupt. That exercise meaningfully de-risked the business for the investors that we sought which was a massive help. Two, as an entrepreneur time is your least scalable resource, and money is a commodity. Find investors that believe in you (easier said than done), and who can help. If folks can help you in a profound way, that makes a huge difference.
Amazing, Last question. Feel free to be as verbose as you’d like. What advice would you have for any aspiring entrepreneurs?
Take more time than you think is necessary to raise money. Be more frugal with the money than you think. Be more frugal than what your initial instinct is, or what you think you should be. And while you are not raising money, prove out the highest risks in the business. Make sure you've identified the top risks and the top opportunities and make sure you're focusing every day on either answering or reducing the risk that is most profound in the business and increasing the most profound opportunity. And if every day you make wild progress towards that and you haven't yet raised money and with every day gain confidence, then once you feel like you can do that without capital, once you feel like you've gotten to the furthest point without any money on that quest, only then raise money. And if you never need to raise money, that might be the best outcome you could possibly have.
