← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: The Wild Story Raising $450M From Masa and Softbank | Why My Biggest Mistakes Came From Listening to VCs | Why 100 VCs Turned Us Down | Why European Founders Are Tougher Than US Founders with Johannes Reck, GetYourGuide
01:16:45
Johannes Reck is the Founder and CEO of GetYourGuide, the $2BN company that started with a holiday to China and nothing to do. For the first two years, GetYourGuide received only 5 bookings. Today the platform is worth $2BN. They have raised from some...
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- [00:00]
Johannes Reich
I would have not raised as big of a Series A. Looking back, I think it was too much dilution. What did change was that suddenly I felt like a celebrity. That was the moment when I made the biggest mistakes. If you have a Sequoia Capital or an Index or a Spark Capital on your cap table, the reality is that your next round will be so much easier.
- [00:21]
Harry Stebbings
This is 20 VC with me, Harry Stabbings and now today we feature one of the most incredible startup stories from Europe. In the first two years of get your guide existing, they did just five book. Today the platform does 35,000 per day. They're worth $2 billion. The show today has so many great stories, including how Johannes Reich, the co founder and CEO joining us, got a $400 million check from SoftBank and Massa sun and the Napoleon portrait behind Massa that was present throughout the whole meeting. This is an incredible journey and I.
- [00:56]
Johannes Reich
Hope you like the show today.
- [00:58]
Harry Stebbings
But before we dive into the show.
- [00:59]
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- [01:58]
Harry Stebbings
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- [02:12]
Unknown Guest
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- [02:15]
Harry Stebbings
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- [02:24]
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- [03:13]
Harry Stebbings
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- [04:11]
Unknown Guest
Johannes dude, it is so good to make this happen. I have been a fan and follower from afar for a long time, so thank you for joining me, man.
- [04:19]
Johannes Reich
Thank you for being here.
- [04:20]
Unknown Guest
I've got a company now, a great company that's raising a Series B in Europe and they've just gone to the US From Europe and they've just raised a little bit and had meetings in Europe and now they're out in the US raising and they're like, God, the difference is just insane. In terms of Series B investors and how they think and how they operate, would you say that you had a vastly different experience between European and US Investors?
- [04:43]
Johannes Reich
I think the biggest difference is that the US Investors just have had much bigger home runs and that relieves a lot of the pressure. So talks Bar Capital, our Series A lead. The deal after get yout Guide was Oculus Rift Palmer Lucky. So we were basically off the hook a couple of months after they made the investment in US because the fund was already returned and then afterwards Wayfair was in the same fund. The fund got returned another time and then if get your guard returns at another time, that's great. But that's ICING on the cake. So that I think has a completely different dynamic and VCs Europe don't have that. And that allows you to think much bigger because your early stage investors don't feel the same pressure on the US versus Europe. I think we have the same ambition level among the founders in Europe and the us. I think it's bullshit to be honest when people say European entrepreneurs don't work as hard, are not as ambitious. I've heard Peter Thiel and others say that, but I think that's BS to be honest. I think people here on average have a much tougher time because it's much harder to raise funds. It's much harder to build a business across Europe than in US where when you raise funding the addressable market and everything is much bigger. I think where we have a big difference and that's where we need to catch up is just the overall flywheel of having had successful NVCs that have raised bigger and bigger funds. And also, and that's very important, having the talent density in the different startup capitals of Europe. If I want to hire, let's say the next chief product officer at get your guide, it's almost impossible to do that in Europe. I need to go to Silicon Valley because the density of people who have done that scale have serve tens of millions of customers a year. Build a business that's 10 billion plus valuation that just doesn't exist to build the structures and the processes and everything to do that.
- [06:28]
Unknown Guest
Do you think Trump and a less stable America makes it easier for us to bring talent to Europe?
- [06:34]
Johannes Reich
Totally. I think that's why both of us are so committed to Europe. I think that's the eureka moment of Europe. I think we need to seize that moment and I wish we had the landscape and the leadership to do that. I mean if I was in charge of Europe, I would say pump up venture capital funding to match US levels. We spent 50 billion a year in VC in Europe. The US is north of 200 billion. Why do we have that gap? Doesn't make any sense. I mean just to give you another number, Germany subsidizes its broken retirement system every year with 100 billion. But we have 7 billion invested in VC, 100 billion subsidies in retirement system. That doesn't make any sense. That's not the future.
- [07:14]
Unknown Guest
I would just push back on that and say we have way too much money in European venture. We have so much money that your execs are getting emails from VCs encouraging them to leave. Get your guide and start companies where Execs are saying, hey, I'm not leaving. This is a weird VC rumor that I'm leaving.
- [07:32]
Johannes Reich
I disagree with you, Harry. So I agree on like the seed and Series A and like all of that territory. Yes, probably there is enough capital. Maybe. I don't know, but probably there's enough capital. But you know, when you look at the get your guide stage and like our last couple of rounds, like we had to go around the world and it is harder to raise as a European company. And that's where the big rounds happen.
- [07:53]
Unknown Guest
I get you. So you're saying kind of cde, CDE.
- [07:56]
Johannes Reich
Pre ipo and then even public. I mean, like, how can a German company go public in Europe? It's impossible. And like, if we go public, it's only with American funds.
- [08:04]
Unknown Guest
Well, you're not going to list in Europe.
- [08:06]
Johannes Reich
You know, we haven't decided that. But the reality is, regardless of where we list.
- [08:10]
Unknown Guest
I'm sorry, I'm not being a journalist, being honest.
- [08:13]
Coda Ad
How could you?
- [08:14]
Johannes Reich
It's very difficult because we don't have the pools of capital here. That's the problem. And we don't have these pools of capital pre ipo. We don't have these pools of capital post ipo. So that's what I mean with like, we need to invest a lot more in innovation. It's not just about the next seed round is really about scaling these companies and making sure that they stay in Europe and making sure that they continue to innovate and build in Europe. We need way more budgets for innovation and that ultimately comes with a lower cost of capital, which means higher valuations for growth stage companies. And that means more money for these companies.
- [08:44]
Unknown Guest
I agree with you that on growth. I totally agree with you there and get you that. Okay, so more money at growth for companies in Europe. Agree.
- [08:51]
Johannes Reich
Next one. As the Prime Minister of Europe that I would recommend here is we should attract talent like crazy. Right now we've got the entire immigration debate in Europe just kills me because we have the wrong debate. Of course we cannot have all the refugees in the world migrate to Europe. We need to solve that problem. Agreed. But why don't we spend that airtime now discussing how we get the greatest minds in the world to Europe because that's going to make or break time ever.
- [09:19]
Unknown Guest
Because they're all going, God, the US is a shit show.
- [09:23]
Johannes Reich
I would go so far to say anyone who relocates to Europe with a computer science degree or joining a tech company should get massive tax benefits. I don't know, five years tax Free or no taxation on stock options, whatever it is, bring them over. We can't compete with less capital, a more scattered European landscape, more bureaucracy and less talent. It's not going to work. So we got to solve the talent part. And the great thing is we can turn our weakness into a strength. Because everyone wants to live in Europe. Everyone I talk to, they want to live here. They want to live in London, Berlin, Munich, like you name it. We're a very livable continent. People love to be here. So let's make sure that they come.
- [10:04]
Unknown Guest
That's such an interesting one. Okay, so you do like tax incentives for great, talented people, whatever that is.
- [10:08]
Johannes Reich
By the way, I recommended that in Germany and got shot down immediately because, you know, people said, you know, this is not egalitarian. You know, it's like we need to pay the same taxes everywhere. But I think it's so misguided because we have.
- [10:18]
Unknown Guest
So it's a progressive tax system, then it was not egalitarian.
- [10:21]
Johannes Reich
Yeah, don't ask me the problem, though. If you look even at the old industries. So Volkswagen, Mercedes, etc. What do they need? Brilliant software engineers. They do need the next people figuring out autonomous driving. So we need that level of talent. And Harry, at Get yout guide, we have 90% of our employees in Berlin are not German. Are not German and not German. Most of them don't even come from Europe. Because the reality is, with demographic change, we don't have enough people here. Even if I wanted to hire only Germans, I couldn't do that. It wouldn't be possible.
- [10:56]
Unknown Guest
90% are not German. That's astonishing.
- [10:59]
Johannes Reich
90% are not German. And it's not because we opted to not hire Germans. It was really because that's the only candidates that are available. We relocate massive amounts of people from India, Northern Africa, the United States, and then obviously in the European Union.
- [11:14]
Unknown Guest
Is there anything else you'd do to attract great talent? I love that. In terms of the tax incentive for software engineers. Anything else that you'd do?
- [11:20]
Johannes Reich
It sounds very sad, but actually making it easy, removing the red tape and the barriers. So we hired a CTO from Netflix last year, Gaurav Agarwal. Amazing guy. He was the guy who led all of growth at Netflix, which was very successful, was at Meta before. Tremendous resume. He's Indian. For him to get a visa to come to Germany after he had signed a job contract. And this guy makes a lot of money. Took him six months. Why? Because he had to go to the consulate in San Francisco and they only take appointments Two times a week and they've been booked out for the next six months. So I literally had to call up the foreign office in Germany to get him an appointment in San Francisco so he could bring his paperwork, literally the paperwork, because he can't send that anywhere so that he can get the visa and migrate to Germany. I kid you not. I mean, if you make it that hard, it's no wonder that we don't have a tech ecosystem in Europe.
- [12:15]
Unknown Guest
Okay, make it easier. Anything else?
- [12:17]
Johannes Reich
I think lastly, this comes to the nuts and bolts. You need to have a really functioning society. I'm actually really concerned about the far right in Europe because that will be a huge detractor for these type of people. I mean, it's something that we.
- [12:31]
Unknown Guest
I'm Sorry, why the AfD has kind of been diminished, Reduced?
- [12:34]
Johannes Reich
No, no, no. It's stronger than ever.
- [12:36]
Unknown Guest
Oh.
- [12:37]
Johannes Reich
And people like. I understand why, like Germans or Brits are very upset because we have all of that red tape. We have these stories that I just told. But the problem is if we turn into nation states and if we turn into these very nationalistic things in Europe, then ultimately we'll detract the people that we really desperately need right now. So I think having really a functioning civic society and that ranges really from good education systems to good hospitals to good roads and infrastructure to actually people just engaging and loving Europe again, to be honest, and advertising it, that is something that we need. And I think frankly in Germany we've done a terrible job at this over the last couple of years. We've had a really good brand for a long period of time. I think we've really tarnished our brand over the last couple of years.
- [13:27]
Unknown Guest
How do you think you've tarnished your brand?
- [13:28]
Johannes Reich
I think today when you think of Germany, you just think of things that don't work and social media has just spiraled that up so much. I think the UK is a little bit in the same spot after Brexit. So to be honest, I think we need to turn the page and be much more optimistic about our future.
- [13:43]
Unknown Guest
Able to reinvest in energy and innovation in technology the way that we need to fast enough to. And fundamentally our governments are totally ill equipped.
- [13:52]
Johannes Reich
Absolutely. But I think that's going to be the challenge for our generation, Harry, to do that. I think if we don't display that level of optimism, if we don't believe in Europe, if we just look at the US and I like.
- [14:03]
Unknown Guest
But my question to you is, would you ever go into politics?
- [14:06]
Johannes Reich
A lot of people have Asked me that. I think the biggest contribution I can give to Europe right now is build a really big company post that. Would you ever ask me then?
- [14:15]
Unknown Guest
Because I always say the same thing. But it's like fundamentally, if you have the power structures broken and actually we don't have the time, China and the US are accelerating away from us faster than ever before.
- [14:24]
Johannes Reich
So what I do is I support a lot of. So I donate to a bunch of different political parties across Europe. I do support young politicians. To be honest, I don't know whether politics is the only thing that's broken here. I think a lot of it also has to do with the education of the people. I think the politics are ultimately a reflection of what the people think and what they want. So I think it's really upon us also as leaders in technology to bring that progress closer again to the people. That's why I try to speak out about this type of stuff as much as possible, try to educate. Even if you get a blowback like I got with the tax incentives, I don't give up. I continue to try to make the point and I try to do that in a way that is as inclusive to these people as possible. And I feel like if more of us do that on a continuous basis, ultimately things will change because we have a very loud voice from the younger generation that are very dissatisfied. A lot of them, I don't know what it's like in the uk, but a lot of them in Germany actually now vote for right wing or left wing parties and we need to make sure that they understand that they can still shape their future. And at the same point in time, I think we need to build up the empathy from the older generation which is the biggest voting bloc. Right. They have the power to change things to ensure that we have again opportunity for the young generation in Europe.
- [15:43]
Unknown Guest
Do you not think we're going to see the concentration of capital towards few people and wealth inequality like never before? We're in these kind of rarefied airs. We both came from the same conference where everyone's loaded and everyone at the top is just getting so much richer and that will get smaller and smaller.
- [15:58]
Johannes Reich
I think in Europe, much less than the US to be honest. I think that's again something that's quite positive about Europe. If you look at Germany and many other European countries, our Gini coefficient is actually quite healthy overall and we have a ton of redistribution. So I don't think that redistribution per se in Europe is our biggest problem. I think it's rather how we choose to invest that money. If I'd sum up my claim here is, I'd say we need to invest that more in the younger generation, not just in the older generation. I think ultimately we'll need to make sure that the older generation understands that that's the right thing to do.
- [16:31]
Unknown Guest
Project Europe.
- [16:32]
Johannes Reich
Project Europe.
- [16:33]
Unknown Guest
I want to go back to the beginning because I hear that get your guide is actually the result of great friendship. It's you and Tao coming up with an idea from university together. Can you just take me back to you and Tao sitting in a room together, deciding you were going to start a company together?
- [16:47]
Johannes Reich
Yeah, totally. So this is actually 2007, 2008. Tao and I were both students at the Swiss Federal Institute of Technology. He was doing physics, I was doing biochemistry and neurobiology. So something very remote from online travel. And we both led a student delegation to Beijing and China at the time. And I made a pivotal mistake in that I booked my flight ticket a day early and arrived in Beijing without the group. And I was trying to do stuff. Then in my hotel room, I logged on the Internet. I was going on Google trying to find things to do, going to the Beijing wallet, doing something with the day, and I couldn't find anything. I got stuck in the hotel room. And the next day, Tao shows up as the guide. Literally, he's like, hey, Johannes, gonna take you out. I'll show you Beijing. We'll go to the Beijing Wall, the Great Wall. We have Beijing duck in the hutong. So it was a really special day. That epiphany really of like having seen the the city through the eyes of a local, someone who speaks the language. We went back to Switzerland to ETH and said, you know, we have to build a website. We have to build a community for people so they are able to do that. And we did that. And like the prequel to to get your guide was like, we were building a travel community for everyone to be a guide. No one actually used that. You know, I think we had a hundred guides because that's what I read.
- [18:07]
Unknown Guest
I read that you pivoted three times before you found real product market fit.
- [18:11]
Johannes Reich
Totally. It was terrible.
- [18:12]
Unknown Guest
So what was the first iteration?
- [18:13]
Johannes Reich
First iteration was literally a PE to peer websites for guides. Small untold story is we also considered doing something like couch surfing at the time homes. And we thought, no one is going to stay at someone else's home. So discarding that idea, someone else in San Francisco picked it up very successfully. And then we went to guides and we were like, guiding is such an important thing in travel. So can't we build a community of guides? But we're thinking this from the lens of the student. We didn't do any market research or anything. So we built a social network. Only 100 students signed up. Most students don't have time to be guides. We had, I think, three to five bookings in the first two years of our prototype, three of which was my mother because she took so much pity on U.S. students.
- [18:58]
Unknown Guest
Three to five bookings in two years.
- [19:00]
Johannes Reich
Yeah. But then what we realized through that prototype was that there was this gigantic market out there for experienced providers, particularly in Europe. I mean, Europe has 60% of the global inbound travel. There's just so much to do in any city. And none of that was digitized in 2009, 2010. So we. We went back to the drawing board and said, look, we clearly didn't find product market fit. This first iteration was terrible. Let's pivot into this much bigger market that's out there and that's just not digital.
- [19:30]
Unknown Guest
In those two years, what are you doing when you have three to five bookings and three as your mother, what are you doing?
- [19:36]
Johannes Reich
Completing our degrees. So we were still at uni at the time. So we're still at uni, living honestly of very little money at the time. But the great thing about it was we could fail. There was no problem in failing. Even more so it was just a lot of fun. We didn't do that really to build a company. Even at the time, it was more like, this is a great space. We want to build a really successful web product. Facebook was going viral at the time, so those were the days of Web 2.0, and we were really working at night, to be honest, we were studying throughout the day, and then at night we'd do this.
- [20:11]
Unknown Guest
There's a common mantra that if you want to win, you've got to go all in. You've got to go all in. Respectfully, you had the nice landing pad of being at university. You were working alongside it. You were doing both at the same time. You didn't leave university to do get your guide in a similar way. I was at law school when I started the show. It wasn't actually that risky. If the show didn't work, I'd just carry on being a lawyer. Luckily, the show worked and so I could drop out. But, like, my question to you is, do you think you have to be all in, or can you do the. No, I'm going to build it alongside university and see what works.
- [20:43]
Johannes Reich
No, Respectfully, you have to be all in. And we had an all in moment. So the first iteration of the product actually failed. Right, as I told you. And then we had to go out with the second iteration. And with that second iteration, we were done with our degrees and we really needed to try to make this work because it was clear you can't just do this on the side. You really need to sign up supply now. You need to build an online marketing function or need to do online marketing. And at that point in time, we really needed to go full time with a prototype that was unproven and two years of failure. Failure, right. So in a weird way, it was a very stressful moment. And even worse, I need to go to my parents and basically say, hi, you need to fund me for like another year after university. So, you know, can you please put a mortgage on your house and like, fund me? Because there was no seed capital available. No one would give a bunch of students money at the time for an idea that wasn't proven.
- [21:36]
Unknown Guest
What gave you the conviction? Respectfully, you had two years of it not working. Where did you get the conviction to say, hey, parents, remortgage the house, fund me. It's going to work?
- [21:47]
Johannes Reich
So honestly, I have no idea looking back, but the way how we operated at the time was really being in this deep tunnel. I once met the great race car driver Nico Rosberg, Formula one champion. And he said, when you go and race, you look at the road, you don't look at the wall. Because if you look at the wall as a race car driver going to hit the wall, so stay focused on the road. And I think that's very much what it felt like at the time. We were even consider, like, for me, like, failure was non optional. It was like, you know, that's not a valid option. We will stay the course, we'll win this.
- [22:18]
Unknown Guest
I love that. And Nico's a fantastic dude in France. I'm pleased to hear you drop some wisdom from him. I do want to go back to that. So then we said to the parents, hey, you know what, fund me for another year. This is going to work. What happens then?
- [22:31]
Johannes Reich
Well, then what happened was a miracle because we signed up the first couple of suppliers and we got very lucky with a few of them.
- [22:38]
Unknown Guest
How do you do that?
- [22:39]
Johannes Reich
Literally cold calling and going to people. I remember I traveled to Salzburg and signed up the Hop On, Hop off bus tour. It was very random. There was no CRM or anything like that. So it was very much what looks good, what's Nearby, Whom can we address? We got very lucky because we got a very good tour agency which did tours to the Vatican very early on. And the Vatican is one of the major sites in all of Europe. And no one had sold the Vatican online at that point in time. I still remember the day when they went live and suddenly the booking started to take in. And then we had more and more of these types of experiences. The revenue just came and we're growing and growing. I think we did something like half a million then in the first year in 2010, in net revenues or commission revenues, more or less profitable. But we didn't have any cash because we were just living off the mortgages from our parents. So we're constantly looking into the abyss. And. And that was also the first time when I realized there's actually seasonality in travel. So it actually goes up in the summer, and then November, it really goes down. So for the first one or two years without any type of VC funding, we're literally going bankrupt every winter and needed to somehow survive. So it's very tough early years.
- [23:50]
Unknown Guest
Take me to that. So we're starting to see actually relatively good early numbers and we're profitable enough at that point. You must be getting inbound from VCs.
- [23:59]
Johannes Reich
No, no. This is 2010, 2011. There was basically no venture capital scene whatsoever in Europe. And the biggest problem was that we didn't have a US original that we were a copy of. So I remember I was talking to Oliver somewhere at the time we had started to relocate some of the staff from Switzerland to Berlin because Switzerland was just too expensive for us to survive in our bootstrap mode. He looks at me, he's like, so what's the equivalent here in the us you're the copy of what exactly? I was like, there is no exact copy. We're trying something new here. Experiences, marketplaces don't really exist right now, but I believe it's the future of travel. And he was like, so do you want to join Rocket Internet or do you want to work on your own startup? And I was like, I'm going to work on my own startup. And he was like, okay, thank you very much. See ya. And this is really the spirit of the time. Time. It's very hard to recollect because things are so different today. But we couldn't raise funding.
- [24:55]
Unknown Guest
Okay, so there's not the VC ecosystem that exists. We're going through this seasonality where suddenly actually, oh, shit, we're going bankrupt twice every year. When do we start to raise money? When was your first VC meeting?
- [25:09]
Johannes Reich
So first VC funding was from Brent Hoberman who invested a small seed check alongside with an outfit called Profounders here out of.
- [25:18]
Unknown Guest
Sean.
- [25:19]
Johannes Reich
Out of London. Sean Seaton Rogers. Exact. And that was actually really weird because I got a ticket, sponsored ticket I think through some lottery or something to go to Loewep, which was a big startup conference at the time. And Brent was on stage and I couldn't raise VC funding. We had this business that was constantly going bankrupt but growing really fast. I just hit Brent up after he was on stage and said I'm in travel. You found it last minute, we should talk. And he was like, okay, interesting. Here's my business card. And picked up the business card cart wrote him an email, just cold email basically. And he said, come and see me in London. So I remember I went to see brent@the made.com offices back then. This is probably like 2011, 2012. I had to wait for four hours to get like a 10 minute meeting with Brent. I still vividly remember the meeting. I think he does too. And it was basically, you know, this is what we're doing. You know, we're creating the experiences marketplace. You know, this is the next biggest thing in travel. It's the last big green field. No one has conquered it. And Brent looked at me and he said I made one pivotal mistake@lastminute.com I had the opportunity to buy booking.com at the time as a seed stage company. I still regret that to the present day. I'm not going to make that mistake twice. I'm going to invest in you. That was the moment really. We got our first funding and the rest from there is history.
- [26:38]
Unknown Guest
How much did you raise then?
- [26:40]
Johannes Reich
It was a million bucks.
- [26:41]
Unknown Guest
A million bucks? At what price?
- [26:43]
Johannes Reich
It was I think at like a 5 or 6 million pre money. So you did very well.
- [26:48]
Unknown Guest
Wow. A million at five or six. Okay, fantastic. But that wasn't the first VC meeting. I heard that you got rejected a hundred times.
- [26:55]
Johannes Reich
Yeah, I tried to raise capital but like we got rejected everywhere because you know, again like we were not the copycat of anything. We're first time founders. No one likes to invest in travel. Like you know, this is a very weird industry for a lot of people In Silicon Valley, for the people that I met in the U.S. most people said, you know, move over here or we're not going to give you funding. And I said no, we're very happy in Europe. Like we don't want to move to the.
- [27:15]
Unknown Guest
What advice do you have to founders who are on the 50th meeting with VCs and it just doesn't seem to be hitting, it does not seem to be resonating. To what extent are you like go back to the drawing board, it's your story, you're not resonating versus it's just a game of numbers. Keep going.
- [27:31]
Johannes Reich
The constant is you have to have tremendous tenacity and you will have to pitch 100 times and it will only work once maybe.
- [27:39]
Unknown Guest
So we raised this million at whatever 5 or 6 or whatever the price was. What happens then? That's our first bit of money. Where do we go and double down? How does that change?
- [27:48]
Johannes Reich
We continued with our bootstrapping mode but with a little bit more money and not going bankrupt all the time, which is positive. But what Brent actually then did is he pretty much immediately afterwards set up a meeting with a bunch of VC funds in the US and that referral from him as a proven travel entrepreneur made all of the difference. So suddenly we were starting to get meetings, people got more interested and there was just a much better reference for me as a first time founder as well. Ultimately there was a partner, Alex Finkelstein at Spark Capital took like a very keen interest in get yout Guide and he was like, no, this is interesting, like there's something there. And then he led the a round in 2013 and that was really the moment that getyourguide was transformed.
- [28:33]
Unknown Guest
Where was the business at that point?
- [28:35]
Johannes Reich
Business was doing somewhere around 2 million net revenue at that point and growing I think 2x to 3x y of.
- [28:43]
Unknown Guest
A year got you and your plan to take is like 10, 20%, 25%, 25%. So it's kind of doing 8 million in bookings and he does it in Series A. What's the Series A?
- [28:52]
Johannes Reich
Series A at the time was actually very big for European standards at the time. Somewhere around 14 million. Series A, like I think like 30, 35 million pre money.
- [29:03]
Unknown Guest
Wow. Can I ask you, that's quite a lot of dilution. How do you think about and advise founders on dilution Today I would have.
- [29:09]
Johannes Reich
Not raised as big of a Series A. Looking back, I think it was too much dilution. Ultimately it all worked out because you know, if you're in the company for enough, you know, there's also founder re ups and all of that. So I would say personally it didn't matter. But I do think you should actually manage dilution because otherwise you end up with problems with your employees, you know, with the, you know, other investors and also the share of like early stage investors just gets too large, which might be a problem later down the road. We fortunately at get yout Guide got all of that fixed over the years, but I do think at the time was a little bit too much.
- [29:44]
Unknown Guest
I'm going to get in shit for this. Do you think founder RE ups are kind of. I mean it in the nicest way. As you said that with hindsight you would have not raised as much and not diluted as much. It's like me as an investor going, oh, my bad, I paid too much. I want a better price now with three years of data down the line and then me wanting a better price. Well, no, I agreed to that and that's the deal.
- [30:06]
Johannes Reich
Totally. I don't think that you should walk back and you cannot correct mistakes.
- [30:10]
Unknown Guest
I'm just seeing so many founder re up packages now and investors are getting screwed, Screwed. And it's like, why were you getting screwed? Do you know what I mean?
- [30:18]
Johannes Reich
Totally. No, look, I think the founder incentives that you see first and foremost should happen after a longer period of time. Right. So if I look at myself, I think the first founder incentive package that I personally got awarded by the board with, I think happened after like a decade or so.
- [30:35]
Unknown Guest
Wow.
- [30:36]
Johannes Reich
Much, much later.
- [30:37]
Unknown Guest
Okay, so Finkelstein needs the A, and that's a US Fund. Leading a European company, that's a big moment. How does that change the company?
- [30:44]
Johannes Reich
Completely changed our life. Because at the time, the series A was very large in terms of total quantum, so we had a lot of money. And also very few US VC companies were investing in Europe at the time. So we went from a nobody to a superstar literally overnight.
- [30:59]
Unknown Guest
Did you feel that in the ecosystem, in the presence, how people respond?
- [31:03]
Johannes Reich
100%. I think the only equivalent at much greater scale happened in 2019 when we raised from SoftBank Vision Fund like that massive round. So those were like the two to, I think, defining rounds of the company. But with the A, it was really going from being a complete nobody to someone who is like very present on the startup radar and in the scene. We could hire completely different people. But also, I must say that was the moment when I made the biggest mistakes in hindsight in building the company. So we almost lost the company after raising that A round.
- [31:36]
Unknown Guest
Oh, what were the biggest mistakes that you made in that? Hear it.
- [31:39]
Johannes Reich
We first and foremost listened way too much to the VCs. We were like these young founders not having a clue and we completely lost our way. And going to the board meetings literally looking for advice of what we should be doing in our strategy instead of pushing for the strategy that we saw working in the day to day.
- [31:57]
Unknown Guest
That's interesting. What do VCs want you to do and how did that compare to what you would have done if you'd followed your gut?
- [32:03]
Johannes Reich
Well, they had a much longer term vision around. Hey, you should build SaaS products for your vendors, should do multi market, you should go into all of these new customer segments, into all of these new supply segments and most importantly, you should hire all of these senior people to do all of that. And that's about the worst thing you can do as a series A company without proper management experience. It's much better to stay very narrow and go very deep and continue to drive the growth that you're seeing from the core customer segments that you have and do much less, but do that much better. So we were going way too broad, hiring a bunch of people that were completely wrong for the stage of company. No culture fits. And growth then started to really calm down while expenses spiraled up like crazy. And I remember like a year or so after raising that a round, I needed to lay off 30% of the company and completely rejuggle, getyourguide to refocus us on the core.
- [33:02]
Unknown Guest
Did you do that quick enough? Because sometimes you can leave it quite late.
- [33:06]
Johannes Reich
Thankfully I did it quick enough and I got incredibly lucky that at the time time, a person that's not actually not very well known in the European startup ecosystem, it was probably one of the most successful European founders of all time, called Case Colon called me up, you know, one Friday night I was watching Netflix with my wife. You know, we're sitting there and you know, he called me up and he said, you know, here's Case Colon. And I obviously knew him because he was the founder and CEO of Booking.com and he said, you know, look Johannes, I just left booking.com I've heard about your company. I think you're onto something. Give me your numbers. So I run him through the numbers. He was like, give me like every cohort and like, you know, kind of like supplier. And it was just really going deep on the first call. And by the end of it it was like one and a half hours. And he said, this is interesting. I'm going to be in BERLIN Tomorrow morning, 9:00am at your office. This is Saturday morning. Next morning, 9:00am, I'm there. So a Case is there and he goes to the meeting room with me and to the whiteboard and he basically maps out the entire journey of where he Sees value and where I see value asked a ton of questions. It was literally being in the room with the Jedi Grandmaster for almost, I'd say the full day and then he leaves and he's like, I'm going to come on board, I'm joining a board of directors and I'm going to personally invest a million bucks in the company. That was incredibly pivotal because it happened exactly at the point of time when I was laying off the 30% of the people when I needed to reboot the company. At that point in time I had someone along side with me who had done this before and who was like a really good mentor. And that truly transformed me. And I told Case two, three years later when the company was successful. Probably learned more from you than from my dad.
- [34:47]
Unknown Guest
When we look at those bad hires, what do you wish you'd known then that you know now about what makes a good hire and what you did wrong there?
- [34:55]
Johannes Reich
I think you need fundamentally different people for a series A to series C D stage company than for a pre IPO or public company with billions in revenue. And I do see it today being on the other side of that. People who are incredibly effective at Netflix or Meta or Google or even get your guy today are not the type of people who really thrive with a 30 or 50 people company where you still need to continue to refine that core product market fit where the way how you manage and do things is so different because you're in the weeds every day with the team, you need to ship stuff, you need to be really opinionated about what's going on and then the muscle that you have later on around, you know, managing multiple teams, managing organizations, doing roadmaps and you know, creating more structure in the organization which you need at some point, otherwise things don't work anymore. When you're at a certain scale, those are just fundamentally different skill sets and typically also different types of people and oftentimes VCs mix these two phases. So you really need to have these very entrepreneurial people in the early days who oftentimes by the way, don't work work out in the late days. So when you're going public and you know that stage of your life, those are not the same type of skill set. So it's really about can you find these people who are strong culture fits, who are right for your company at that point in time.
- [36:16]
Unknown Guest
What are some of the other big mistakes? Hiring the wrong type of people, maybe listening to the board too much. Anything else?
- [36:23]
Johannes Reich
Not having a really tight strategy, you know, founders Typically think that they have way more capacities than they really have. So being really tight on what's the core thing that we want to be doing and how can we deliver value to the customers and how can we obsessively focus on that. So this is really the core lesson from case and booking.com, was don't do too much. He told me at Booking, you know, they had looked at experiences for many, many years and you know, he said, you know, on these type of innovation projects, you know, people had to go to the innovation department. The innovation department had one person there was himself, and it was called the no department because he was always saying, no, go and refocus on the core. Because typically people underestimate the Runway that they have with their core products. And really improving that and achieving product market fit and scaling that over a longer period of time is much more valuable than doing 10 things that are all sexy, but you're going to be mediocre at all of them.
- [37:20]
Unknown Guest
I totally agree with that. I often see it with founders who want to go into enterprise too early and I'm like, SMB is so much larger than you think. Fuck HubSpot. Did it fit? 15 years. You can too. So I totally agree with you there. Okay, so we have those three learnings. What happens then? We've got 14 million, that's probably like eight now. We've laid off 30%. We're refocusing, pressure's on. Because now you gotta perform.
- [37:45]
Johannes Reich
Absolutely. And we did perform. So the beautiful thing was we had a lot of really good people in the company. So instead of hiring expensive new execs, I just promoted the best people in the company, which was the best thing I ever did, and gave them responsibility, although a lot of them were very junior to their jobs. We refocused the company really on our core segments of attraction, tickets and guided tours, and just the core European capital. So we weren't looking worldwide as we did after Series A, but just looked at Rome, Paris, London. We went and acquired all of the supply there and no big magic, but suddenly demand was coming back and growth was coming back. We're going back to more than 100% year over year growth at much better unit economic. Just I think six to 12 months after that, we could raise a really good Series B.
- [38:34]
Unknown Guest
What was the Series B?
- [38:35]
Johannes Reich
Series B was co led by Spark Capital and Highland Europe. So Spark Capital was so impressed by us going through that roller coaster of like dropping off the cliff, reshaping the company, bringing case colon in that they said hey, you guys are clearly onto something. You're doing this right? And this, by the way, another advice for a lot of founders. We gained so much more respect when we went against the board and said, we're not going to do this, we're not going to do that, we'll focus on this. This is my opinion, this is where I stand. Suddenly the VCs were like, yeah, we follow you. You're right. Instead of just saying, oh, this is a great idea, we're going to do it. Really shaping the opinion of the board and of the investors is something that I really learned during that period. That is something that I would also say then afterwards helped us actually raise the subsequent rounds because we were so much more opinionated about what we were doing.
- [39:23]
Unknown Guest
Series B is often said to be a very hard round. You need to have a very clear, proven model. And it's about edging into the scale capital phase. When you think about the Series B and how many meetings did it take to get the Series B together, it.
- [39:37]
Johannes Reich
Was very easy because Hyland actually co invested with Spark and those guys actually really liked each other. And the partner who actually joined from Highland, Fergal Malin, he sat down and I vividly remember when he invested, he literally let us pitch for 30 minutes and then he pitched for 30 minutes. So we were like, this guy is something special. I had never seen that in VC before. Before he showed me through his fund deck, he was like, this is my strategy for the fund. I wanted to do something for Europe. Highland, Europe. He just came back from the US and it was really about creating that ecosystem here in Europe. So we felt it was such a good connection. So that was a very easy one.
- [40:15]
Unknown Guest
How big was the Series B?
- [40:17]
Johannes Reich
Series B was, I think, roughly 25 million, if I remember correctly.
- [40:21]
Unknown Guest
Added like 100.
- [40:22]
Johannes Reich
Yeah, a little bit less than that, but 90, 100.
- [40:25]
Unknown Guest
To what extent do you think Series B is traction versus story?
- [40:28]
Johannes Reich
It's all in the numbers. I think from the Series B and C onwards, if you don't have the numbers to prove it, it's very hard to raise that round.
- [40:35]
Unknown Guest
So we have that and we're now totally looking great again. We've got 25 million, we've got Highland, we've got spot. The numbers are good, strategy's perfect or better, what happens then? We continue to just nail European cities. How do you think about going broad versus deep? Talk to me about that.
- [40:53]
Johannes Reich
So from then onward, we basically rinse and repeat for a number of years and we're obviously growing our Supply base, we're growing the demand base. We're growing to more European countries. We're doing a little bit in the us, but it was basically rinse and repeat all.
- [41:08]
Unknown Guest
Why did you do the us? That's an interesting one. Big one to take hold of.
- [41:11]
Johannes Reich
It was a big one to take hold of. And to be honest, probably we did it prematurely. If I'd go back in time, it's another lesson for a lot of founders. I would have not gone as early. I would have done more in Europe. I think we would have had even more growth and more profit ability. But we did a little bit in the us it wasn't detrimental. So we weren't overextending ourselves and we were building a good foothold there. All of that leads up to raising a massive round from SoftBank Vision Fund and Timarsack in 2019.
- [41:38]
Unknown Guest
How does the SoftBank round come together?
- [41:41]
Johannes Reich
SoftBank round came together in that at the time, there was a small team there with Jeff Housenbal, Ted Feig, Andrew Sloto, some of which have worked at Airbnb. Airbnb had tried, except experiences from 2015 onwards, they had failed. They had seen getyourguide as being clearly the innovation leader in the space. They were like, this is a big market. We just raised this massive Vision Fund. Let's put some dollars behind it and make that market a reality. And to be honest, the Vision Fund, in a way, actually did do that. So with that funding, our market went onto a completely different stratosphere.
- [42:18]
Unknown Guest
How did those meetings go? People often talk about Source bank, where it's like 500 million in 30 minutes was how it went. What was the experience like?
- [42:26]
Johannes Reich
It was not with us. I think that group of people which was doing marketplace investments at the time out of San Francisco, they invested in DoorDash, they invested in get yout Guide. They were much more like traditional growth equity investors, who are very metrics oriented. It was a very deep diligence process. Ultimately, while I did get to meet Masa, you know, he was just one meeting along the road of raising that investment. It was very much a growth equity investment process. So there was nothing crazy about it.
- [42:53]
Unknown Guest
Dude. How was Meeting Masse?
- [42:55]
Johannes Reich
Very interesting.
- [42:56]
Unknown Guest
Was it in London or.
- [42:58]
Johannes Reich
No, it was in his private home in San Francisco. He had this incredible painting of Napoleon right behind him, which I still vividly remember. This is kind of funny.
- [43:06]
Unknown Guest
Are you nervous?
- [43:07]
Johannes Reich
I was very nervous, yeah, of course, because he could have just put his thumb down. We had just worked on this investment for half a year and this Meeting of one hour determines whether you get it or not. But Maso was very friendly person. He's Japanese, so he's in a way very calm and he's very gentle. He was very interested actually in the P and L, surprisingly. So he was literally looking at, okay, how do we value this business? How can this be very profitable over time? So with Marketplace investments, I think he's much more financially oriented than with the deep tech stuff. So he was really going deep there, surprisingly deep. And he's actually really good at this. So I was surprised because you have these startups stories of Masa that he's just this crazy person, but he's actually a really good financial investor as well. So don't be kidded by all of the headlines. He knows what he's doing. And then the second part of the meeting, apart from the financial traction, the KPIs and P and L and all of that, was really about the product vision itself. And to give him credit, he was already completely onto AI in 2019. So he was like, how is AI going to transform this? How do you think about the UX of the future? How can you build an app that is much more personalized, much more engaging? How can you embed virtual reality in there? For instance, finding the meeting points or even being in the Louvre? How can that experience transform? So he is really very visionary and at the same time very grounded in the financials, both of that.
- [44:37]
Unknown Guest
Wow, that's amazing. And so you have this and you have that second half of the meeting. What happens then? You, you leave and you get a call from Jeff saying, hey, he liked you pretty much.
- [44:46]
Johannes Reich
We like this. Let's go make it up.
- [44:48]
Unknown Guest
How big was their check?
- [44:49]
Johannes Reich
Between SoftBank Vision Fund and Timasek, we raised an aggregate of roughly $450 million at the time. We did take some of that capital to buy out earlier shareholders. So not all of that was primary.
- [45:02]
Unknown Guest
Do you think that was the right decision? It's a lot of money. Do you think you needed that much money?
- [45:06]
Johannes Reich
It was the decision that ultimately made getyourguide into what it is today. Because just six months after we raised that Covid hit so we would be bankrupt without that round.
- [45:19]
Unknown Guest
And so we have that. What was the price of that round?
- [45:21]
Johannes Reich
I think that was at the time, 1.5, 1.6 billion.
- [45:25]
Unknown Guest
Did you feel the weight of that at that point? 1.5, 1.6.
- [45:28]
Johannes Reich
No, not really, to be honest. What did change was that suddenly I felt like a celebrity. It was like, you're going into rooms like everyone was trying to please you, everyone wanted to do business with you. All of the VPs of the Googles and metas were calling me up and all VCs in the world wanted to have a meeting and was suddenly speaking of you as if you were the greatest and smartest person on the planet.
- [45:52]
Unknown Guest
Did you believe the hype?
- [45:54]
Johannes Reich
To be honest, I had too little time to really reflect on that because six months later, we were managing the biggest crisis in the history of online travel. So that was such a brief honeymoon period that to me, it was very surreal looking back. But I actually did learn the hard way that when you're down, then none.
- [46:11]
Unknown Guest
Of these people call, okay, so six months go by, we have this honeymoon period and then Covid happens and there was this kind of week or two week period where it was like, like, what is this coronavirus? It started off with, take me to that. The internal discussions there around how bad is this going to be? And then how it transformed.
- [46:31]
Johannes Reich
So in February 2020, we have this board meeting with SoftBank Temasek. Those are obviously Asian funds and they're already seeing what's going on in Asia where you have lockdowns and everything, everything. And they were saying, we better build some contingency plans if this actually spreads to Europe and the US and the naive, still very gung ho founders that we were, we said, look, we've managed crises before. We've had the Butteclomb attacks in Paris in 2015, which hit us hard. We managed to survive and all of that. We've got to manage. Famous last words. It took three weeks from that board meeting to us being at zero revenue. Literally zero. I was going on the website, I think there was maybe 15 bookings a day down from like tens of thousands. There was no one on our website, looked at Google Analytics. It was just really no one. It was just no traffic. We had 600, 700 employees, we had no revenue.
- [47:25]
Unknown Guest
What do you do?
- [47:27]
Johannes Reich
That's a really good question.
- [47:29]
Unknown Guest
You get in a room with town and go, fuck.
- [47:32]
Johannes Reich
I mean, the closest I can describe to the feeling that I had was like having a car crash on the highway at like 100 miles an hour, just straight on hitting a wall, basically. So. So it was like, you're almost like.
- [47:45]
Unknown Guest
My analytics must be broken for like.
- [47:47]
Johannes Reich
Two or three days. I felt like, this is surreal. This can't happen. This can't happen to me. I did this for more than a decade. This is just not right. I felt like, no, the world is not right. There's something wrong in the world right now. But then I quickly turned into a mode that in retrospect, I describe as being the surgeon. So I tried to put myself outside of the car, and the car accident just said, okay, everything is broken. Like, the car is completely destroyed. The patient needs to survive. I need to help the patient survive. So I put my strategy hat on and thought about, what are the potential scenarios that we have from here and how am I going to survive and not only survive, but also thrive after this crisis. And the good thing was I had a lot of cash on the bank. The bad thing was I had a lot of investors who basically called me up and said, you have to lay off the entire company immediately to save all of the dollars you have on the balance sheet and then afterwards rebuild. With these different pieces of information, I needed to build a picture of what the right solution was for getyourguide at the time, and Tao Nils, the cfo and I, we all huddled in a room for multiple days to work out that crisis plan. In hindsight, we made all of the right moves at the time, which was, number one, not to listen to the investors who wanted to lay off the entire company, but to rather focus on different scenarios of how long this crisis could could take and then how we could build a company that is actually prepared for the rebound. Because already in March 2020, we thought that this is a massive crisis, but there's also a tremendous opportunity in here. We have the cash on the bank. So if we are the first ones out of the gates afterwards, if we do really well by our suppliers in the interim, and we help them survive as well, if we're really agile, if we continue to build our products, product, we could be a much better company actually coming out of this pandemic than going in. And that was really the mindset that we took. That same week, I sent an email to the entire staff and I told them about something that I had learned a year, two years earlier when I did a tour with my wife Annika through Sequoia National Park. And one of the interesting things about the big sequoia trees is that they actually grow after wildfires. So when the park is devastated, the biggest trees grow because they have the nutrient rich soil after wildfire and they have full exposure to the sun. And I said, I want to be that Sequoia after the COVID crisis, so let's build that Sequoia now.
- [50:11]
Unknown Guest
So where did you invest in that time that allowed you to come out stronger post fire?
- [50:16]
Johannes Reich
So we did a Couple of very extraordinary measures. First of all, we came back with that vision and that target picture to our entire organization and particularly the engineering and process product org, which is the majority of our expenses on the people side. And we told them we would love for you to reduce your salary, but we'll give you shares as a compensation. So if this actually works out financially will be great for you, but you'll need to take the short term hit. And what happened was magical our product and enter organization and even beyond that into management function. People on average reduced their salaries by more than 30% percent in exchange for shares. Some people went down to like 80% salary reduction in leadership. I kid you not, it was crazy. And with these type of measures, we basically could go very deep into the pandemic and only had to cut marginally. So we only had to ultimately lay off throughout the entire two years, roughly 15 to 20% of the staff. Not a single engineer, not a single product person, despite being at zero revenues for more than a year.
- [51:19]
Unknown Guest
Knowing all that, you know now, what did you not do that you wish you'd done?
- [51:23]
Johannes Reich
I think the thing that really helped our plans was that the recovery. Then after I forgot it was the Delta virus, like it was the benign virus, I think in early 2022, people were storming back to travel. Right. And suddenly there was like this complete over demand.
- [51:41]
Unknown Guest
Did you really see the numbers just go?
- [51:43]
Johannes Reich
We went. And from late 2021 to March 2022 we grew 10x. It was crazy. And then all of 2022 we were already double pre pandemic volumes.
- [51:55]
Unknown Guest
When did you get back to 2019 levels?
- [51:57]
Johannes Reich
Literally in 2022 we were double 2019 levels.
- [52:01]
Unknown Guest
Wow.
- [52:02]
Johannes Reich
And 2021 was still half 2019 levels.
- [52:05]
Unknown Guest
Was that quicker and more than you thought?
- [52:08]
Johannes Reich
Yeah. I didn't expect the rebound to be as forceful as quick, but I did expect it to happen.
- [52:13]
Unknown Guest
Can I ask in mid-2022 when everything's starting to come back and oh thank God, the world, it looks better. How much cash do you have?
- [52:20]
Johannes Reich
Then we thankfully, because all of the measures still had plenty of cash. And we did another thing during the pandemic which actually helped us quite a lot in that we raised some convertible debt on top. We raised roughly 100 million, both from existing and some new investors. So that was kind of like the reserve that we had on the bank.
- [52:38]
Unknown Guest
For people that don't know. What's convertible debt?
- [52:40]
Johannes Reich
Convertible debt basically means. Means that's a note that converts with your next equity round at a discount to that price. The Only thing that was kind of not so great was the moment we came back, the equity markets went down like crazy, right? So it was this completely weird world where everyone in 2021 was celebrating in tech. You know, it was like the boom year of tech. We were deeply depressed, we were saving the business. We are nowhere. And then in 2022 we had this massive year growing super fast, fast. Everything was working up, but no VC was available because they were all working on saving their portfolio for most of their companies. It was really doomsday at the time. So it was a very interesting dynamic. So we actually held off raising more capital until early 2023, which is the first round. Then we raised after Covid.
- [53:30]
Unknown Guest
Can I ask, given just before we move to that, do you advise founders then always take the money? If you benefits on the table, you could look at your softbank round and go, wow, it's ridiculous. Crazy amount of money. But no, actually it wasn't. And it turned out to be incredibly prescient. If it's there, take it or not.
- [53:47]
Johannes Reich
I do think that founders can over raise, particularly in the early days. I told the story of my 2013 race. So I don't think founders should take too much cash too early. So I often advise against that. But fundamentally, if you have traction, if there is a big market opportunity, and if it's clear that there will be plenty of competition later down the road, make sure you raise the capital and make sure that you go fast. The tricky part is to maintain the discipline of raising and then not overspending in your own organization and staying nimble and staying focused. Right? So you need to do both. You need to stay incredibly focused on building out your core customer segments, your core value proposition. And then you ultimately need to outraise your competition. You need to do both at the same time.
- [54:32]
Unknown Guest
You mentioned also earlier, and I forgot to ask it to you, you mentioned us VCs coming in, Spark in particular. Do you think that brand name VCs are incredibly important for signaling?
- [54:42]
Johannes Reich
Yes, I do. I've seen that time and again also with my personal investments. If you have a Sequoia Capital or an Index or a Spark Capital on your cap table, the reality is that your next round will be so much easier.
- [54:55]
Unknown Guest
Would you say they should take them at a discount?
- [54:58]
Johannes Reich
I wouldn't take anyone at a discount. I would actually have a competitive process and then I would really look at the gp. I think that's very undervalued because, you know, they're many people at these different funds and I think The GP probably matters more than the fund itself. While I do think the brand name really does matter, the GP probably even matters more.
- [55:19]
Unknown Guest
You know what no one considers is, is this GP going to be here in 10 years?
- [55:23]
Johannes Reich
Exactly.
- [55:23]
Unknown Guest
And I promise you, no GPS will be there in 10 years. I promise you they will not. 95% will not be there in 10 years. That's why most VCs are not rich, actually, is because they're not there long enough for the cat carried a hit. That's why you go with people who founded the firm, because they're fucking stuck. They're never leaving.
- [55:40]
Johannes Reich
Exactly. So Alex Finkelstein, the guy who wrote the check from Spark, and then also Fago Mullen of Highland Europe, they were both co founders of their respective firms. Yeah, they're never leaving, which I didn't consider at the time, but there was genius for us because they're still with those firms today. They're still crushing it. That's like a very important consideration. So I would take a discount for that. So for these type of people, I would take a discount.
- [56:04]
Unknown Guest
I've seen so many recently where people have led rounds at firms. They go to another firm and suddenly even if you're doing okay, you're not doing badly, no one in that firm wants to do you because you're just orphaned. It's the most dangerous thing. Okay, so we have that world comes back, we're like, oh, thank God. We're now double Pre pandemic levels. 20, 23. Then we raise another round.
- [56:24]
Johannes Reich
We raise another round. We never touched any of that capital because we broke even at the same time.
- [56:28]
Unknown Guest
Wow.
- [56:28]
Johannes Reich
Which is great. But I love.
- [56:30]
Unknown Guest
Is that a special moment?
- [56:31]
Johannes Reich
Yeah, totally special. Particularly after the PAL pandemic. You know, we were at scale at that point in time. You know, fast forward today, we're now five times the size of pre pandemic and we're profitable. And it's a very different company in the sense that suddenly we can invest our own cash flows into innovation. Right. We can do all of these great projects, you know, we can do all of this stuff, but it is actually our own cash flow.
- [56:55]
Unknown Guest
And is your cash flow enough to invest in innovation to the extent that you'd like?
- [57:00]
Johannes Reich
Yes.
- [57:01]
Unknown Guest
Really?
- [57:01]
Johannes Reich
Today it is. Yeah, today it is.
- [57:03]
Unknown Guest
So if I were to ask you the question, if you had unlimited cash, what would you do?
- [57:07]
Johannes Reich
If I had an idea where I'd say, we absolutely have to do this and we can't stomach it from our own cash flows, I would go out and raise that capital and do it. But the reality is, when you break even and you have that constraint and you start to grow your ebit, it's a wonderful constraint in a way that you're much more disciplined about investing your own cash, actually. And that is an important lesson. I wish I had a little bit earlier being an entrepreneur, because very often we're like investing and we hope for the best and we don't cut these projects, but they're not really working. And again, we dilute our focus. And the beautiful thing is, if you're a profitable company, I feel it actually forces you to focus a lot more.
- [57:47]
Unknown Guest
That's super interesting. I can absolutely see that. And so 2023, then we do go out and raise more, though. How does that go and how much more raise then?
- [57:56]
Johannes Reich
Back then we only raised in an incremental 100 million. We still had quite a bit of cash on the balance sheet.
- [58:01]
Unknown Guest
Was this the convertible debt?
- [58:02]
Johannes Reich
No, that was after convertible. So we converted the convertible debt and we raised some additional capital back then.
- [58:08]
Unknown Guest
What price did you do that at? Because it was on top of the 1 1/2 billion from SoftBank.
- [58:12]
Johannes Reich
So we raised at an up round compared to that.
- [58:15]
Unknown Guest
Were you pleased with that price? You've done so much better as a business, but the price is probably quite High from 2021. It's a tough one to kind of match.
- [58:23]
Johannes Reich
This is where you get into the whining of the CEO and consumer Internet company these days. We all feel that we're very undervalued compared to a lot of other AI or even SaaS businesses. But the reality is, it is what it is. I do think that at the end of the day, these valuations will expand and sometimes they will contract and you need to build a really good business. I very much empathize now with Jeff Bezos, who said willing to be misunderstood. So I think you need to invest for the long term and then maybe the valuation will be slightly below where you would personally want it. That's fine as well, because ultimately I don't need to sell any shares. Right. I'm going to be in this for the long run. We're profitable, we're investing, we're growing like crazy. The numbers are amazing. They're better than they've ever been. I'm pretty sure that over time the valuation will take care of itself.
- [59:11]
Unknown Guest
Can I ask, did you sell secondaries? You mentioned they're selling shares.
- [59:14]
Johannes Reich
I did sell secondaries, thankfully, in 2019 as part of the Softbank round, which actually was very helpful. I was very averse against selling secondaries before that, and I had a very hard time.
- [59:25]
Unknown Guest
Why were you averse against it before?
- [59:27]
Johannes Reich
Because I felt I wanted to be all in. I felt like that would show that I'm not 100% committed to the company anymore. And I was really wrestling with myself whether I should be selling or not. I told you I had even debt from my parents. And please tell me you paid them back. Family and friends, I offered. They never wanted to. With the softbank. I said, finally, I can pay you back. But my mom said, this your heritage. Go be happy. Don't worry, we love you. Look, I'm very happy. Ultimately that I did because that gave me another level of calm in the pandemic.
- [60:00]
Unknown Guest
How much do you think is a reasonable amount to take off?
- [60:02]
Johannes Reich
A couple of million bucks is probably the right thing if you're a mature company. I don't think that you should be taking too much off the table. So it shouldn't be enough so that you retire forever, never need to work again. I think that's not the right. Right amount.
- [60:17]
Unknown Guest
Do you think 10 million is too much?
- [60:18]
Johannes Reich
Probably on the upper end, yeah.
- [60:21]
Unknown Guest
I had a founder on the show the other day and they're like, why would you bother? Unless it's like 30 or 40 million, you can't live life without 30 or 40 million. And I was like, oh, but that's the point.
- [60:29]
Johannes Reich
Like, you should not.
- [60:31]
Unknown Guest
Wow, okay.
- [60:33]
Johannes Reich
You should not get into that lifestyle, right? So, so the way I'm like, also, like, for me, right, I put that money into MSCI World, right? So, like, haven't touched it, right? So, like, you shouldn't change your lifestyle if you. That's the most important part.
- [60:43]
Unknown Guest
Do you not think you should? And what I mean by that is I might do change your lifestyle. Do up level. Being blunt now. I have the best food, which I never had, so I'm much more healthy. I have the best gym, so I'm much healthier. I have a pt. I changed my lifestyle phenomenally and my performance has gone up 2x.
- [61:00]
Johannes Reich
Okay, let me rephrase all of these things. Totally fair. And I do that as well. You should not lift the lifestyle of all of your paper wealth being liquid. And I think that's what a lot of people do. They even take loans against their paper and all of that. So don't do that. Don't do the private jet, don't go to the most expensive resorts, don't hang out with all of the crowd that has that level of wealth. And don't delude yourself. That's what I'm saying.
- [61:25]
Unknown Guest
Did you ever find that tempting? We're both in this world where it's.
- [61:29]
Johannes Reich
No, it's not my thing.
- [61:30]
Unknown Guest
Not your thing?
- [61:31]
Johannes Reich
No.
- [61:31]
Unknown Guest
What do you advise young founders who are approaching. Approaching that you invest as well. And you see some founders where you can almost see them getting sucked into the vortex of tech power and influence and money, and you're like, oh, that's going to lead you badly.
- [61:46]
Johannes Reich
Yeah, I don't think you'll be successful if you will. If you look at the most successful founders in Europe, they're super smart. They've been working on their companies for a long period of time. They don't get eaten up by their success and by their wealth. In fact, they reinvest a lot of this into the startup ecosystem. I don't think that hanging out with that type of crowd or living in that world brings you joy and fulfillment. Like what brings me joy and fulfillment personally is seeing the next founder succeed.
- [62:15]
Unknown Guest
Reinvesting in success, seeing the next founder succeed. You angel invest now today, correct?
- [62:20]
Johannes Reich
Yes, I do, quite a bit.
- [62:21]
Unknown Guest
Okay. How many angel investments have you done?
- [62:23]
Johannes Reich
30, 40.
- [62:24]
Unknown Guest
30, 40. What's the best one?
- [62:25]
Johannes Reich
I was just literally with some pocket cash and some advisory shares in the seed round of Travel Perk, which was a big success. So Avi Meyer, you know, is an amazing.
- [62:38]
Unknown Guest
Love him.
- [62:38]
Johannes Reich
Fantastic, amazing CEO. I was early on in Trade Republic, which is amazing success. And next to Revolut is probably one of the best ones. And like lots of smaller SaaS, companies that are growing really fast.
- [62:49]
Unknown Guest
Love that. Did you have a strategy going into angel investing?
- [62:52]
Johannes Reich
No, it's the strategy of investing behind great people and business models that I really enjoy, and also spaces where I think I want to learn.
- [63:00]
Unknown Guest
So it wasn't a consistent check size?
- [63:02]
Johannes Reich
No, it was somewhere between 500k to 150k. Somewhere 200k. Somewhere.
- [63:07]
Unknown Guest
There. Got you. How has investing changed how you think about operating? Seeing 30, 40 companies grow, build the founders within them? How is seeing that as an investor change how you think about operating?
- [63:19]
Johannes Reich
Very much so. Before investing, I thought there was just one way to be successful, and that was the way how we built getyourguide. Because I saw how that worked and I had such strong beliefs and I'm such an opinionated CEO and I was so opinionated and deliberate about building our culture and all of that, even the operating model and the strategy, I felt there was just one way to do it. And then, for instance, take a trade Republic, which very successful fintech Company, probably one of the most underrated companies in Europe. They're absolutely crushing it. And the founder is great, but in many ways what he's built in terms of culture, in terms of operating model, is 180 degrees different to what I've built. I would not make the same decisions at all in many instances, but he's very, very successful.
- [64:02]
Unknown Guest
Miles, what decision did he make that you would not have made?
- [64:04]
Johannes Reich
The same as he's centralizing all of product under him, basically every product review runs through him. He has a culture that is much, much harder hustling than we are. And maybe to a degree you might call. You ever worry that you're soft, little less empathetic. So what I learned, my take on this is different markets deserve different, different cultures. So we're in the business of selling experiences. We're in the business of hospitality. We're in the. In the business of unlocking unforgettable memories for our customers. The way how we have to build our cultural DNA, by its nature, has to be different. It needs to be a little bit softer than a revolut because we're just serving a different type of customer. And also the employees that will join us will have very different motivations and personal needs than people working at a fintech company or people working at a SaaS company. So it's really, how can you build a culture for your market and for your customer base?
- [65:00]
Unknown Guest
I posted the other day, if you want to win today, in other words, be 0.01% successful, you have to work seven days a week. Silicon Valley has turned up the intensity and that is the new reality. Do you agree with me?
- [65:14]
Johannes Reich
This is a very tough question because any founder who's built a successful company will remember that they did work seven days a week. Right? Right. So it does happen. I don't know of any founder personally, none of the ones that I've backed, and certainly not me personally, who have not been absolutely obsessed and have not worked insane working hours at the same point in time. I think the danger with the general statements is it is not always the same throughout the entire journey. And clearly I would not expect today people to work seven days a week at getyourguide. And I don't work seven days a week anymore. In fact, there comes a time when working too much can actually destroy your startup as well, because after a time, it is actually much more about sustainable growth and sustainable working hours at very high intensity, at scale. So today I'm much more focused on.
- [66:10]
Unknown Guest
Push back in the nicest way. You see, Jensen. Jensen does not take a day off. Very openly admits it. When you look at the greatest founders that they still don't. And we talk about sustainability, I don't know. I'm not arguing with you. I'm more just like ideating because I totally. First five years, 100%. There's just no debate, I don't think. But when you build infrastructure, you have the ability to be a little bit more.
- [66:32]
Johannes Reich
I don't know the exact routines of the different CEOs. I think as a CEO, you need to see yourself as a system ultimately, and you need to build up your own capabilities and your strengths as part of that system. And you need to understand what you're using uniquely qualified to do and what you can do different than anyone else in the organization. And that's particularly true for a founder CEO with all of that history and that context. So for me, what that means is I have a strong spike in strategy. I think I've built a really successful business because I've made the right bets and my intuition is very good. That means for me personally, I need to take some time off to actually brainstorm, talk to people, understand where we at, review the numbers, review the metrics and reflect, find the strategy and bring that back to the company. Because that's my unique position and my unique role and I structure my day exactly like that. There are other people, you know, I'd say Daniel Ek, for instance, is probably one of the world's best people at like, product. For him, it's really a lot about introspection and understanding what product he types, he likes to build. And, you know, he actually, I think, said that he doesn't have anything on his agenda all day long. So I think they're just like different ways of doing it. Any founder is going to be in the business anyways all the time. If you're not thinking about your business all the time, you're not doing something that you love and then you won't be successful anyway. So any founder thinks about it all the time.
- [67:53]
Unknown Guest
Do you think we have too many tourists? I think there are a lot of people who think that being a founder is sexy. There's so much VC money that they get funded and they kind of can start the life. And so you don't get it.
- [68:03]
Johannes Reich
Yeah, and that's, I think, the point where we need to be careful with ourselves and we need to make sure that we have a sustainable lifestyle.
- [68:10]
Unknown Guest
We don't become you, Harry.
- [68:11]
Johannes Reich
And no, look, I think ultimately, ultimately life is long and I Do think, you know, when I'm 60, 70, I want to look back at my life and I want to make sure that I've spent the time in the right way. And that means I will want to have built a very big business. But my lesson has also been you don't build that in a year or two. You built that in decades. Right. And you need to sustain over decades. You need to sustain that pressure. You need to have that high level of energy over decades. Right. How do you do that? That's like a question I ask myself quite a lot. I've completely changed my, my own lifestyle because of that. You know, I do a lot more sports. You know, I do spend more deliberate time with my family, my kids, for instance, because that actually helps me sustain. That is the antidote.
- [68:53]
Unknown Guest
Listen, I want to do a quick fire on. I love this. So I say a short statement. You give me your immediate thoughts. Does that sound okay?
- [68:58]
Johannes Reich
Absolutely.
- [68:59]
Unknown Guest
So you can add anyone to your board that you don't have. Who would you add?
- [69:03]
Johannes Reich
Jeff Bezos. He's been one of the most inspirational leaders for me and how I built the company. I think for most people in marketing marketplaces, I think just his level of rigor and thinking about the customer and about building the business would be amazing to have on the board.
- [69:18]
Unknown Guest
Will you have more engineers or less engineers? In five years time we'll have more.
- [69:24]
Johannes Reich
But a lot less than we thought we would add. So in other words, we'll gradually grow, but I think the productivity gains from these engineers will be massive.
- [69:32]
Unknown Guest
Where has AI most impacted? Get your guide today.
- [69:35]
Johannes Reich
On the small, the supply side. The supply side is completely transformed. Used to take, I think, days to upload a product because experiences are so complex. You need to add a description and photos and take 100 boxes at the meeting point and the tour itinerary, etc. And now you just paste in a URL or you upload a bunch of files and done. It's huge. And then the pricing and availability management and the AI insights on how you can improve your experience, I mean, all of that is pure magic.
- [70:02]
Unknown Guest
What supply do you still not have that you would love to have?
- [70:06]
Johannes Reich
I would love to go deeper into what we announced this year is shows and events. I think that's actually massively important for tourists. So when I come here to London, I want to see Arsenal, London, I want to see Chelsea, etc. And we're just dipping our toes into that market. There's tremendous interest also from these clubs from.
- [70:23]
Unknown Guest
Is that not a shit show? Going into the ticketing market is such mafia.
- [70:28]
Johannes Reich
We're not going into the core ticketing market, we're going into into the touristic part of the ticketing market. Very different markets, much higher margin. People love to spend on hospitality tickets. That's something that the clubs also love because they get the true fans, they get to build their brand internationally and at the same point in time those are people that spend much more when they come to the games or the shows, etc. So it's a different part of the market that I think is very interesting. It's going to grow a lot over the next couple of years.
- [70:53]
Unknown Guest
How have you most changed as a CEO when you look back at over the last 15 years?
- [70:59]
Johannes Reich
Yeah, I've become a lot more humble. I do know my deficiencies and I think the things that I get wrong a lot more. I really was very, very self confident when I started the company which really helped us survive and I think grow over the first five years. Today I'm still very self confident but I also understand much more how I need to be complimented.
- [71:20]
Unknown Guest
Why did your confidence hurt you? Where did did it help you?
- [71:24]
Johannes Reich
I think it helped me in just having the sheer stamina and energy to drive the company forward time and again and not take failure as an option. I think it hurt me and that I don't think I was as inclusive as I could have been and I think that has hurt innovation to a certain degree at times.
- [71:43]
Unknown Guest
My brother just had a baby. What's your biggest advice to a new parent? On being a killer at work and also smashing parenting?
- [71:51]
Johannes Reich
Yeah, exactly. Don't do that. Don't be too hard on yourself. You will not be a perfect parent and that's fine. And you also won't be a perfect CEO and that's also fine. I think find your balance. I think balance is the most important thing when you're a parent and you're growing a tech company and you have that demand on you. So really make sure that you find time for both. At the end of the day, when we're 67, 20, 80, I mean get your guide will be a very important part of my life and I want to make sure that that is as successful as possible. But at the same point in time, I think my kids will mean more than anything else in the world is.
- [72:26]
Unknown Guest
Get your guide your last job.
- [72:28]
Johannes Reich
I think it will be very hard to have a job after that.
- [72:33]
Unknown Guest
Final one. What do you most want to be remembered for when people say about Johannes and the impact you had, what do you most want to be remembered for.
- [72:41]
Johannes Reich
At the highest level. If Johannes had a massive impact on creating more human connection, I think. And that's across get your guide and the product we sell, but then also the topic of Europe and recreating the future of Europe. I think if I would put that under one theme, it is creating human connection.
- [72:57]
Unknown Guest
Dude, this has been such a joy. As I said, I'm a European. I have heard so many wonderful things about you for so many years. This was such a joy to do. What an incredible story. Thank you for coming coming on the show, man.
- [73:07]
Johannes Reich
Thank you so much, Harry.
- [73:10]
Harry Stebbings
I mean, what an incredible journey. The first two years, just five bookings, now 35,000 per day and a $2 billion valuation. What an incredible story. Huge thank you to Johannes for giving.
- [73:22]
Johannes Reich
Up the time today.
- [73:23]
Harry Stebbings
And if you want to watch the video, you can find it on YouTube by searching for 20VC. But before we leave you today, I.
- [73:29]
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Harry Stebbings
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Unknown Guest
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