STARTUP STAGE: Virdee provides contactless access solutions for hotels and rentals

Virdee

Virdee provides software to simplify access and authentication for residents, visitors and staff in hotels, apartments and other commercial real estate.

Founded in April 2020, Virdee’s tech-enabled, touchless systems integrate with existing hardware and software such as door locks, payment platforms and property management systems.

What is your 30‐second pitch to investors?

Based in Austin, Texas, Virdee is a software company serving hotels, apartments and others in the commercial real estate industry. Virdee’s goal is to help clients elevate the customer experience, reduce costs and generate ancillary revenue.

Its primary product is Virdee Concierge, which provides a virtual reception for clients’ tenants, guests, leasing prospects and vendors. Virdee uses an API‐first approach that connects best-in-class platforms for ID verification, payment collection, access control and remote support. The company customizes the user flow per client specifications and serves customers in lodging, multifamily, healthcare and other property types.

Describe both the business and technology aspects of your startup.

Hotels, apartment towers and other institutional‐grade commercial real estate all require a litany of software and smart‐hardware systems to operate. It is becoming increasingly difficult for owners and managers to handle integrations among all these systems. Often, the software and smart‐hardware is left fragmented and ill‐suited for seamless end‐user interactions – whether those end users are property staff or customers. 

Most of the hard work of building these integrations has historically fallen to in‐house IT teams that often lack the economies of scale necessary to justify investment into a better outcome. On the other hand, when Virdee builds a key integration, such as with Oracle’s Opera PMS, it can be used by any of Virdee’s customers. This approach means Virdee can generate a greater ROI for its investment in each integration than brands or management companies typically could individually.

Virdee offers a virtual reception to clients, and in order to do so, Virdee must integrate with major access control, property management and payment collection systems that clients are already using. To provide the value of a complete product, Virdee must tie those systems together seamlessly along with other innovative features like identity verification, choose‐your‐room and remote assistance via video chat. Not all end users have the same preferences on technology, so, in order to provide a complete solution, Virdee must also offer end users the choice of interacting via mobile, web, in‐lobby device and/or virtual agent. Virdee does all these things to a very high standard, and above all else, the company strives to build best‐in‐class experiences for the end user. 

By automating all the traditional functions of a front desk, Virdee helps clients optimize their needs for on‐site staffing. The costliest shifts for hoteliers occur during the highest and lowest periods of check‐in demand. By leveraging the power of each guest’s smartphone and Virdee’s in‐lobby devices, hotels can shift from three front desk agents to one greeter, for example, and more effectively manage guest inflow and out‐flow. This change alone can result in a boost to client EBITDA of 8% to 10%.

Also, the power of our ID verification and payment collection platform working together can reduce fraud and charge offs, which is often 2% to 5% of revenue for hoteliers. 

The cost of a subscription to Virdee’s system is priced affordably for any hotel owner. In fact, a small fraction of the economic impact described above is enough to completely offset the cost of Virdee’s system.

Give us your SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of the company. 

• Strengths: 
  • Complete system – All elements of the guest check-in process are fully supported (e.g., ID verification, payment collection, key issuance), and end users can interact with our mobile app, virtual concierge, iOS/Android Wallet and virtual agents throughout the arrival process. 
  • API‐first – We integrate with the best‐in‐class providers of locks, payment platforms and PMSs that our customers know and trust and provide a product that helps enhance and maximize their utility. 
  • User‐focused – We’ve built our product to serve 100% of arrivals, and we offer a choice of arrival path to end‐users regardless of technical prowess. 
  • Affordable – With limited to no upfront costs to customers, our solution is available on a subscription basis, and the cost is low enough that it pays for itself with only slight reductions in credit card charge offs and/or front desk payroll. Most customers see an operating income increase of 8 to 10x the cost of our system.
• Weaknesses: 
  • Track record ‐ New company with limited customer deployments. However, the founders, investors and advisors behind Virdee have deep prior experience in the space. 
  • Brand approvals ‐ In process but not final. However, brands have only recently started exploring third-party partnerships for systems like Virdee’s so the timing is good. 
  • Integration count – We need more integrations in place to expedite customer onboarding.
• Opportunities: 
  • Strategic partnerships – becoming a third-party partner with Hilton, Marriott, Hyatt, Wydham, InterContinental Hotels Group, Choice Hotels, etc., opens up significant opportunities for scale in the hotel sector. 
  • Key integrations open up opportunities with other industries (e.g., Assa Abloy owns HID, which is ubiquitous in office buildings worldwide). 
  • National scale – a large footprint can lead to integration opportunities with companies like Amazon, FedEx, Instacart, UberEats, etc., for to‐the‐door or in‐unit delivery 
• Threats:
  • Competitor pivots – Virdee’s industry is still very immature and as a result, no two companies look exactly alike. Some companies sell PMSs with compatible mobile and kiosk products. Others only sell kiosks or mobile key products. No other companies offer a complete solution for the customer journey, and there is risk that they could adapt their business model to deliver a similar approach to Virdee’s. 
  • In‐house versus third party – Large brands such as Marriott or Hilton have developed some elements of Virdee’s solution in‐house. Many in‐house IT teams have had their product development budgets slashed due to COVID and are currently exploring third-party solutions as an alternative to in‐house initiatives. Some brands may prefer to elect in-house solutions versus third parties like Virdee moving forward.

What are the travel pain points you are trying to alleviate from both the customer and the industry perspective? 

Guests can choose how they want to check in – either via mobile app or in‐lobby device. They will no longer be required to present ID and credit card for incidentals every single time they check in at a hotel. Once a guest has ID verified and provided a method of payment in the Virdee system, that info can be used for future check-ins. They can also easily upgrade or move their room based on personal preference through our software. 

The costs of staffing a 24/7 operation are becoming increasingly challenging for many hotels. Our system can ameliorate staffing need during both peak and low‐demand hours of the day. Also, the impact of fraud and charge backs is often 2% to 5% of revenue for many hotels, and the security of our platform can reduce those losses dramatically. 

So you've got the product, now how will you get lots of customers?

On the hotel side, we will roll out to as many independent properties as possible in the short run. As that is happening, we secure the brand approvals and strategic partnerships necessary to trigger a larger scaling opportunity. 

Tell us what process you've gone through to establish a genuine need for your company and the size of the addressable market.

Step one was to work through the business case with our initial group of customers. The general feedback is that implementing our system at a typical hotel creates EBITDA increases for owners that is at least 10x the cost of our system. About half of that is on the revenue side – both through increased upsell conversion and reduction in fraud/credit card charge offs. The other half of the value proposition is on the expense side through labor offsets.

Our system helps ameliorate labor needs during both peak and off‐peak demand periods. For example, from 4 p.m. to 5 p.m. when check-ins are at their highest, our system can handle that increase in volume completely – saving the owner the cost of one or two front desk agents on that shift. The same impact is felt from midnight to 6 a.m. when our system can stand in for the front desk agent with on‐site by enabling one off‐site agent to support multiple properties. 

When the airlines implemented a similar tech‐enabled check-in process over the past 10 to 20 years in lieu of desk agents, they were able to cut costs in that area by over 70%. 

Looking at the U.S. market alone, there are over seven million hotel rooms, and we believe they will all transition to either tech‐first or tech‐only check‐in models in the next 10 years – with most transitioning in the next two to three years.

How and when will you make money?

Due to the scalable nature of SaaS companies, we believe that breakeven for our platform will occur in the next 12 to 24 months.

What are the backgrounds and previous achievements of the founding team?

• Rajiv Trivedi – Chairman - Executive and C‐suite leader at La Quinta for 20 years, including its acquisition by Blackstone, subsequent IPO and finally an acquisition by Wyndham. He currently leads an investment company TST Capital, focused on hospitality-related real estate and technology investments.  
• Branigan Mulcahy – Founder - An experienced real estate developer and investor. His projects include Facebook’s Austin headquarters, Yeti’s flagship store and several other urban, mixed‐use buildings. He deployed twice to the Middle East as an infantry officer with the U.S. Marine Corps and also spent time as an investment banker after receiving an MBA from the University of Virginia. 
• Nadav Cornberg – Founder – In the last 15 years, Cornberg has managed teams of up to 50 software engineers at companies including Zynga (gaming) and Check Point (security). His expertise centers around leading and scaling teams. Cornberg holds a BS in computer science from the University of BarIlan. He served in the Israeli Army for three years as an air force coordinator.

How have you addressed diversity and inclusion within your business?

Virdee is inspired by the contributions of people of all backgrounds, regardless of their age, ethnicity, race, color, ability, religion, socioeconomic status, culture, sex, sexual orientation and gender identity. Although our team is small, it is already very diverse. We have team members from a wide range of backgrounds located around the world in countries including Thailand, Taiwan, Columbia, Finland and the United States. As we grow, we will continue to hire in a way that supports diversity and inclusion, and we will maintain a significant presence abroad as well as in the United States.

What's been the most difficult part of founding the business so far?

So far, we have been blessed with strong customer interest, which is the most important variable in building a new business. We have a motivated team – many of whom worked for sweat equity during the first few months of our existence. We also met our goal of raising a $2 million seed round by September, and the round was sized to carry us through breakeven and likely beyond.

The biggest challenge, however, has come in securing approvals from large hotel brands for our system. While our type of technology is top-of-mind for hotel executives globally – in large part due to the impact of COVID-19 – changing course for big brands takes time and numerous layers of approval. In the past few months, the approval process has also been materially affected by widespread layoffs, furloughs and other corporate restructuring throughout the industry. We’ve received positive feedback from everyone we’ve talked to on the brand side, and the hotel owners are asking the brands to expedite the approval process. However, getting to final brand approvals has proven to be the most difficult aspect of building our business.

That being said, we are already starting our first brand‐connected implementation, and that proof‐of-concept at the brand level will hopefully be a springboard into more brand approvals in the near future.

Generally, travel startups face a fairly tough time making an impact ‐ so why are you going to be one of lucky ones?

Our product solves a very difficult technical problem for a very large industry. The best solutions currently available, outside of Virdee’s, only work for 20% to 30% of guest arrivals in the hotel space. To be an effective solution for guest arrivals, a product needs to handle 100% of check‐ins, and our system does that. Also, our team has significant experience with the key elements that are important to building a successful business:

• Hiring and retaining talent - The co‐founders have each built and led teams of up to 200 people. Our engineers are strategically spread throughout the globe in a way that expands our development capacity from the typical 9 a.m. to 5 p.m. workday to a 24/7, uninterrupted cycle of progress. This cuts our product development timelines by 60% and will continue to give us a competitive edge. 
• Relationships - Real estate remains a relationship business, and our founding team and board has decades of experience working with all the major stakeholder groups in the client decision-making process. Our cap table also includes strategic investors from other focus industries. Most tech decisions at the level of our product are made at the C‐level, and our pre‐existing connections to the C‐suite with a large percentage of our customer base will be an important factor moving forward. 
• Execution - The founding team has a proven track record of execution and a complementary set of skills that addresses client needs throughout their onboarding journey. We can efficiently project manage a portfolio‐wide rollout of the physical aspects of our system while also working with the client on customization of the software interface to meet their needs.

A year from now, what state do you think your startup will be in?

We expect to be in 100 to 150 locations, mostly hotels, with a team of about 30 people. Outside of a large group of customers with independent properties, we will have brand approvals from two or more of the large hotel companies. We will also have added implementations at one or more other property types (e.g., multifamily, medical, etc.). If we haven’t already, we will be in discussions to close some additional financing to fund our next cycle of growth.

What is your end‐game? 

A great outcome for us would be an eventual sale of some or most of our company to a strategic or financial buyer. We expect that the large private equity shops that also have real estate funds will be able to underwrite the most upside by pairing a financial investment with the ability to unlock operational efficiencies throughout their real estate portfolios.