One week ago travel management company TripActions laid off
300 employees – about 25% of its work force – as it deals with a drastic
reduction in revenue due to the COVID-19 coronavirus.
It was a dramatic turn for the startup that has been one of
the brightest stars in the business travel startup space since it launched in
2015. The company has nearly 4,000 clients around the world, has raised more
than $480 million and in late February brought in up to $500 million in debt
financing to launch a new
payment product, TripActions Liquid.
PhocusWire talked to TripActions CEO Ariel Cohen about the layoff
strategy, what he’s hearing from his investors, what can be learned from China
and why he’s optimistic about the future of business travel.
We last talked in late February when you launched
TripActions Liquid, and at the time nothing came up about coronavirus and its
impact on business travel. Do you recall when it first came on your radar as a
serious issue for your company?
I actually remember it vividly. I was
on a flight to Seattle, and my meeting in Seattle got cancelled because of the
two first cases there – it was over a weekend. And I remember at that point
I was like, OK, we need to rethink our strategy.
Then the situation unfolded. We modeled something back then
and obviously that was a more optimistic model than what we actually saw as
every week passed by and most of the flights got cancelled. Our business model
– we sign corporate accounts, and we have their users using us booking trips
and we have a booking fee per trip. So we make money when someone is using us. That
means if nobody is traveling for business we are almost making no money.
Explain a bit more about how you have assessed the situation
and reconfigured your business plan.
Interestingly enough, we see two almost contradicting things
right now. On one side, we have no new revenue, but on the other side we are actually
accelerating on signing new corporate customers, and the reason is they see in the
post-COVID era they have to manage travel and they have to manage travel in a system
like ours. So yesterday we actually signed our biggest account to date, and the
reason is that from a future perspective, people really want to be equipped
with the best technology...
So I had to reconcile between the two - on the one side the
future volume that we think will be really high, but on the other side the fact
that we don’t have usage right now and therefore won’t have any revenue. I
had to reconcile between the two and that’s eventually the decision that I made
[to do layoffs].
You basically operate based on a model. And you are trying
to assess the situation and trying to compensate for how long do I think people
will not travel and what percentage is it going to drop.
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At the beginning we modeled a 50% drop – that was three
weeks ago. Then we modeled 70% off. When we modeled 70%, we said we can take a
lot of internal measures and still not let go of people. We cut salaries of all
the employees across the board starting with me and my co-founder - we reduced
our salaries by half. The executive staff took a cut, and then we built it down across
the board. We cut some other things like some benefits ... and these
were the fairly easy cuts.
But eventually, when we see almost no travel right now … at
that point we decided the right thing to do is to do layoffs. First of all, we have
a lot of teams that you don’t need right now. As an example ... we grew 5X year-over-year for quite some time. This year our plan was calling for 4.5X on
revenue, and we were planning to double the team. Double the team means you
have a very big recruitment team - but you don’t need that size of a
recruitment team anymore. We had a big marketing team in charge of building our
brand. They were doing events - going to events and our own events. We don’t
see that coming back any time soon.
So you go across the board, and you say these are teams that
you just don’t need in the foreseeable future. That was the thinking. But
the entire thinking was on a model where you don’t see a lot of bookings – we
went on an extreme approach of saying for 12 months. Then how do we want the
next 24 months to look like? This is basically how we looked at this.
We are fortunate to raise money before this. We still
today have roughly $300 million in the bank. We are fortunate to have it and
that allows us a lot of leeway, a lot of ability to decide how we want the
future of the company to look like. But it is based on a model where you have to
say this is the model I believe in right now based on everything I know.
Hindsight is, of course, 20/20. But six or 12 months ago, if
you had known this would happen in March 2020, is there anything you would have
You always model for a recession – you always ask the question
what happens in a recession and how do you adjust the spend. That was always in
our plans, and we always talked about it. And from a value perspective, because
we save money for the companies using us for their business trips, we knew our
value proposition would be even stronger in a recession.
We never modeled a
global travel freeze. It never occurred to me that it was even a possibility. If
I had known that was even a possibility, of course I would have gone in a
The situation is still evolving day by day around the world, and the end is unknown. Is there a chance you might need to make more cuts?
From three weeks ago, I was thinking this is a severe crisis,
how am I going to manage this crisis? Being transparent as much as I can is one
of the goals I set for myself. I think coming to employees and telling them I
don’t think we’ll do layoffs again is actually irresponsible. Definitely in
this environment. So in our plans right now – the answer is no. But if we model
something more severe, the answer is yes.
There are a lot of different things that could happen – some
of them could be positive. Governments are stepping in and providing some
relief. People can get back to slowly traveling for some reasons. I’m usually
not a pessimistic person, but I think people need to look at what’s going on
and respond accordingly, so I will not tell you that I will never see more layoffs
in TripActions. I will tell you that based on the model that we have right now that
is not part of our plan for the next 24 months.
What are you hearing from your investors?
I have been fortunate not just to have the ability to raise
money but also to have the best investors on the planet. In my board I have
people with a lot of experience that is actually relevant in this context. So
if you think about someone like Ben Horowitz [of Andreessen Horowitz]. He was
running his own startup in 2001. He wrote a book about it. He gives me a lot of
advice on what’s the best way to weather this storm.
I have an investor who was
investing through all of the crises - Oren Zeev - he was actually very aggressive
through all of the crises ... and I have Lightspeed [Venture Partners] and
Arif [Janmohamed] who is someone who has great expertise in the B2B space.
All of these guys are in TripActions for the long run. We
all believe that people will continue to travel for business once the health
crisis is solved. And we believe TripActions can become the leader in the
corporate travel space. We think that we have a huge advantage from a
technology perspective. So the belief is really high and also the support. It’s
much more a long-run thinking than what’s going to happen in the next 12
There are some who wonder if this crisis – particularly in
tandem with climate change issues – could change corporate travel strategy
permanently. What are your thoughts on that?
People were saying similar things after 9/11. I think eventually
we are all social creatures, and we want to meet face-to-face. TripActions’ mission
is to enable personal connection. I think if you and I were sitting right now
in the same room, the level of energy would be completely different, the abilities
in terms of interacting would be completely different. So do I fear a world
where people are not traveling for business? I cannot even imagine a world like
that. I think that as long as people are social creatures, they will want to
So do I fear a world where people are not traveling for business? I cannot even imagine a world like that.
Ariel Cohen - TripActions
And eventually it’s an efficiency question. Is it faster for
me to close a deal via video conference compared to meeting face-to-face? If it’s
faster and easier then I’ll do it through video conference. And am I getting
training now that I can do more stuff through video conferencing – of course
But also will it be urgent for some people immediately after they can get
out of their homes to go into their offices? Think about me – I laid off people
in London. Do I really want to fly right now to London and meet with the team there
– the answer is yes. Do I want to talk to them through video conferencing – the
answer is hell no.
I think people will optimize based on the best thing for the
business. Budgets will be very tight ... I don’t think COVID is just going to vanish.
I think there may be a hybrid where there is some COVID and people are traveling
out of their houses, so people will need to manage budgets very effectively and
TripActions is in a position to help solve it. But I don’t see a world without business
China just tightened flight restrictions in an effort to cut
down on imported cases of the coronavirus. Doesn’t this foreshadow the issues
other countries will face – and the possibility travel could be limited
worldwide for quite some time?
We have a partnership with Ctrip in China, and we have
connections with a lot of Chinese investors. I was talking this week with
people from China, in Beijing, and also people in Singapore, and talking with
them is almost like talking with our future. You can ask them how life will
look like for us tomorrow and in three months from now. What they told me is
that for the Chinese government, it was important to bring business travel back
online before consumer. So they have restrictions on both, but the restrictions
Regarding the situation of when you open it up and then close
it again and so on ... post-COVID people will get back to some normality. But I
think you will have this – you will have a COVID outbreak in one region and you’ll
have regions that are safe. ... Companies that will use technology to manage
travel at this point will be able to say I’m allowing my employees to travel to
New York but you cannot travel to China right now, or vice-versa. You will
see this selectivity, and this is where you can make these decisions just with
technology and based on data.
I think what you are seeing in China is a good indication
of how our future here is going to look like. And technology companies like us
will be able to build a product that will allow companies the ability to have
business continue to operate in a completely different environment.
You explained that two of the big areas where you’ve made
cuts are in recruitment and marketing. What parts of your business are staying
busy – or even busier – due to the virus?
I’m a product person so when I see a problem I’m usually
addressing it through product. So maybe that’s my comfort zone. Our R&D
right now is extremely busy. While we don’t have users using the product, there
is a lot of innovation that is happening right now around two or three kinds of
features. One is really safety. Everyone is calling it duty of care, but it’s
not duty of care. Duty of care is almost a feature in the way you want to
manage business travel post-COVID era. You want to rely on data, you want to make
decisions online based on data. So there are a lot of innovations there - our
team is working very hard on that.
Then there is how do you run your budget in the most
efficient way possible. It’s not just you are a director and therefore you can
fly this or not that or this is the approval process. It’s not a work-flow
thing; it’s actually a data-driven thing. ... So budget is very important.
Then last thing, we talked about Liquid – the credit card - last time. Think about
it – even if you booked outside the system, I still know you did it, and then I
can connect you to safety, and I still know where you are.
I can talk to you for hours about product and what kind
of innovations you will see from us. And it’s one of the reasons it’s important
for me to maintain cash and be responsible here, because I know that there is a
day after. And in the day after I see a world where we are one of the leaders in
the travel space because we are a technology company.