00:06:48 · Constantin Schröder
[00:06:48] S2: Yeah. I think very well described also by Din. I would add that in our space, it's a very operationally heavy business, a business where there's a lot of communication needed. And with how AI has developed in the last one and a half, two years, that's a fantastic kind of playing field to inject kind of AI into, because we have to communicate with property owners, with guests a lot that have many questions with service providers, and we see ourselves in the middle orchestrating these three stakeholders, and how AI has developed with large language models, it's absolutely fantastic to adapt into. I think the virtues of what you are asking, the big kind of difference I think to classical business where you grow organically is that you you also have debt that you have to manage, and you have a far more complicated kind of setup in which you have to show that you're actually performing. So the businesses that you acquire always have a track track record, a history. And you have to really show very very well that you are improving margins and service quality. And at the same time, you're financing these businesses that you acquire with with debt, and managing that, we've done around 45, 50 acquisitions now. Managing that debt is is quite difficult when when you scale, and you also have to kind of serve that that debt well. So there's I think pros and cons, some of the pros that Din mentioned, some of the cons I think you have to balance and juggle really really well and understand before you actually do that. When we started, we were very much focused on the guest side, so we acquired small scale Airbnb hosts and we built a company that was running very well, we had some automations, we were growing, but we realized that we had basically done many many learnings that a classical property manager hadn't had. And so we looked into the property manager side a lot more, and we saw that there's around 50 to 60,000 property management agencies in Europe in our space. And we saw that all of these companies are struggling to scale, and that they are delivering extremely poor quality to property owners. And so we started tapping into that market and that field a lot quicker, and started doing some acquisitions there. It happened around one and a half years ago that we transformed and moved into that direction stronger.
00:09:01 · John Reynolds
[00:09:01] S0: Okay. Same question to you then, Dan, and then we'll go
00:09:04 · Dan Lifshits
[00:09:04] S3: we'll go around To be a devil's advocate a little bit. I would slightly disagree with your interpretation, I think, of how you call AI roll ups. What has happened is that kind of with the appearance of AI, clearly, I think a little bit of a borderlines between your typical kind of VC backed businesses and PE backed businesses slightly overlapped. I think that's exactly the topic that one of my cofounders, Eliade, was discussing with Kate kind of the other day, I think, like, this month or something. And I think the battlefield for this crossover especially happened in kind of traditional business services and businesses. This is like a huge space of economy. I think that in Europe alone, it's like trillions of dollars of, like, household consumer expense, so kind of clearly a huge battlefield to potentially go after. And I think that you can look at this business model from two distinct lands. I think that you can call it a PE roll up, but with a glimpse of technology. And I think that was your kind of last part of the definition of a year roll up that you've made. But if you would ask me, then I personally, and I guess that the gentleman would agree with me, look at it differently. I think that the way why it's different is effectively rather the, I think, vision and the philosophy of what we're building is just an AI native or kind of AI first kind of business in the given vertical of a new generation. In our space, kind of AI native letting agency or in Guy's example, for example, AI native kind of property management company with kitchen rentals. And I think the important distinction is that... And we're building kind of this business while for us acquisitions just happen to be the only scalable way of the go to market today as a tactical go to market angle. But the way to me why I underline it is just that tactical go to market angle. Because today, we're buying the businesses, tomorrow maybe we'll find a way to overcome the limitation of organic growth. The day after tomorrow, we maybe would like platform our product and start kind of offering to the other kind of players. That's why to me I think that kind of roll up here is not the core of the value creation in itself, as usually how your typical PE would position that.
00:11:05 · Dan Lifshits
But to me, it's effectively rather just a tactical go to market angle to buy the customer base and go kind of about buying it rather than just acquiring customers organically. Because a lot of traditional business services industries are described by crazy high stickiness of your customer base, making organic growth very, very hard and very, limited. That's why to build something truly meaningful and that scale, effectively acquiring the business and buying primarily the customer base in the virtue of buying the business is the only scalable way to go about it effectively. So that's why I think that between this borderline of payroll up with the technology or AI native kind of business of the new era that tactically grows as acquiring businesses, to me, the second definition will be kind of slightly more correct than than the first one.
00:11:50 · Constantin Schröder, John Reynolds
[00:11:50] S2: I would totally agree to that. Really, really well put. I think if you look at roll ups that have tried to to scale before these AI enabled roll ups, I'm looking at these Amazon ecommerce roll ups, I think that was completely different there. It's also why they failed because they didn't have this customer stickiness. And for them, it really meant taking a PE style approach to a VC kind of market suddenly, and where we are building a product and we have, I think for us, organic growth, if you look into kind of four or five years from now, would be 90% growth driver. Right now it's only to really scale the business quickly to get access to really strict sticky customers, and then over time we we scale our platform very organically. [00:12:30] S0: So it's not a... The AI roll up's not a long term play then, as you say. It's kind of a a short term, and then you revert to organic growth. And can you also... I mean, you've touched on this kind of AI injection. Can you just, each of you, talk about how you're actually injecting generative AI? Because, I mean, there's a big issue, isn't there, about businesses kind of struggling... Enterprises struggling introducing generative AI into...
00:12:52 · Dan Lifshits
[00:12:52] S3: I think that exactly talks about the difference of the definition, right? Because quickly answering your last question, I would say no kind of roll up is not kind of short term angle there. I think it's just one of the channels of acquiring customers. But we at each point of time sitting down reassessing which channel of customer acquisition is just best in terms of the capacity of the channel and customer acquisition cost. As simple as that. So the only moment of time when, for example, organic flips over to be just more efficient than kind of acquiring businesses, we'll start doing more of that. But it's effectively just you have marketing dollars and you're deciding putting them on Google or putting them on kind of Meta. That's exactly kind of for us going organic or going kind of roll up or whatever kind of that is. And I think to your question of the kind of tech adoption, that's partly to me underlines the, I think, philosophical difference between how to look at things Because kind of whenever you're trying to kind of just build a kind of transformation team side by side by your main team and try to adopt some changes into the business, etcetera, etcetera, it doesn't work. I mean, adopting technology is not by having a transformation committee where you meet once a week and just run by the checkbox exercise of like what has been done, what not. I think it's like quite a kind of founder led mindset of like how you can be looking at every process, trying to reengineer the process in the first place and make it as most efficient as you can. And I think that this is working on business services as a great battlefield because most of the businesses that we're discussing, whether it be kind of letting agents as property management or case rentals, accounting firms, law firms, tax advisories, are described by kind of highly labor intensive, very mundane kind of repetitive type kind of jobs that people are doing. Because usually in this industries, labor represents more than kind of usually 50, 60% of costs of the business.