Founded in 2012, AirDNA is a bootstrapped start-up that provides short term rental insights on AirBNB and VRBO properties.
The company is growing almost 100% per year doing $8.4 million in annual revenue across a customer base of 6,500.
Customers are split between 6,000 customers who own short term rental properties and 500 Enterprise Customers.
Nathan sat down with founder and CEO Scott Shatford to better understand the history and metrics behind his success.
Specifically, will there 20% monthly churn kill them?
What is your average revenue per customer?
Most of the 6,000 smaller customers pay $60-$70 per month generating $420,000 in monthly recurring revenue.
In addition, Shatford shared that 500 Enterprise customers drive in an additional $300,000 per month in revenue.
Together, the company is doing $8.4 million in annual revenue (+$3.5m yoy) representing 87% YoY growth from our last interview in September of 2018.
2018: $4.9 million in annual revenues
2019: $8.4 million in annual revenues
Why such a high churn rate?
AirDNA loses 20% of its monthly recurring revenue each month. Shatford shared that most customers view short term rental data and insights as a one time decision. This short term need leads to the high churn rate in the first month.
Churn is 40% in the first 30 days. Between days 31-60 churn reduces to 20%. After 90 days, the churn is 5%.
At the $60/mo price point, AIRDNA see’s higher churn than other similarly prices SaaS products:
AirDNA’s 500 Enterprise customers take a more holistic view on how to use the AirDNA data and insights. They go beyond occupancy and charges, by adding additional data elements like set-up, price and performance.
What is the primary source of Customer Acquisition?
Organic search is the primary customer acquisition channel, resulting in an average customer acquisition cost (CAC) of only $3.
With 80,000 unique monthly website visitors and 100 daily inbound inquiries, Scott had no concern replacing the 1,200 customers that churn every month.
To continue 87% YoY growth, they will need to replace 1,200 monthly churning customers and add 500 new customer monthly. With a $3 CAC, this would not be that hard.
How can AirDNA increase the number of Enterprise customers and how would that impact churn and gross margin?
How Many Engineers and Sales People Are On the Team?
The company has 12 Engineers, 7 quota carrying account executives and 5 outbound lead generation resources.
Scott mentioned a key differentiation they have are the deep data scientists and a killer technical SEO resource. For example, Scott shared that Data scientists are key to developing unique data insights,such as “why vacancies occur” and “when properties are booked”.
Are you looking to grow through acquisition?
AirDNA is bootstrapped and has no plans to raise external capital. When pushed on how they use today’s free cash flow, he responded that it would be re-invested in the product to maintain competitive advantage.
The three founding partners, including his father had to absorb early losses, thus current profits are being used to make up for those earlier losses.
Companies like AirBNB are positioned as “free services” that do not provide a rich set of data. As a result, most competitors do no provide the granularity of data or robust API’s that Enterprise customers require.
An acquisition to expand services to other markets and providers has not been ruled out. Currently, casual courting is the extent of the inorganic growth strategy today.
Shatford shared that with a gluttony of 50+ small competitors. As a result, if a “Fire Sale” at less than 1X revenue presented itself, he would never say never to buying one of his smaller competitors.
What’s next for AirDNA?
We project the short term rental data and insights market will experience major consolidation as large hotel chains and REIT’s become more inquisitive.
AirDNA is well positioned to be a major player. However, enhanced customer acquisition techniques, enterprise level services and increased customer retention will be critical to be the market leader.
Ultimately, I see a cash heavy REIT paying a premium for AirDNA in the next downturn because AirDNA datapoints would tell an acquisitive REIT exactly what to go buy, for how much, and where.