Creating the Budget-Based Travel Company Elude with Alex Simon

Alex, welcome to the show.

Thank you for having me so much. I really appreciate it.

Yeah, there's a lot to discuss with your company. Where I want to start with though, for people who are not familiar, what is Allude?

Yeah, so basically at its core, Allude is budget-based travel. We like to showcase everywhere in the world where you could afford to get to, and that's flight and hotel combination. So the idea and the premise is that, you know, you as a traveler, you might not know exactly where you're interested in traveling to. You come on to Allude, you tell us exactly what that budget is. And then from that point onward, you're really able to kind of see what your time and money is worth in the travel space.

I love it. I tested it out. I downloaded the app and started playing around with it. I was like, all right, let's just see what $500 does, like $1,000. And I was playing with it. I was like, okay, this is pretty cool. Of course, I'm wondering then on the back end, how are you deciding like which hotels or which locations or like, you know, is there some criteria? I'd love to hear more about that because my entrepreneur brain is thinking of like, How they do this, actually.

There's a lot of, uh, there's a lot that actually goes into what gets shown. So the first I'll just mention, we're currently tapped into the largest GDSs in the world. So anybody that doesn't know what GDS is, Global Distribution Systems, basically it's where we get the flight and the hotel data from. And so what we end up doing after tapping into that is layering in our own level of assumptions when it comes to our algorithm. And so for instance, Right now we only have 3.5-star hotels and above. We also optimize for flight times. So again, you won't have like a 24-hour layover, let's say, in someplace in Germany. The idea and the premise is to kind of make it simple for the traveler by also maximizing their budget. So again, there's a little bit more that kind of gets done behind the scenes, but, you know, as far as kind of seeing those different options, you're spot on. There's a lot that goes into that.

And with this too, so who are you targeting? Who's the type of person that's a perfect fit for using this? And I can imagine a few different use cases, but I'm curious on what that is for you guys.

Yeah, so what we're finding now, more importantly, is kind of the first launch of the app is much more geared towards kind of the younger demographic. I call it kind of younger millennials directly into maybe their first or second year into the workforce. They're new to discretionary income. You know, they have a little bit more money to play around with. And as we've seen kind of trends A lot, a lot of individuals want to buy experiences rather than go and purchase a home. Right. And so it's much more geared towards that kind of spontaneous, let's, let's, let's just get out and go, but might, might have their work calendar, you know, next to them and know exactly the dates that they need to, that they can have off, basically.

Yeah. And then taking just a little bit of a step back. So I love setting up with what we're doing, what you're kind of working on today. I've done a lot of research for this. So where did this idea come from? How you decide to actually take the plunge from, you know, from banking and then into your own startup? How did that go?

Yeah. So, this is actually a personal problem of mine. This is another reason why we actually started Allude was myself and my co-founder Frankie, we lived this life, right? So, we were basically— my previous life, if you will, before starting Allude was in investment banking. So, I was over on Wall Street for 5 or 6 years. And the culture there is that you really don't have off of work, right? You have maybe a long weekend here or there. Holidays are kind of few and far between. And so, anytime that I had that second to get away and get basically get the hell out of New York. It was let's get to Paris, let's get to Rome, let's get to Japan. It really didn't matter. The destination was not, you know, what, what we were looking for. It was really just a physical act of flying outside of New York and going to see a different culture and experience something different. Um, and so both myself and Frankie basically started to live that life, and a lot of our friends, co-workers, and family said to us, how are you guys getting to Barcelona for 3 days? You know, why are you guys going to Japan for 5 days? And it kind of became this talk within our network. And that was really the catalyst in those early days to say, well, hold on, we're already doing this search, right? We're spending the hours that it's taking to kind of back ourselves into a flight and back ourselves into a hotel. Why isn't there something that exists where you can just come onto the site, you know, tell us what you're looking to spend, and then all of that work gets done basically? And so again, a lot of those early days, now looking back, it's kind of funny because we were like, oh, let's just go build it, right? But, you know, there was a lot that went into that. And I think it was a personal problem for us. Certainly, it even is today, right? It's like people just are fully unaware of where they could actually afford to get to. They know the Londons, they know the Paris's, they know ballpark figures for some of these locations. But when you start to actually go and scale that out, it really takes a lot of time and energy to figure that out.

From that then, that experience, you're solving your personal problem. You understand that, okay, we know what we want to get to in terms of this. But you were in banking, weren't running, you know, creating a startup yet. What did that first kind of initial MVP look like? How'd you get your first customers? I'm curious about those early days too.

Yeah. So a lot of the early days was us basically testing and seeing what actually worked. I like to call ourselves a glorified travel agent for a short period of time where literally myself and Frankie were fielding, you know, we had like a website where somebody would come on, they would tell us exactly what their budget was. We would get that request, and then we would actually formulate you know five or ten different city options that they could afford to get to with with specific lengths in hopes that they would actually go and book our trip. We weren't making money that way; it was more so of just kind of proving the demand and kind of showcasing that people were willing to go through this process. And I think that's that's something that I would strongly urge any founder or any entrepreneur is you really need to start very very small. It can't be scalable. I mean, there was no way that we could. at that particular point, kind of manage the inbound that we were getting. We scaled that to a little over 15,000 users in terms of users who were signing up and actually figuring and giving us their budget. We couldn't keep up with that demand, and we knew that we needed to go into kind of the next phase, which was the automation and really kind of scale this thing to a larger company.

Okay, we got to go back for a second. So even getting to 15,000 users, like, what does that entail? What were some of the things you did?

Because I obsess about growth and marketing and all things like that, so I'm curious what you guys There's kind of 2 big areas. So one is the marketing outside of just like regular social. So we really hung around the Facebook groups that were, you know, points-driven or loyalty-driven, flying, you know, flying miles or anything, basically anything to do with travel and spontaneousness. We were, we were within those groups kind of posting about what we were about to do and getting people to, you know, just check us out and, you know, put in basically a request. The second, which we had friends and relatives that worked over at iHeartRadio and another one at the Chive media media, if you're familiar with them. And we did 2 partnerships that kind of blew us out of the water. It took us from a few thousand followers and a few thousand subscribers to tens of thousands. And what we learned in that is that if we're really actually solving a problem that is meaningful, people will come, right? We're not trying to sell something that doesn't exist yet. It was, yes, the process was still long and people were on a waitlist and we couldn't keep up with that level of demand. But the problem still exists, right? People were still really interested in where they could afford to get to. And I think that actually a lot of those early days kind of helped us with what actually the product started to look like from a UI and UX perspective. Because when you start to move from like a web beta, right, which is what we were in, that glorified kind of travel agency, moving that into an actual app base that does it within an app is completely different, right? There needs to be a lot of factors that gets kind of put into that. And so we're very fortunate that a lot of those early users were really great test beta users as we kind of migrated and scaled into TestFlight and then eventually launched.

Yeah. And one of those things too, with what you mentioned going back, did you quit your job like cold turkey to do this? Did you work on the side for like 6 months or a year? I'm curious on how that transition went because a lot of entrepreneurs are kind of wondering, do I dive in? Do I not dive in? Just curious what your story was with that.

Great question. So it's a 2-factor. So my co-founder Frankie quit his job about 6 months before I did. And he started to work on that web beta that I was mentioning and sending out those itineraries literally day in and day out. The main reason that we're actually based in Los Angeles is he's like, look, if I'm going to be in a coffee shop day in and day out, I'm going to LA. I'm not going to be doing this from New York. And so what's funny is that during those 6 months, I was still working in banking. And the way that I like to say is that I was basically robbing Peter to pay Paul. Any paycheck that I was getting in from my banking job was getting basically back into the business in those early days. And for me, it was more of like proving that demand that was that catalyst. And so my internal number was after we hit 15,000 users, and those were people who have signed up, put in a request, and were interested in basically booking through us. That was my catalyst to say, okay, yep, let's go out for either fundraise or at least me jumping ship and doing this full-time. And so it took a little over 4.5 to 5 months for us to hit that. And then that was kind of my transition over to full-time.

And then on that note, you mentioned the fundraise. With that, how would you go about that in terms of strategically who you wanted to obviously target in terms of having on the fundraise, the amount you wanted to raise? I'd love kind of some of those logistics and how you were thinking through that process of fundraising for Allude.

Sure. So in the early days when I was just describing kind of the transition from, I'd say, like, you know, full-time career to full-time jumping in and starting a business, A lot of what went into it was more about kind of friends and network effect that we started to kind of share the idea with in hopes that they would be early investors. I don't think I actually knew even the landscape of really what it meant to get an angel or a VC. I think that was, again, it was very early to going out to fundraise. What I did realize is that warm intros and direct leads are a real thing, right? If you have someone who is on your side or is aware of you and they're connected to a great fund or a great angel, that will really provide incredible value for you, even if it's not just a check, right? It's getting insight about what maybe you're going to need to show, whether it's a pitch deck or financials and things like that. And so, our first few investors, actually, the funny story that I like to mention is that both myself and Frankie were traveling the first 6 or 7 months of running the business because it was cheaper to live abroad than it was in the States. And so, we closed our first check, which was an old coworker of mine in banking when we were over in Europe. And that was kind of like the first introduction to angel investing that we got. And it was really just a friend in the network to say, okay, yep, you're betting on this idea, and we're not quite sure where we need to take it yet, but we'll get there. And then, from that point onward, there was a handful of other venture groups based here in Los Angeles that we were really kind of connected with from, from our early, from, I would say, like early employees or other, other friends and family that we were able to connect with.

Yeah, it is interesting. There's so many different ways to go about in terms of raising. One, there's, you know, a lot of pre-seed kind of early-stage venture firms, even like Precursor, even Hustle Fund. And there's like angel communities, there's individual angels, so many different strategic partners you could in theory go with as well as you went from that then. So you raised, I think it was like $2.1 million seed round as well. Difference between that and transitioning from that pre-seed early to then the seed round. Take me through that.

Yeah, great question. So there's a big difference between angels. I'm sure your audience knows this as well, but there's a big difference between angels and funds. And I think as we grew, we realized what the value really was. It's not just capital, but it is introductions to portfolio companies. It's introductions to heads of perhaps future partnerships that might come to fruition for your company. And so as we saw started to look at kind of building and scaling the actual, you know, the actual team, we knew we needed to go down the venture route and not just continue to raise from angels because there is a cap limit, if you will, not only just on cash, but on the amount of resources that one or a handful of people have. And I think when you start to actually put that in comparison to funds, you see a massive opportunity to really scale your company very quickly and much more efficiently. And so, you know, in our particular case, there was a full of funds specifically here in LA that had an incredible name, was really able to kind of, you know, take us from, I would say, like this no-name business of banking and, you know, finance guy to, to really something that, that, you know, we were able to kind of scale into that pretty quickly.

Yeah, I know you have Mucker and then obviously the Upfront Scout Fund as well. And yeah, there's so many different ones, especially in LA, just seeing kind of the increase, everything long LA, but seeing the increase in everything LA, you know, startups and founders and then even VCs is pretty interesting. And even back to your point of people helping your company along the way, that's a big part of what we do at Vitalize now with having an angel community that can help founders with all the connections. There's like 260-some people at the time of recording at least. And then having a fund on the backend where it's like we also have the fund resources then in their next round. So it's like you can see the value as you're early and have these angels. And then as you get the fund, you have those resources, the co-investor network that we have, for example, same thing. It's like You have those co-investors that can invest in your company and make sure you get to that Series A, Series B and beyond, which is so important, obviously, assuming you hit those metrics and everything. And take me through them with, with the growth of it and then raising that, that seed round. What was that mostly for? Was that, you know, pouring the fuel on the fire in terms of spend on any ad stuff? Was it more partnerships? Was it team? Like, how is that kind of allocated?

Yeah. So it's largely— it was largely for tech enhancements and kind of building out not only iOS, but we wanted to kind of hit all fronts. So we want iOS, web, and then Android as well. And so, a lot of the early development was much more on the iOS front just to get it out of the gate and, again, kind of test and get people through the motion. The second, which I would say like the largest expense outside of just tech, is actually the partnerships, both for future marketing but then also direct partnerships. So, I mentioned the GDSs and the technology that we're actually connected with. We need to pay for some of that data as well. And so, it's not just, great, let's turn this on and let's go. There's a lot of And unfortunately, I think within our sector, travel, there's just behemoths that exist that haven't changed in 15, 20 years, and you kind of need to play by their rules in order to really kind of establish yourself. I'll give you a few examples. You know, we're IATA accredited and ARC certified, which is a fairly big deal within travel. It allows us to basically be something called a merchant of record and take payment for every transaction. You'll see like a Kayak or like a Skyscanner. They're like just a meta search engine. You know, the example that I like to give is when you go onto their site, you click onto a link and then it kind of pushes you elsewhere to transact. We never wanted that to happen in that experience. The third, which is outside of just like business and partnerships, is really operations. So, you know, we want to make certain that when somebody comes onto our site, it's trustworthy and people, you know, feel comfortable. But then what ends up happening kind of pre-trip and post-trip is really something that we want to shine. I think this is where a lot of other travel sites in general just miss the buck. They really fall flat and they can't kind of deliver on this great customer experience. That's something that I think our generation and definitely what this next kind of phase of travel is going to look like needs to be. And so high level, that's kind of the areas that we're focused on.

Yeah. And I would love to dive into the product then. So you mentioned that. Take us through what that experience is like for someone using Alude from beginning to end. And just to give us that kind of overview of like what that looks like and what I can expect as a consumer of it. What does it look like then?

Perfect. Yeah. So basically high level, if you haven't downloaded the app yet, I would strongly urge you to do so and just play around, see what you can afford to get to and get that kind of exciting factor. There's kind of 3 main buckets that I'll actually explain. So the first one is our onboarding. So we actually have a handful of questions. They're fun, quirky questions to basically get to know you as a user. The idea and premise behind this is that over time we'll be able to actually, you know, pretty much come up with curated experiences that you'll love to do. So this is everything from loving hiking to, you know, loving coffee and maybe cheese or something along those lines. The middle, which is kind of our main search area, this is basically where somebody comes on, they tell us what their budget actually is and the dates that they're able to travel. So for example, maybe next weekend for $1,000. Once the user actually selects search, What ends up happening is we actually showcase every city that you could afford to get to, and that's flight and hotel package trips. So what the user will actually see is for that, let's say, search, they'll say Paris, London, Rome. They're able to fully customize each one of these. So for example, if they want to say, great, I want to go to London, this is everything that I'm excited about, but I can't make 7 PM flight happen, right? They're able to actually within app change that to, let's say, a 7:00 AM or something that's more conducive. And then the same thing goes for your hotel. Right now it's all pre— basically pre-populated or recommended, but let's say you want to stay at a 5-star instead of a 4-star, you're able to customize that within app. And the way that I like to say is that we do the homework for the user, but it's still fully, you know, the credit's still on the user, right? So they're able to make that adjustment or make that change. And then the third bucket This is kind of the biggest piece here is that you're right, and I was describing this a little bit earlier with the ARC and the IATA, but you're actually able to transact directly with Allude. And so we're taking the form of payment, we're being the merchant of record, and within that kind of full process flow, the user is able to just get their confirmation and literally go within seconds. And so we've actually just did an update to the app. It should be launching within the next few weeks, but we're taking that kind of process from almost 15 or 16 taps down to around 5. And so really, it's, in our case, it's going to be the fastest way to book a trip, but it's also the most efficient, right? And kind of that most spontaneous.

Yeah, no, I love that. That's such an amazing experience. And it's all obviously a plan of, you want to make this the best experience possible. There aren't as many brands that stand out in that capacity from kind of beginning to end in that way, which is, which is really unique as well. And as you're moving forward here and, you know, thinking about growth, and obviously you went the venture-backed route, so there's expectations with that as well. How do you think about organic versus paid in terms of growth and what kind of leverages it? What are things you can leverage to take you to that next phase, the next level?

So what's funny is we have pretty— when it comes to advisors-wise, we have a few advisors that have sat on the board of Facebook or C-suite level over at Instagram as well. And the reason I bring that up is that from day one, we've been very against just dumping money into paid ads in hopes of getting people to go through our process. I think we'll continue to be pretty lean on anything like that. Even for the current form, we really haven't spent much money on paid marketing just yet, and I think that'll probably come middle of next year. But for the time being, I think the largest areas where we see growth and opportunity, one is partnerships. So there's a lot of brands, travel brands, that can actually monetize on the trip that we can actually partner with very, very nicely, actually, that have millions at scale. So this is either Are there deals like, I don't know if you're familiar with Scott's Cheap Flights or things like that that are incredible opportunities for us.

Yeah.

Same thing for maybe more local experiences. And this is what I was getting at before, which was the pre- and post-trip, right? It's like, what could we be servicing that's not just the flight and the hotel that really kind of shines a little bit of a different light into our business? And so I think there's a lot of opportunities there. And then just more generally, I think we've been doing a few giveaways where we give away a trip per month and something along those lines. That's been very well perceived by our users and definitely getting a lot of great traction when it comes to user growth and even just, you know, in general signups and stuff like that.

Yeah. And you kind of mentioned this a little bit, but with the business model, is it strictly just a fee off of what their trips are like? How does that work in terms of the business model, how that's structured for Alude?

Yeah. So right now, it's basically the way that all other travel sites operate. It's a commission based off of the transaction itself. So exactly There's opportunities for us to get into alternative ways. So let's say, for example, subscription models or things like that in the future. We haven't turned those on yet. I think, again, as a consumer, we want to do everything right by the consumer first, and then we can figure out ways that we can turn on additional monetization if needed.

Yeah. And one thing that we haven't really talked about, but you kind of alluded to as well, saying we, the team, how have you grown your team? How's this evolved over time? That's like the number one issue for basically every startup is how do you find people, hire them? Like where are you located now with this kind of remote work world we live in? How have you gone about that for Allude?

So we've taken an approach of being remote first for basically every employee. We have employees over in Bali, over in Europe, here in the States. And I think having that kind of precedent, especially as a travel company, is fairly definitely something top of mind for us as far as kind of where we've been able to take the team. Right now there's a little over 20 of us total. There's 15 total developers and then 5 full-time when it comes to marketing operations. I have my CMO Frankie and then our CTO Ivan. And I think what we've realized very quickly is that we need to build and scale the right team at the right time. And so we have large aspirations. You know, I didn't even get into this, but like, you know, personalization and getting into kind of those bespoke trips, that's something that we want to really target for early next year. And that's going to be We're going to need to basically hire a whole machine learning team, as well as, again, I mentioned the operations as we grow and scale. So basically, so does our operations team, right? There needs to be kind of 24/7 service. And so that's kind of the different areas that we're slowly seeing are going to be top priorities over the course of the next 6 to 8 months.

Yeah. And one of the things that's kind of the last thing I'm curious about, it's really the elephant in the room, potentially this time of COVID and travel, not the most ideal time for a startup, I'm curious about like what was that pitch or those discussions like with the venture capitalists and investors to be like, hey, we're building this travel startup, it's going to crush. I know this time right now is weird. Like what was that pitch like for you during this time?

So funny enough, so the good news is I'll say this, a lot of our investors have either deep roots in travel or have dealt with travel before. So this is not, yes, this could be their first pandemic, right? But they've seen ebbs and flows and I think What definitely we were selling in those early days and even just throughout COVID is that the demand is going to come back. That's not a question. It's more of like the lack of awareness and really the unknown was kind of the scary part. I think we're definitely through a lot of that. And I think that was actually a big reason why we launched 2 months ago is that we kind of saw the light at the end of the tunnel. Yes, there's Delta and yes, there's a handful of other kind of variants that I'm sure will start to come up. But for the most part, we're hitting a lot of our kind of pre-COVID numbers in terms of users that are traveling and just travelers in general. And so I think the consensus is definitely that we're through that. But I think when it came to fundraising, the great news is that, again, a lot of them have dealt with travel before. And so when we said, look, the demand is going to be pent up, it's going to be there, there was really no lack of question. It was just more of, okay, You know, let's time this right now, right? So it was not so much about, well, you guys can't make it through the pandemic. It was more so about, okay, well, you guys need to really, you know, properly align so that when you do get out, it's at the right time and it's, you know, it's not insensitive and things like that.

Yeah. What a time to have your first startup, Alex.

Right?

In the travel space.

I feel like if we can get through this, like I was saying this to Frankie and my entire team, it's like if we can get through COVID, I realistically, the next 5 or 10 years is going to be fairly simple for us. So I'm excited.

Yeah, no, I'm glad to hear that. It's always hard to start a company. I've talked to hundreds and hundreds of founders at this point. It's like, no one says it's easy in any capacity of like fundraising. Oh, the second time it was easier, but it still wasn't easy. Like there's so many things that are challenging. Throw on top of that, yeah, a global pandemic and it's like, oh, great, lovely. This is perfect.

Like literally shut— yeah, everything shutting down and not being able to travel like Like that. What's strange is that even like 2 years ago or like right before COVID I think, you know, people wouldn't expect that to be even a thing, right? And so now, you know, factor in— that was another thing that I wanted to actually mention. Within our searches, we actually do factor out locations that you can and cannot go to. And so we're not going to just kind of push you to a destination. And I think, again, this is where it comes back to being just genuine and not being insensitive to our users.

Yeah. And Alex, where's the best place for people to connect with you and also then learn more about Allude?

Yeah, so definitely LinkedIn. I'm fairly active on there. If you just type in Alex Simon, that's fairly a generic name, but Alex Simon and then Allude next to that, you should see my face pop up. But yeah, outside of that, I'm also on Instagram and that's Alex Allude. And so definitely check me out and happy to help in any way that I can.

Perfect. Alex, thank you so much for taking the time to come on the show today.

Yeah, thanks for having me.