The Trulia founder explains why he chose real estate over travel: fragmented markets with high margins and lower regulatory friction beat commoditized ones. He learned from Lastminute.com that scaling across European rules was hard, so he built a media-driven model in the U.S. instead. Growth mechanics on both supply and demand sides matter most.
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So going back to Trulia though, what were some of, I guess, the key learnings from your time there that you've then taken with you to NFX and investing in marketplaces?
Well, I actually think if I dial it back a little bit, I actually probably learned more from LastMinute.com in many ways than Trulia. And it was early on in marketplaces and it was a success, but it was You know, I kind of look at— so Lastminute.com was acquired by Travelocity in 2005 for a little over a billion. And then, you know, and it's— that was an amazing European success story. But then you look at the other company in the space, Booking.com, that was acquired— that was— I didn't look recently, it's probably gone down a bit. But, you know, that was worth $100 billion not long ago. And the, you know, the lessons from that, just, you know, it was sort of fascinating, because Lastminute.com was doing so many different things, you know, everything at the last minute was the idea. So flights, hotels, holidays, entertainment tickets, restaurants, whereas Booking.com really did just one thing, and did it extremely well. And it did it in a really attractive category. So what I mean by that was when you look at, you know, a real clear example is like the 2 primary lines of business at lastminute.com were flights and hotels. Flights, we made like, you know, a buck, a dollar a booking, the sort of margin on that because it's larger commodity was, was de minimis, whereas hotels, you know, it sort of varies on the, on the company, but it's, you know, it's 15 to 25% margin on those. And so the, and the sort of characteristics between flight industry and hotel industry is like, hotels are generally non-commoditized. They are, once you stay in one hotel, you often want to stay in a different hotel. Because you, unlike flights, where like, you know, I know I'm going to get with United or whoever, and then I'm going to stick with that because they lock you in. Whereas hotels is quite different, you're sort of somewhat promiscuous. So non-commoditized, which means high margin, sort of promiscuous, which means you keep coming back to the marketplace. They are highly fragmented. When you look at the number of airlines versus the number of hotels, chains or independent hotels, it's like several orders of magnitude difference. So those were kind of some of the key lessons, plus the, you know, the rolling out the travel market across Europe was a nightmare. Local regulations, local insurance, local employees, it's like It was a real struggle. And so in some ways, going from last minute to truly, it's like, we want to do things completely differently. We wanted to, okay, how do I focus in an industry which is highly fragmented, which was real estate? How do we think about it? So we had a team of 6 people and we could be nationwide. Unlike in Europe, we'd already licensed it. So we didn't get into the transaction. Wanted to basically become more of a media model. So we didn't need to be licensed in every state, which, you know, in, in, in travel used to be— needs to be licensed. So high scalability for what we wanted to do. And then, you know, high, you know, these are high margin products that, you know, whatever you think of real estate agents, they work hard, and they make a lot of money, many of them do. And so it's like there's a high margin there's a high margin opportunity for in this category. So that was a little bit of the kind of background plus a million other learnings through, through that process. The other, the other thing to note is that I might— my role at Lastminute was, you know, you'd probably call it today kind of head of growth. So I was the person that was responsible for, for growth at Lastminute. And that was just an incredible training. 'Cause you look at these marketplaces and the stuff that we like to invest in are those that really have figured out the growth mechanics of the business. And so like, so I mean, I'm a student of growth is what I spend my kind of like when I wasn't CEOing, I was like the head of growth at Trulia. And so I'd be obsessed with that on the supply side, on the demand side. And the thing that we really look for is just what is a novel approach to growth, both on the supply and demand side. And that's just critical component of what I look for. And then also somewhat what we can help with as well, because we have some expertise in the area.
