Highlights:

1. The importance of acting fast and acting radically, but with decency
2. Why tech founders can no longer have the luxury of just raising money and growing fast. They must pay attention to the inefficiencies in the business.
3. Moving to a simpler organisation that could withstand the shock.
4. Moving from sales led growth to customer-focused product led growth.
5. The importance of constantly making decisions and moving fast.

Welcome to the first episode of our “Reimagining” podcast with Richard Valtr, founder at Mews. Richard shares his experiences during the COVID-19 pandemic, rescuing, recovering and ultimately reimagining his business and industry.

Setting the scene

Richard Valtr is the founder of Mews, now one of the world’s leading hotel property management systems providers, and is a hotelier turned tech founder. In 2012 Richard was launching a new hotel in Prague (where Mews is based) and was searching for a software platform to run his hotel on.. He couldn't find one that met the vision that he had for the business. What's more, he was shocked to find that some of the world's biggest hotels were still operating on DOS so he decided to build his own property management system.

Richard hadn’t realised how tough the journey was going to be. Six years later, in June 2018, Mews raised 6 million euros at Series A with us, Notion Capital, just as they were entering a period of rapid growth. In August 2019 they raised a further $33 million Series B from our friends at Battery Ventures.

At the beginning of this year, early 2020, eight years after founding the business, Mews was flying high. Year on year 3X revenue growth, adding more and more hotels, expanding around the world and growing the numbers of employees dramatically. Everything was pointing upwards and business was looking good. And then the hotel industry around the world shut its doors.

It's fair to say that Mews has undergone a rapid transformation in just a matter of weeks, when their industry closed for the foreseeable future.

This article is based on a recent interview with Richard that you can listen to here.

Suddenly, everyone quickly had to become a partial expert at thinking through unknowables, such as, “How quickly will a vaccine actually take?”, “What will the impact be on travel?” “What will be the impact on the economy?” And I think, at least in my mind, it was a transformation from the beginning of March thinking this is just some blip, to by March 20th, realising this is going to be a 12 to 18 month disruption to most businesses and most economies around the world, and it's going to be severe.

What’s more, the thought that most businesses around the world are likely to emerge from this crisis as different businesses to the one that they were when this started, drove a lot of my thinking and our decision making during that time.

How did you feel when you realised the enormity of the impact?

It was strange. My experience over the last few years of very fast growth isn’t like you read in the business books. And, especially with SaaS businesses, everything happens so fast. It means you don't always have the luxury of solving some of the problems you would like to fix and some of the structural issues you can see emerging systematically. In many ways, this experience was positive, as it forced me to think about what really matters.

So the questions going around in my mind were, “What are the things in our business that represent a huge risk if we persist with them?” and “What are the things we are investing in that are going well?”

That way we could decide what to stop investing in, versus thinking about “What are the things that will require some investment to maintain some semblance of growth, that will allow us to build for the future?”

Understanding the fundamentals of what we should and should not keep on investing in drove a lot of the decision making in those frenzied weeks.

How did you reconcile yourself to the far reaching changes you needed to make?

There was a pivotal moment when our VP of Finance, Pavla, created a financial scenario for us. We just looked at it and let it sink in. It was a Friday, we had a debt option on the table that would have allowed us to continue much as we were, we had all of these different scenarios that we were looking at and it was not going to be a six month plan, rather, something far more profound. We knew that if we were to take on this new debt, it'd put the business at considerable risk. So we knew we needed to make some fundamental changes to ensure our best chance of survival.

We had invested in an extensive regional structure with MDs and people in those markets. It had been a big thing for us, as we wanted people in the countries we were operating in to sell locally, but we knew also that it had always been problematic because it depressed our margins. So it was good for the tactical aspect, but it wasn't great in terms of where we wanted to be with the business.

We had created this structure whereby sales were being done by the central commercial department, but also by these local teams. Customer success was being done centrally, but also by these local teams. And I woke up on that Saturday and I said, “if we want to really, really drive huge efficiencies within our business, we've got to get rid of all of the regions, there's just no way we can still continue to invest in them or even keep a few of them if we want the business to have a chance of survival and success.”

So I called Matt early on that Saturday morning and I said, “We have to let go of our regional teams.”

We had to make this big organisational change, to move towards a much more simplified structure that could withstand this shock. That's the way that we talked about it. Then we brought the leadership team together on a Sunday, talked through it and, by Monday, we were already putting plans in place.

It was a really strange weekend, but it was pivotal to the success of our company.

You had an incredibly accelerated process of thinking about the fundamentals of your business, and then you put in place some quite far reaching changes. Did you think of it as a mind shift from a strategy that's all about winning to one that’s all about surviving?

Weirdly enough, at the time, I didn't think about it like that.

Earlier in that week, I had this session with the rest of the company where I was talking through the macroeconomic effects of the Coronavirus and giving everyone - even though I'm a terrible economist - what I thought was important for everyone to understand about the economy and the difference between a V-shaped, U-shaped and L-shaped.

So while what happened that weekend was fast, I feel like I'd been slowly - in the two weeks prior - getting to a mindset where we could act fast and radically.

I don’t believe this is going to be a V-shaped recovery. It's not something where it just has an impact and then we go back to the great economy of 2019. It will have a profound effect. And we're seeing it in the numbers. And those numbers don't look like they're going to be great for at least the next six months. We had to be radical. We made the first round of layoffs on the 22nd of March.

On that day, I let go of most of the American team that we’d put in place to have a big push into the US and I was working with all of the different stakeholders in our business to figure out exactly where we would continue to deploy resources. It was a crazy couple of weeks. But it didn't feel monumental. Rather it felt like another of those experiences we’d had in fast growth, where you have to make decisions and act quickly. The hard part for me was creating the framework for the changes we needed to make, making sure that everyone within our leadership team understood and was aligned, rather than actually making the decisions themselves.

The two year strategy is still work in progress, but most of the changes we needed to make were completed by the end of March. We figured out how many people we could keep and the structure we would have going forward. The fact that that happened over a 10 day period, in retrospect, was just incredible.

So what are you doing now differently?

What's changed is that before we had the luxury of being able to just grow quickly, and so we didn't have to think about a lot of things that get hidden by growth.

You may have some inefficiencies in the business that you're always aware of, and you know it doesn't make sense, but the business is working, so you don't really want to break it. And then all of a sudden those inherent inefficiencies become your entire point of focus.

Previously we were fighting on many different fronts, focused on trying to grow fast. At the same time we were investing a huge amount into our technical capabilities.

So one of the biggest things is just us saying, “look, we don't have enough money to be able to go after all of these different clients. So wherever there are low margins, let's just stop.” So we have rationalised our customer focus and have kept only a few very senior salespeople.

Now we are going after enterprise customers, but not just anyone, rather we are focused only on those closely aligned to what we want to do as a product-led organization going forward.

So now our customer focus is simple: we want to win every major hotel brand that represents the future of the hospitality industry.

And we have changed our organisation towards winning them, supporting them and making them even more successful. We want to live that idea of defining our success by our clients’ success.

That was a huge change for us as an organisation because the move we made from a customer success focus that was about the efficiency of answering support tickets to a focus that is truly about success is not trivial. The same is true for our product, which has to make customers better versions of themselves. So now we are really living the mantra of being a product-led company.

This accelerated process has clearly made you think hard about the business you want to build, the customers you want to work with and the value you want to offer them. How does it feel to be executing against this strategy?

It is premature to think about victory, but it feels that some of those things are already paying off.

• The clients we are already working with feel we understand them and are being better looked after and that it's not just a platitude for the future but that we will be working hard to make them successful.
• For the clients we are now trying to win, there is much more clarity on why we want to work with them.
• Then for the organisation as a whole, everyone understands that we are not a custom dev shop, but working with our clients because we want to change the industry as a whole.

When I now think about the innovation that we are bringing to these clients, with whom we are completely aligned, then it gives me confidence that we have the ability to change the industry for the better.

There's a reason why hospitality is quite a stodgy business; not a lot of people from the actual industry realize just how complex it is to solve and automate their problems and give their customers a great experience.

If you think about the first GDS (global distribution systems) those are like the first versions of the internet and it is very fragmented so companies rely on systems processes that are very difficult to dislodge.

You can see that within government, banking, travel and others. But I'm surprised at how well - knock on wood - it is working so far. And I'm excited about the challenge of it. Because now rather than relying on simpler growth, we're actually back to solving really complex issues, as we did when we started building the technology, which is exciting and motivating.

And we are working with customers who believe what we believe. It's not just customers who want to move to the cloud because they've heard it's a thing. It's customers that really want to change their business, are excited about the innovation that we bring and willing to listen to us about our ideas, to make sure we are truly solving the problems.

How are you imagining the evolution of Mews and the hotel industry in general?

Evolution is a really good word, because for me this all is just an evolution, definitely not a revolution. But the process of evolution has become dramatically more accelerated. That’s within Mews as a company, but also within the hospitality industry as a whole.

The way people are thinking about running hotels is starting to change.

If you go back to 2012, one of the main drivers for why I wanted to start building Mews was because I didn't understand why hotels need a reception, and especially a reception desk. Why the receptionist needs to work on a desktop. Why the registration process happens in the way it does.

If you build from the fact that a hotel has a reception desk, that reception desk is going to need people behind it. Then because you've got those people behind the desk, they are only doing one job. Then because you've got that one person doing only one job, then you have another person who needs to do other jobs to supplement that receptionist. It makes no sense to me. So if you come in saying, “You know what, you should rip this out. You should think about self service, you should think about automation.” It feels like you're questioning somebody's entire paradigm.

Even just a few months ago that was still the prevailing mindset. But now our ideas, the things we've always held to be true, they're just being accelerated as people are now realizing, that maybe it's going to be difficult to have a contact experience at a reception and that maybe those in-person client requests are better done through a self serve mechanism. Then if you have it as a competent self-serve mechanism, how can you continue to build on that? How can you redefine what a great customer experience is supposed to be?

What constitutes a great hospitality experience isn't determined by the person who's actually talking to you or standing behind a desk. What’s exciting is if the hospitality industry realises that it's not just for health reasons or for costs reasons that you have remote check in, automatic door locks, keyless check in, contactless payments, the passing of registration information and so, but that they also realise that there is genuinely a different and better way to interacting with guests.

You've seen that in other industries. The idea of travel, for me, has always been actually quite close to something like entertainment. In your normal life, you're spending two hours on a weekday, transporting yourself and traveling to a completely different reality through your TV or through your computer or through your VR set. And the reason why travel is so popular is because people need real experiences as well. So that’s what we are helping our hotel customers to do; giving their customers a great experience.

One of the striking things that happened after the financial crisis of 2008 is we saw accelerated change. Do you believe that your clients and customers are already in that accelerated thinking mode? Or are they still thinking this is a crisis that will soon be over and we can go back to the way we were.

I think it comes down to the question of where does change come from? Does it come from supply or demand or a combination of the two.

We feel that it comes from us being able to create the tools to solve the problems our customers have, get validation from them they want to use them, work with them to refine it and make them successful. Then iterating on those products and models to apply them widely to the industry. That's roughly how progress happens. It’s not just one person sitting in a room, and then releasing the code and everyone going, “Wow, this is great!”. It’s actually through somebody creating a solution to a problem that is iterated and iterated.

We talked earlier about how resilient and adaptable people are. What we have also seen after the adaptations in certain industries is the normalisation to a new way of working. Humans adapt super fast and we believe our industry will do the same.

So how do you feel now?

What’s particularly interesting about this time of crisis is that it surfaces frustration with things that haven't changed fast enough. So you come to a moment, like this crisis, and you think, “Well what better time than now to make the changes we need to make, a huge crisis is a terrible thing to waste.” That's essentially the prism through which I see this crisis; it’s accelerating change, and forcing people and companies to face up to their inefficiencies and poor customer experiences.

But it's difficult thinking about it in that way because this crisis has impacted so many people's lives. And it definitely impacted the trust that our employees have towards our company. I have been conflicted by the moral questions that arise as a founder. As a founder, do you have a moral obligation to growth? Do you have a moral obligation to make the types of quick changes we made which impacted so many people that had put their trust in us?

I'm still struggling with the moral aspect of the changes we made and understanding whether one can justify the types of decisions that you have to make as a leader. But again, you have a moral obligation also to the idea, to the people that remain, to your investors, to your customers and to the idea of progress itself.

How has the change affected you? Made you weaker or stronger?

This is the point of startups, right? This is the capitalist creative process. You have moments of destruction, you have moments of creation. I really liked Marc Andreesen’s “it's time to build” manifesto. The sentiment was exactly right. As technologists, and as founders, it's easy to get swept up in the fact that you are raising money. But you can get lulled into a false sense of security and forget that your primary function in the world is to be a creative force and a change agent for the industry that you're working in or for, for the types of product that you want to bring to bear.

It’s too easy to get fixated on the idea that your life as a founder is about raising money, growth and execution. And whilst those are really, really important, it's good to have moments like this that actually make you realise that, no, this is about doing things in a new way. This is about building technology and building companies in a better way, in a more resilient way, in a truer away. And I think that that's something that we're now trying to put into place to affect that change.

That’s why I can imagine every single company within your portfolio, or anyone else's, being energised by this as I am. We and our industry will withstand and benefit from this shock.