Skift Take

Technology clusters are hard to build, and make startups' lives easier when they happen. The CEO of a new company doing tech for Airbnb owners says he left San Francisco because he's found one in the Rockies. He's not alone.

Series: Travel Tech Briefing

Travel Tech Briefing

Editor’s Note: Exclusive reporting on technology’s impact on the travel industry, delivered every Thursday. The briefing will guide executives as they decide if their companies should “build, buy, or partner” to stay ahead.

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On paper, Justin Miller was a man sitting right where he belonged. He and his partners had sold Pillow, a San Francisco startup that managed short-term rentals sold over Airbnb and sites like VRBO, to Expedia, and Miller wanted to do something like it again. Airbnb was right there in the South of Market district, practically down the street. Easy, right?

So why is the 34-year old sitting 1,250 miles away in Denver?

The answer, he says, is that his new company, Showplace, will benefit from what he sees as the emergence of a small technology cluster for travel tech companies, many of them focused on short-term rental properties, in the Rocky Mountains. The first was Exclusive Resorts LLC, now 20 years old, and the biggest startup is likely closely held Evolve, which has raised $224.2 million in venture capital but doesn’t disclose its sales and earnings publicly. There’s AirDNA, which does business analytics for investors in short-term rental properties and was sold to a private equity firm in March, and Inspirato, a luxury vacation club that went public through a special purpose acquisition company, or SPAC, in February.

And now there is Showplace, which raised $2 million in venture capital in a deal announced on June 7. The so-called seed round, the earliest stage of venture capital, will let Showplace add engineers and begin building a sales team, Miller said in an interview.

“We view Denver as a travel technology hub,” Miller said. “Being in Denver provides Showplace with access to industry brainpower to partner with and share best practices. Denver is also home to a lot of short-term rentals, so it’s a good testing ground.”

Technology clusters are hard to build, and good for young companies when they happen, said Natty Zola, a venture capitalist at Matchstick Ventures in Denver who led Showplace’s investor group. They tend to promote virtuous cycles of hiring, as people with relevant skills live near each other, and idea generation that result in growth and jobs.

And they are the holy grail of economic development leaders around the nation. Harvard’s William Kerr and Frederic Robert-Nicoud count 25 different efforts by public officials to brand their local tech clusters as Silicon This or That, and 238 cities that bid on Amazon’s HQ2 proposal, all of which collectively have made little dent in Silicon Valley’s supremacy. The Valley still gets 48 percent of U.S. venture capital, versus 1.1 percent for Denver, which sits between Miami and Austin in 9th place among U.S. tech clusters overall, say Kerr and Robert-Nicoud.

It’s not hard to imagine why the cities try so hard. Seattle has four times more high-paid workers in R&D intensive industries per capita as Denver does, according to the Harvard team’s 2019 paper.

Even though Zola’s last job was running a business incubator in nearby Boulder, he says there hasn’t been an organized effort to make Denver into Travel Tech Central. But he does see some signs of workers moving between local firms in the industry, beginning with Exclusive Resorts, majority-owned by former America Online CEO Steve Case, where Evolve CEO Brian Egan worked for seven years.

“When you have a lot of experience and success, it builds on itself,” Zola said. “You don’t have to be where the incumbents are to build a great company.”

For Miller, Denver doesn’t have to dislodge the Valley to add value to Showplace. For starters, he only has a team of 10 right now, so even a relatively small pool of people with highly relevant expertise will help build his team. And he found his lead investor in nearby Boulder, though Showplace is Matchstick’s first travel tech play. Zola’s own startup, before he went into coaching and investing in startups, developed tools for travel bloggers, Zola said.

Showplace’s business is basically to help new short-term rental owners get their properties in condition to be noticed, and rented often, Miller said. He compares the process to helping home sellers “stage” their houses by picking furniture, colors and other elements that will attract buyers, and photograph them in a way that grabs shoppers’ attention. Once the unit is set up, he says, most owners will move on to hiring a management company to help them run their unit as an ongoing business..

This means using standardized design plans Showplace is developing, and taking advantage of discounts it has arranged with leading furniture companies. The deals let owners shave as much as 80 percent off the price of Airbnb-friendly design, Miller said.

Like interior designers he hopes to displace, Showplace will take a design fee that varies by the size and design of the house, plus a cut of the savings offered by furniture sellers and other vendors.

“We help onboard a property in half the time, and we help the owner save money,” Miller said. “Most owners are new to the business.”

The goal is to move fast, snagging 100,000 new Airbnbs and and similar units as clients within 18 months, or about 10 percent of the million units a year he expects Airbnb alone to add. Software-driven design templates will help the business scale, he said. With valuations in his sub-industry as high as 30 times revenue in some cases, he says Showplace can be a billion-company within a few years.

To do all that, Miller will need help. He’s hoping — and betting — that he can get some of it from his new neighbors, like a digital cup of sugar exchanged over the back fence.

Here’s More of What Skift Has Had to Say About Travel Tech Hubs

Why Barcelona Is Becoming a Hub for Travel Startups : A new study highlights Barcelona’s recent growth as a hub for travel startups. A rich tourism history, a sun-dappled location, and a favorable cost-of-living. The pitch is certainly attractive.

Brazil’s Travel Tech Scene Is Blossoming Despite the Pandemic : Brazil is fostering dozens of travel tech companies. Developing homegrown digital clout could help the country resist incursions from foreign heavyweights as it leans into a post-pandemic recovery.

6 French Travel Startups Thriving Despite the Pandemic : Travel bookings will get worse before they get better. But we found a half dozen French travel startups defying the odds. They appear to be setting themselves up well for the post-crisis rebound. Bonne chance!

Can Scotland Create a Regional Travel Tech Hub for a Post-Coronavirus World? : Countries lack a playbook in coping with the pandemic’s effect on tourism, but Scotland is one to watch when it comes to its new effort to boost its travel tech sector.

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