In our latest series, we’re interviewing Voyager members and other startup founders who have recently sold their companies, acquired another company, or merged with each other.
The exit looms large in the startup world. The years of hard work. The stress, the uncertainty. The highs and the lows. It’s the exit that motivates many to push through and persevere. Of course, there’s plenty of satisfaction that comes from solving a real problem and delivering a service or product that the world finds valuable enough to pay for. But let’s be real: the dream of a big payoff is a big part of the appeal of startup life. It’s the reward part of the risk/reward equation.
There’s also a measure of relief that comes from a successful exit. Whether it’s a massive windfall for all involved, a break-even for investors, or an aquihire, each exit is illustrative and inspiring.
To explore these nuances, we’re asking Voyager HQ members to share their candid perspectives on the experience of selling, acquiring, or merging their startups.
It was exciting news for the Voyager community when LuggageHero - one of our top 25 startups to watch in 2019 - announced its acquisition of Knock Knock City, a competitor based in New York City. LuggageHero CEO Jannik Lawaetz and Knock Knock City Co-Founder & CEO Selin Sonmez, have graciously agreed to give us their insights on the process so far.
LuggageHero, which raised an additional USD 1.45 million this past February, will acquire Knock Knock City’s trove of baggage storage locations, and its current operations. For Knock Knock City co-founder and CEO Selin Sonmez, this next chapter starts with her taking up the role of Country Manager for the U.S. and Canada. In announcing the acquisition, Jannik highlighted the value of Knock Knock City’s existing partnerships with property management brands Guesty, Makomi, STRB, Victoria Prime, and Domio, telling Phocuswire:
“Knock Knock City offers an exciting opportunity for LuggageHero to expand and strengthen its network of on-demand luggage storage locations in as many cities as possible,” Lawaetz says. “As we grow, we will want to build more third-party relationships, an area Knock Knock City has excelled in.”
We asked both founders a series of questions to get behind the headline and go a bit deeper into their respective perspectives on the acquisition. The conversation has been lightly edited for brevity and clarity.
How will this merger enhance the customer’s experience using short-term luggage storage?
Jannik Lawaetz: Knock Knock City offers an exciting opportunity for LuggageHero to expand and strengthen its network of on-demand luggage storage locations in as many cities as possible. As we integrate Knock Knock City’s amazing set of partnerships, we will work to expand those to create more awareness about the option of storing luggage in local shops.
As we continue to grow, we will want to build more third-party relationships. That’s an area that Knock Knock City has excelled in.
Do you see more consolidation happening in the luggage storage market in the near future?
Selin Sonmez: We would be surprised if we don't see more consolidation in the future and we are happy to lead the example of how to make a successful one work. As much as we see great potential for luggage storage (drop & collect) concepts similar to Knock Knock and LuggageHero.
JL: We also acknowledge that other solutions to luggage storage struggles could be more ideal in some situations. So we could be looking at a future where acquisitions would happen across verticals in the luggage struggles category.
Where do you see this industry in its life cycle? Is there a next phase of the luggage storage industry that you’re looking towards?
JL: It is still a mystery to most people that no one has come up with a unified solution to luggage storage. It's an integrated part of all travel and something that causes big stress.
We see a future where only a few providers worldwide will be dealing with a solution to fit all situations related to the pain of carrying your belongings with you when you travel.
How does Knock Knock City (and now Luggage Hero) optimize relationships with third-party partners such as property management and apart-hotel style brands?
JL: We are now pursuing deeper integrations to make offering luggage storage easier and more seamless for accommodation providers.
Moving forward, property managers who use Guesty, for example, can offer our service to the right guests at the right time within a few clicks of the initial setup. From a supply angle too, given LuggageHero's size of over 1,100 locations, the convenience that we'll bring to both our partners and travelers is much stronger.
What are the primary goals of the newly expanded company?
JL: Making travel easier and more convenient has been the guiding force of both start-ups from the beginning and will continue to be so.
LuggageHero currently operates in 30 major cities in Europe and North America. Ten more locations are due to launch by early 2020 as part of a fast-paced expansion plan. With the acquisition of Knock Knock City, LuggageHero also will fortify its reach in several U.S. locations where both companies have been operating.
So, with the expansion, our goals haven't really changed. The advantage we have now is deeper penetration in our cities and greater access to expanded third-party partners.
Jannik, as a Founder, what was the experience like of acquiring a competitive company?
JL: I am very proud to be able to join forces with the two Knock Knock founders, who have been working like crazy to expand and maintain a platform solely dependent on organic growth. This kind of drive and dedication is rare to find. We had the same motivation and drive when expanding LuggageHero's from Copenhagen into London, where we relied only on bootstrapping.
What factors led to the decision to acquire Knock Knock City?
JL: There were four primary factors in a decision to acquire:
A strong team.
Like-minded and good people.
A strong network within the short-term rental industry.
What does it take to integrate two businesses? It's early days, to be sure, but is there anything you can share with members about the planning process for integrating operations?
JL: It's very early days, to say the least -- only 10 days! But our first priority is to integrate partners, and onboard shops and previous customers into LuggageHero. And, while this is in process, we are also expanding our footprint to new U.S. locations to ensure growth and claim ownership of the most important cities in America.
For those founders currently considering a sale, what advice would you give around valuing your business?
SS: The most challenging part of valuing your business is quantifying the "goodwill value," as it's so intangible. In some cases, companies take a multiplier on projected revenues, or on historic revenues, or guesstimate how much value your business will add to the other side.
I think it's important to look at a deal from both sides and find the sweet spot where everyone feels like they are winning.
How do you know it's the right fit when selling your business? Is it more of a gut feeling/instinct, or is it a leap of faith?
SS: You know that it's the right fit when the visions are aligned.
Are you both thinking of a similar future for your industry, and where the company should stand? Do you come from a similar value system? We had full alignment with Jannik, so the details could be figured out.
Can you share anything about the emotional part of the journey? What's it like to build something, sell it, and prepare for it to be integrated into someone else's business?
SS: You start something, you build a company because you believe in it. The same is true when selling. You should sell your business to a company that you believe in.
I believe that we're handing our baby over to good hands, so the emotional labor is lighter. The LuggageHero team made us feel like family. We will continue working to grow the combined business, so the journey continues.
Looking back on your journey to this date, is there any moment that stands out as especially pivotal to your success?
SS: There has been so much hope and disappointment at the same time throughout the journey. The pivotal moments all rose from when we chose to be hopeful and took action right away to flip the situation around.
Some examples of that are when we pivoted to using retail spaces rather than personal residences because some customers got locked out; or when the funding opportunity slipped away from our hands...so instead, we rebuilt the whole tech infrastructure to be scalable.
All these moments were very stressful when we were living them, but with the right team and the right attitude, you can pivot to success. You can do it!