Casai ceases operations, founder shares 4 regrets

Casai – a Latin American short-term rental startup that had raised more than $50 million since its founding in 2019 – ceased operations last week.

Founder and CEO Nico Barawid made the announcement on LinkedIn and a note is posted on the company’s website. 

Barawid said Casai’s properties – 1,600 live and 2,000 in the pipeline - are being taken over by other operators, including Blueground, Charlie, Wynwood House, Capitalia and Oasis Collections, and some of Casai’s 350 employees are also moving to those companies.

Closures and consolidation in the short-term rental sector are nothing new. In recent years examples include the closure of Stay Alfred and Airbnb-backed Lyric - acquired by Black Swan Consulting last month - and Frontdesk taking over properties from shuttered WanderJaunt. 

Others, such as Sonder and Selina, have provided a sobering reminder of the challenges of sustaining growth in a maturing sector that was buoyed by the pandemic. Selina debuted on the public markets last October at nearly $41 a share – today it is trading at less than $1.

But Barawid’s candor in acknowledging what he could have – should have – done differently in managing the company is something that is rarely heard from founders and can provide valuable insights for others trying to build companies in travel.

Until about a year ago, Casai seemed poised for continued growth. The Mexico City-based company was moving quickly to expand its model of luxury accommodations fused with smart technology.

After raising $48 million in a round led by Andreessen Horowitz in October 2020, Casai began scooping up other companies – the Brazilian operations of Danish company Q Apartments and rental startup Roomin in 2021 followed by smart-lock provider Loopkey in 2022.

In a detailed reflection shared on LinkedIn, Barawid wrote, “ … at our height, we were booking almost US$30mm in annualized revenue. … At the operating level, we had about 25% margins and were on track to be full-company profitable in Jan/Feb this year. … We had a very strong book of corporate travel with 250 accounts including the likes of Uber, Amazon, Netflix, Siemens, Dior and more.”

The cold truth was we were up against an investment drought with a model no longer favored by VC investors to produce venture returns.

Nico Barawid - Casai

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But by last summer, problems were apparent. In July 2022 Casai laid off about 60 people in Brazil, according to Bloomberg Linea, and then merged with Brazilian company Nomah, which the article characterized as “an emergency operation to save Casai.”

Further moves came in January as Casai shuttered its operations in Brazil.

Barawid said, “We were operating under the assumption that we just needed one last funding round that would then get us to profitability … the cold truth was we were up against an investment drought with a model no longer favored by VC [venture capital] investors to produce venture returns.”

When asked to explain more about what he has heard from investors, Barawid referenced Sonder and Selina: “ … Sonder is currently trading at 0.26x trailing 12 months revenue [based on their 1Q23 filings]. And their market cap is less than the cash they have on hand. Similarly, Selina is trading at 0.46x trailing revenue based on their 1Q23 filings. So it's challenging when those are the closest exit comps.”

Barawid said he also takes responsibility for decisions he made as CEO that he now characterizes as "mistakes" and that he said he will now use as lessons for the future. PhocusWire is republishing them here with his permission (some slightly edited for style and brevity):

• I wish we had invested in better financial infrastructure and tooling at the outset. As an early-stage founder, it’s hard to justify spending money on something as unsexy as books and records, but wow did it end up being important. Our business was complex because of our heavy operational component, with the frequent and small payables that that entails. And our receivables were spread across multiple channels with their own idiosyncratic payout schedules. Forecasting cash and getting to a single source of truth were nightmares. We tried for a couple years to build in-house ERP [enterprise resource planning] modules then hired consultants to do it for us. But anyone who’s tried to implement ERPs knows that adoption is king. Because it took us so long to build solutions, our team already had their own expense workflows. It was a Sisyphean challenge to consolidate data and change behaviors.
• I wish I had invested in our people team more. I started Casai really caring about culture and feedback, but my Achilles heel was that I saw the HR [human resources] function as an unnecessarily corporate drag. So then we ended up having to play catch-up on key motivators for our team: career clarity and leveling, bonus structures, benefits, insights from people analytics, employer branding, etc. Our people team did what they could, but they were chronically under-resourced. And it turns out that “just wing it, perform well, and I’ll take care of you” isn’t actually a productive way to manage an organization. I was lucky to call 350 extraordinary individuals my teammates who took a chance on Casai and our dream.
• Throughout 2021, the sirens of abundant capital and free growth were singing melodiously; like Odysseus, I wish I had plugged our ears with beeswax. I wish I had acted as if (1) we had raised $10 million less, and (2) we were never getting another cent of investor capital again. If I had actually believed that we would never raise again, the hiring spigot would’ve turned off a lot sooner and several deals would’ve been tabled. Brinksmanship in startup-land is a strategy that only hurts employees in the long run. As a founder with product-market fit, it was easy for me to justify investments that made sense assuming Casai would exist in two years. A bootstrapped entrepreneur doesn’t have that luxury and makes different decisions. Well Casai doesn’t exist and those investments don’t matter, but many more bootstrapped businesses continue thriving.
• I wish I had asked for help sooner. The CEO’s fallacy (and, honestly, arrogance) is the steadfast belief that “no one else can understand/empathize.” Of course my team could. I was a worse manager, strategist, fundraiser, board member, husband and dog-dad because I actually thought that I needed to do everything myself. When I started opening up more to “my” co-founder, “my” team, “my” board and “my” Gerry, I was surprised at how much everyone felt ownership over “our” challenges. For too long, I saw Casai as another exam to get a 100 on; if I just studied more or thought harder, I would have the answers. Casai might've had a different outcome if I had asked for support (of company problems and for my mental health) more often and sooner.