Engine: The Billion-Dollar Side Project

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0:58started out as a little side project for another company called Traveler's Haven. And they had a very different path to scale than most of the companies on this show. Today, the story of a bootstrapped small business turned venture-backed startup. And a founder who raised hundreds of millions in VC, yet has some pretty strong reservations about venture capital. That's coming up after the break. Support for the show comes from Engine. A business trip doesn't end when the plane lands. According to Engine's data, 18 % of business travelers spend five or more hours filing expenses after a single trip.

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2:22So what are you waiting for? More than a thousand businesses join Engine every month. Join them and get$500 when you sign up. Start traveling smarter at engine.com slash pitch. Welcome back. Eli Wallen's story and business start where all great stories and businesses start. Florida. We grew up on four wheelers in the swamp. pretty much my whole childhood is what I remember is just like being in mud and dirt and being out in nature. So what were you like as a kid? What did you get up to? Oh, man, I was always up to something, doing something, running something. You know, I started my first company.

3:02I was selling rocks, little shiny rocks when I was probably eight. Yeah. You know, like pet rock kind of thing. No, like my good friends, parents had these like garden rocks, these little white pebbles that I would take and I'd smash them and I'd set up a little booth and I'd sell them for like a quarter, a nickel or a dollar and seeing like an eight-year-old kid who's not going to flip a quarter back then. Any other entrepreneurial endeavors as a kid? Oh yeah. I had a beehive. I sold some honey early on. You really just pulled from the land. You're like, I see a rock. I can sell that rock. I have bees.

3:37Let's make some honey. Cost a good sold or low, man. And then we kind of graduated up, I ran a casino out of my parents' garage for summer. First, it was like a little hobby thing and had a couple of people over to play some blackjack and we just had a little table. And then people wanted to keep coming. And at one point we got up to like, I want to say three tables, all blackjack. And I had a couple, two dealers that I trusted and we ran that first summer. It was a great time. Yeah. Very illegal, but I guess we're past the statute of limitations. We can talk about it now. So we're good. I was working at a restaurant at the time.

4:14And I remember I had to have like enough cash to cover. And so I wasn't putting any of my tips in the bank. I put them in a box in my room because if somebody crushed me, I'd have to, you know, I have to pay up. Luckily that never happened. The house does always win. I mean, it's fascinating to see from the other side of the table. Like, why are people just giving you money? But it worked. Yeah, so we never got cleared out. Okay. So you went to college at Florida Gulf Coast University. That's right. Did you want to go to college? No, for sure not. I had a lot of pressure. Not pressure from my parents as much as just like societal pressure.

4:51You know, I think it was just like, this is what you do. It was not something I was very interested in. But, you know, we gave it a run and we lasted a semester. Why did you drop out? I hated it. I just wanted to get on with things. What are we doing? Did you have a conversation with your parents? like, hey, I'm dropping out? No, I just stopped going. I think they thought I was finishing the year and I hadn't. I think they asked about grades a little bit. I'm like, yeah, you know, they're all right. I wasn't quite sure how to break it to them. Honestly, I felt like I was letting them down and I thought maybe people would associate me with like, you're a dropout, dude.

5:26What are you going to do? Eventually, I obviously told them, but it wasn't right away. Yeah. You look about my age. Was this in the mid 2000s? Yeah, early 2000s. So while you were kind of going to college, but mostly not actually going, you were doing real estate and starting multiple businesses from what I understand. Can you list a few of your 18, 19 year old business ideas? Yeah, I got my real estate license. shortly after that, I got my broker's license when I was 20 and I started my own real estate brokerage, property management company, transportation company, a management company that I started.

6:03We were helping some of the large resorts, the Ritz Carlton, La Playa, so on and so forth, bring H2B and J1 visas in to, you know, the seasonal, Naples is such a seasonal city. So we, we shuttled them across the state. They flew into Miami, put them up in housing, which we set up and then we shuttled them back and forth to work. Oh my gosh. It was a wild time. I mean, I swear, like if I saw an opportunity, I would just file, I'd create an LLC. I mean, in Florida, there's gotta be 10 or 12 or 15 LLCs with my name on it. And then I realized you had to file tax returns if there's zero dollars. And I, you know, that was something that I learned the hard way.

6:40Yeah. What drove you to start all of those businesses besides just, oh, hey, hey, shiny object. I see that here. There's a chance to make a buck. It wasn't even about the money, man. It was about building. It was just like, I see a problem. I see a gap. No one's doing this. Let's go tackle it. So one of the businesses you had around this time was Traveler's Haven. What did that company do? So back then, if you guys remember the movie, The Big Short, Southwest Florida was blowing up. Everybody was buying real estate, like multiple properties. So this is 2006, 2007? Yeah, that's right. I knew a developer.

7:18I went to school with his son. He knew I had my broker's license. They approached me and said, hey, come do a condo conversion for us. And I had a property management company that was managing these investor-owned apartments. Okay, so this is your other business. Yeah. That's right. And basically, a company called and rented a bunch of apartments from us. I said, what do you guys do? And they're like, oh, we're putting traveling nurses in this place because the hospital, North Collier Hospital is right down the street. And they booked more and they booked more. And then I said, who else? What do you do?

7:50Like, what is this? Tell me more. And there's this massive industry around, you know, traveling nurses and locum tenens, which is a traveling doctor. And I said, I can help you anywhere in Florida. They said, great. We need a ton of help. When was it clear that that business was taking off? I mean, early on, honestly, we never raised the dollar until the day I sold it. It was bootstrapped all the way to the end. And frankly, ignorance is bliss. I didn't know anything about raising money back then. I grew up in Naples, Florida. You know, I was in real estate. Like, what the hell do I know about, you know, Silicon Valley and tech?

8:23It wasn't a thing. Yeah, find a customer to pay you and solve their problems. That's all I knew how to do. I was pretty good at that. That's right. Did you run into any trouble during the crash? We had a very unique business model. And I think, you know, for any listeners, I think it's important to, like, understand the exposure. Like if you look at all of these corporate housing companies, think of like the Saunders of the world and things like that. Like even the WeWork on the commercial side, you'd go out, you sign these big leases and boy, hope everything goes well. We were very unique. We were a logistics business.

8:55We would do date matched leases. So if you needed it for three months exactly, I would sign a lease for three months exactly. And I had a furniture delivered the day before you showed up. And I had furniture picked up the day after you left. That was it. So when things come down, like, that's all right. We're not on the hook for these things. And so I used to be a little envious because you'd see some of these like companies scaling and doing bigger and opening new markets and cities and kind of like all that stuff. But we just kept the course on this date matched lease and it, uh, it works really well.

9:30And you could weather a storm with a business model like that. From what I understand, you got an idea from one of your customers to start booking hotels because they wanted like a Travelers Haven Hotels feature. How long did it take before you realized like this little hotels project could be something really big? Yeah, it was THH at first, Travelers Haven Hotels. Very creative. The idea with Hotel Engine, which is what it was called back then, was simply a tool for the existing Travelers Haven customers. The customers that we had, these traveling nurse agencies had a lot of people on the road that wouldn't do three-month leases.

10:08They would go for a week or two at a time. And that was a hotel. And they put it literally on a physical plastic credit card number. And they would move on and do it again and again and again. Inevitably, that card would be flagged for fraud. And you'd have to basically blow up all those reservations you made on that card, cancel it, reissue a new card. And so this was really like a fintech play very early on. It wasn't just the fact that we could book a hotel. anyone could do that. It's we were willing to basically offer a line of credit and build a customer on a monthly basis. And we would handle kind of that fraud and the logistics of paying for these hundreds of people out in the field at any given time.

10:47So that was really the biggest kind of unlock for us and where we created the value. At first, I didn't understand what the problem was until we got closer to it, until it started happening to us. And then we go, oh, okay, we get it now. This is why they don't want to do this. There's all this fraud. Yeah. Exactly. I mean, at the time, the hotels piece sounds to me like a small kind of marginal product. Very. Where there wouldn't be a ton of revenue opportunity there versus you actually renting out properties that you owned. So I'm curious like why that part of the business like got you excited when I'm sure in the beginning it was not that impressive.

11:28I mean, honestly, I remember very vividly, I went to kind of a forum group. I was in a group called YPO. And I remember saying, guys, Hotel Engine, like, I'm going to shut this thing down. Like, I've got this great business. It's ripping. It's growing. I need to focus. I need to really put my time and energy into this. And I said, I'm going to give it a little bit longer, but I think I'm going to shut it down.

11:53The little Hotel Engine that could after this.

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12:40Half of our team was booking everything on their own dime and getting reimbursed because they wanted to rack up rewards points. I booked travel directly for the other half of the team, which was tedious and time-consuming. I had this pitiful little spreadsheet with everyone's traveler details, but it never felt like enough information. Every month felt like a scramble to stay on top of everyone's bookings and reimbursements. We just didn't know any better. That was before I found Engin. The difference is night and day. Engin handles all the annoying parts of managing corporate travel and saves us money.

13:16All of my employees have their traveler profile details, like frequent flyer miles, TSA pre-check numbers, things like that, plus their travel preferences saved in one central location. And all transit details are completely transparent. We can all see who's traveling where and when, which makes coordinating with clients so much easier. If ever we need to change travel to accommodate our client's schedule, it's not a problem. And we can track spending per person or per department. It's not just convenience. Enjin's FlexPro offering has saved my company thousands on trips that changed after we booked them.

13:50And Enjin stops out of policy bookings before they happen, not after. I honestly don't know how we ever did it without Enjin. It completely changed how we operate. Imagine what it could do for you. No contracts, no agent assist fees, 24-7 member support. Enjin lets you easily book, manage, and save on every work trip. You're going places. Enjin can take you there. Learn more at engine.com.

14:26I remember saying, guys, Hotel Engine, like, I'm going to shut this thing down. Like, I've got this great business. It's ripping. It's growing. I need to focus. I need to really put my time and energy into this. And I said, I'm going to give it a little bit longer, but I think I'm going to shut it down. and I don't know why I didn't because I said I would and we were gonna you know we were really thinking about it and I think the bookings kind of just started trickling up literally shortly after that I have this email I sent it to my buddy who was the designer at the time at Traveler's Haven said when we hit 100 reservations a day like hey this thing's got real legs yeah and at the time we were probably doing 10 or 15 reservations a day yeah but once I mean, that's all it took is that little spark of like, hey, maybe there's something here.

15:14It just started really organically, but we were very close to pulling the plug because it did not feel like it was worth the time or the money. And were you just watching the reservations tick up? Like, did it just grow without you doing anything or was there a lot of effort put into growing those reservations? Josh, I used to get an email every time there's a booking, literally to my personal email address, not in a folder. There's no rule on it. I would literally get an email and said, booking confirmation, so and so forth. Every time I saw one, I was like, Oh, Hey, that's nice. You know? And then I'd move on to whatever I was doing.

15:46Yeah. At some point we had to turn that off obviously, but, uh, you know, we stay in that close to the business. You just, honestly, now that I think about it, there's a, there's a great like phrasing, like if you build it, they will come. It's not true. Right. If you build it definitely not market it or sell it or get somebody out there, they will come. I know looking back, it seems so obvious and silly, but once we put a couple of our sellers on this product, it did start to take off. Oh, interesting. Shocking, shocking, right? Yeah, so you took some of your sales team off the real estate side of the business and said, all right, why don't we put a little effort into selling the hotel booking platform?

16:24Last ditch effort too. Like if this didn't work within probably a month, we're not talking right now, for sure. When did you start talking about fundraising for Hotel Engine? So we started taking Hotel Engine serious in 2017-ish, 2018, it was growing faster, putting more resources. I would say in probably early 2019, we started seeing that we're going to probably run into a cash issue here, right? We didn't have large lines of credit or anything. Like we were funding off our balance sheet. We were offering these lines of credit off our balance sheet. And so as it grew, it wasn't just the expenses.

17:01It was actually, you know, the float that we were carrying for those customers. Do you remember your very first pitches to VCs? How did they go? Oh my goodness. I should probably try to find a deck. I'd be really embarrassed. I had some interest in Traveler's Haven multiple times. Traveler's Haven, I think, had a pretty compelling story because we had the growth and we had the metrics to back us up. I mean, Hotel Engine at the time probably would have been just like a ride along investment. Okay. I'll give you a little bit of Hotel Engine too, if you're interested, you know, but met Mickey from Telescope Partners, and he was just a different guy.

17:37He just had a different approach, different pitch, different everything, and we just hit it off, and we ended up closing my first money that I ever raised in summer 2019. That money, by the way, was just for Engine, not Traveler's Haven, or any of Eli's other assorted LLCs. Maybe Mickey found Engine on the VC deep web, which is totally real. I totally know how to access it. I don't know how they find this stuff because it was such a small company. You know, there was no dollars. And frankly, this company was also fully integrated in Traveler's Haven. I mean, yeah, we had an LLC that was kind of like stagnant sitting out there, but like the end of the day is all the shared services, but that's what he was interested in.

18:23So it sounds to me like you didn't actually run a fundraising process. you just had inbound VCs courting you and you finally said, okay, yeah, I'll take that call. That's right. And how did you pick the VC you ended up going with? You said he was different in what way? Yeah. And no offense. There's a lot of great people that I've met in this space over time, but you know, here's what I'd say. Like almost all of them outside of Mickey sounded the same. It was the real quick, do you want me to tell you about us? You know, I'd always be like, sure. Yeah. Well, we're a, you know, a$10 billion fund and we're out of here and here's our thesis and here's what we did.

19:02Like, it was such a generic pitch. It's like they all trained in the exact same place and they had the same script writers out of it. So it just all felt very cold and transactional. Yeah. When Mickey came in, his wife had a fashion business. I remember he goes, my wife, she uses your product and she loves it. And so that was like some instant legitimacy that like this guy actually gets what we're trying to do. And his approach was not this or this. He's like, I was a Sequoia for 10 years, learned a ton, great network. And I wanted to start something where I could get a little bit closer to the action and meet these great founders.

19:38And I said, great. It just felt different than kind of like in that cold suit that was pitching you on them. Like I should be impressed. And frankly, I probably should have been, but it I didn't have the same allure to me, right? I wasn't Silicon Valley still. I wasn't, I didn't get the whole thing. Yeah. How would you describe Mickey? Oh man, his character, charming, thoughtful. He really knows your business, man. He is, is not a transaction to him. I think I'm so fortunate to have a guy like him to be my first money. At the time I didn't have a board. I remember telling people like, I kind of want a board.

20:10I think that that could help me, you know? Wait, who says that? People are like, what did you just say? Like, are you nuts? but I did get the sense that investors would be more adversarial. And I think a lot of people are like, Eli, I don't think you want to take this money. Like Mickey probably sounds great, but once the money lands in the bank, dude, different story, right? You're now married, man. And there's no getting out. Luckily though, he did everything he said he would do. And he's still, I mean, I talk to him every other day. He's just a fantastic guy. What were the terms on that first round?

20:43We raised 16 million, 160 million valuation. Wow. You know what I loved about Mickey too? There was no, you know, I didn't know anything back then. And my attorneys even were not Silicon Valley, you know, and there was nothing spicy or hairy or aggressive in that at all. And he could have easily taken advantage because I didn't know what I was doing. So a couple months after you close that round, you switch and go full time on engine. This is February of 2020, which is a great time for a hotel business. It was absolutely nuts. Yeah, February 2020, I move over and I want to say a week later, we're like, everybody stay home.

21:30Luckily, we raised the money. The amount of luck that goes into getting to where I am is just, I mean, it's remarkable. But I would say we went into that lockdown mode, preserve cash. What are we going to do? And we won a really large contract for NISOM, New York City Department of Emergency Management. We took everyone that we had, redeployed them on this project. And it was just an incredible experience because we were a part of, I mean, the epicenter of New York. You remember those photos and the stories and things, right? Just wild. Yeah, ghost town. And the fact that we were able to help during the pandemic.

22:05I mean, we reopened hotels to put patients that were no longer critical, but needed to quarantine. You know, you had to stay somewhere for two weeks, if you recall. But they had to make room in the hospitals for more critical patients. And we did this at scale. We did 20 ,000 or something people were moved out of hospitals. And then we moved into the healthcare workers. They didn't want the nurses and the doctors that were frontline doing this crazy, amazing work, going home and making their family sick. So we set up that housing. Like it just was just this unreal in the middle of it. And even though we were remote, felt like we were contributing to the recovery efforts and the support efforts.

22:45And we tripled the business that year. That's crazy, Eli. You had a real estate business that survived 2008 and a hotel business that survived 2020. Tough to kill, yeah. So moving on from 2020, you've fundraised more since then, a series B in 2021 and then series C in 2024. Was this the same investors coming to you saying, take our money? Yeah. The B was very interesting. Yeah. We talked to a bunch of people and Mickey goes, how about the easy button? You want the easy button? I'll never forget. You know, we said the easy buttons on our desk. And I said, I sure do like the sound of the easy button because I hated fundraising.

23:31I don't want to pitch this thing. Like, let me just go build a business. Like I'm not goodness. Right. There's, there's nothing worse than I think like, you know, the dog and pony show. That is the name of our show. It's the dog and pony show. The pitch, you know this. Yes. And then Ramsey Ramsey from Blackstone, a great guy. He pitched Traveler's Haven to invest in Traveler's Haven many years before we stayed friends. He was a great guy. He goes, Hey Eli, hi, I just joined Blackstone. Can I get in on this? And I said, well, hell yeah. And so it was the easy button. Mickey kind of set the terms.

24:06Blackstone wrote along. Fantastic partners on both sides. And we closed that deal in, I don't know, two weeks. So it sounds like Mickey raised your Series B. Exactly. So previous to this, you'd been bootstrapping with the boys for well over a decade. and suddenly you've got big boys VC money now. Like how did having a business and this kind of balance sheet change things for you? Not much. I think people think that once the money hits, that something miraculous is gonna happen. It doesn't. Money hits the bank. You wake up the next day, he's the exact same person. Hopefully your ego hasn't changed.

24:51And like, you just get back to work And that's what we did every single round. We still operate as a bootstrapped tight organization that could go out of business any day. It sounds like now you're kind of married to engine travel after being a serial entrepreneur your entire life and always starting more businesses. How did it feel to finally settle down? You know, if you ask anyone inside this place, we haven't settled down. If you ask the board, if you ask Mickey, we have more projects. And just because it's all under one LLC now, it doesn't make us any less ambitious. I mean, we were in the infrastructure side now.

25:34We've built some incredible technology. It's very hard to build. We've just acquired a company. We're launching a new product with that company. There's a lot. So just because it's one name doesn't mean that we've slowed down really on that front. So what's next? Looking at selling anytime soon? IPO? I really don't want to be a public company CEO. I'm going to eat those words. You know, we're starting to have these conversations of what comes next. What Stripe's done, I think, is just terrific. Stay private forever. Just keep raising money. Secondaries round after secondaries round. Exactly. If we can do that and provide liquidity to the team, and if any of the investors, you know, the cap table is quite light here.

26:20And so I think if If any of them did want to jump off, we could backfill that relatively easy. And so, again, it's hard to say. My crystal ball broke a long time ago. So I don't know what this looks like. But I do think I'd like to stay private. I'd like to run. Our growth has accelerated the last five quarters. It's pretty exciting. Having a hell of a time. And frankly, that's why we're doing it, right? The journey is the destination. And I know that I'm going to look back in 10 years from now and say, this is the wildest, most exciting time of my life. and I just, you know, I enjoy the ride for sure.

26:52Do you have any advice for a founder coming on the pitch looking to raise their first VC money? Do it for the right reasons. People want to raise money for headlines and that goes away so fast. That headline does not change your day. Don't do it for a headline. Know where you're going to put the money. Have a plan. The plans will change though, no doubt. And don't be enamored with people and what they want to do. You know your business better than anyone else. the advice is a lot of times bullshit it's really bad and people want to sound smart when they give it and that's why they give it so often you know take it for what it's worth and move on and process it later and if it doesn't feel right it's probably wrong know who those partners are i got incredibly lucky with the right partner if you're not willing to like really shoot the shit with this person if you're not simpatico say no it's going to be very hard and just do it for the right reasons

27:48Can't argue with that. Eli Wallen, everyone. Next week on The Pitch. Hello, San Francisco!

28:01Welcome to The Pitch live at SF Tech Week.

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28:45Elia Wallen: This episode was made by Josh Muccio, Lisa Muccio, Anna Ladd, and Enoch Kim. Music in this episode is by Brendan Burns, Breakmaster Cylinder, The Firmware Rebels, Boxwood Orchestra, Ray Ketcher, Dame Asu, and Peter Jean and the Runaway Queen. The pitch is made in partnership with the Vox Media Podcast Network.

29:13Support for the show comes from Engine. Engine is the travel platform that takes the hassle out of business trips. Their AI helps match travelers with hotels and properties that are the best fit. That means the more you use it, the better it knows you, and the faster it can book exactly what you need. More than 38 ,000 businesses and groups have joined. Now it's your turn. Get$500 off when your business signs up. Start traveling smarter at engine.com slash pitch.