Ep #53 | Make an Impact

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Andrew McConnell is the Co-Founder and CEO of Rented.com, the world's largest marketplace turning vacant rental weeks into guaranteed income for homeowners. Andrew holds degrees from Harvard College, Harvard Law School, and Cambridge University, and has worked with some of the world's largest public and private entities as a management consultant at McKinsey & Co., and as a Director, Solutions Design at Axiom Global, Inc. In addition to speaking and writing about vacation rentals and the sharing economy, Andrew also contributes more general business insights and advice to publications like Inc.comForbes, and Huffington Post.

Andrew has on camera experience as a short term rental expert, as seen here and in this clip from CBS San Francisco. He has been quoted discussing the sharing economy in outlets such as US News & World Reports and USA Today, has written thought pieces for Betterment, among others, writes the Quarterly Trends Update for the Vacation Rental Managers Association, served as the industry trends expert at the Vacation Rental World Summit, and wrote the foreword to the second edition of The Complete Guide to Your First Rental Property

His company, Rented.com was also recently featured in Forbes, on Bloomberg Radio, was named one of the Top 10 Most Innovative Companies in Georgia by the Technology Association of Georgia, was awarded the Travel Innovation Award by PhoCusWright, and won the inaugural Lion's Den People’s Choice Winner at ARDA’s Global Timeshare event.

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Shantel: Hey, Andrew. Welcome to the Imagine More Podcast.

Andrew: Hey, Shantel. Thanks for having me. 

Shantel: Yeah, we're excited to learn more about Rented and your journey of becoming an entrepreneur. I suppose to kick things off, will you tell our listeners a little bit, I know this is such a broad question, but a little bit more about you and if you can describe what your company is?

Andrew: Yeah. So, Andrew McConnell, the Founder, and CEO of rented.com. It's business marketplace in the Airbnb vacation rental VRBO space, where instead of connecting the property to the guest, we're the wholesale market behind those others. Meaning that we connect the owner and the property with professional managers. We predominantly do that by guaranteeing the income stream to the homeowner, and then partnering with our network of over 1000 Global professional management companies to then run it out on Airbnb and BRBO. My background getting into this, of course, I was a lawyer, because that's what lawyers would go do. So, I got a couple of law degrees. One here in the US and one in the UK, and then did the bar exam and then immediately didn't practice law, and went into management consulting at McKinsey. Worked all over US, Europe, Asia for McKinsey for four years, and then left with a partner at McKinsey to go to an earlier stage company. It was while I was there, I came up with the idea for what's now rented.com. It seemed like a really good idea, and I would regret if I didn't go pursue it. And so, after about 10 or 11 months of pestering my wife, convinced her to let me quit my job and take all the money I had been saving and making and pouring it into a totally new venture. That's what I've been doing since November 2012.

Shantel: Well, lots of trust from your wife. That sounds like a big leap of faith. How did you recognize that that was in need in the market? Did you have some friends or family that own property that were struggling with renting it? Or can you talk through how you came about this idea?

| A SERENDIPITOUS BEGINNING |

Andrew: It was all serendipity. I was on a vacation with my family. And two of my dad's kind of fraternity brothers and friends were talking at lunch one day about VRBO. At the time, I didn't know anything about it. That sounded like a funny acronym. And so, I said, "What's this VBRO?" They said, "No, no, no. VRBO. Vacation rent by owner. It's a great site where we run out our homes and we make all this money from running out our homes." I said, "Oh, okay. That's cool. How do you know it's not a high school kid running your home on the internet? Because when I was in high school, we always had to throw parties at our house. And a lot of times we'd get caught. And that wasn't fun. But you're saying now kids can go on the internet and then rent strangers' houses? That seems way better for high school parties.” They said, "Well, I have to look up each person who tries to book it on LinkedIn. And I have to kind of interview them. I speak to each one live and go through this whole process." I said, "Okay. Well, I guess that makes sense. But then how do you get it cleaned? I don't understand. Because you live in Atlanta, and you said your places in Florida. And you live in Boston, you said your places in Vermont? Are you driving there to clean it each time?" They said, "No, no, no. I hire a local company to do that. I hire local company to get people to keys. I hire a local company when things go wrong to fix the toilet or the shower." And so, I just kept asking questions because it was a new space I knew nothing about. Eventually I said, "Wait a minute, I'm sorry. This doesn't sound as easy as you put something on the internet and you start making money. It sounds like you actually have to put a lot of work into it." They looked at me and said, "Yeah, you know, if I do about 10 hours a week on this." I said, "Okay, you're a cardiologist, and you're a dentist. And so, you bull your time at about $500 an hour. You're telling me it's a good deal to spend $5,000 of your time every week on this?" They kind of had a puzzled look and said, "Yeah, I guess when you put it like that, that's not as good of a deal." I said, "Okay, I just am really confused. Because neither of you change your own oil. Do you?" They're like "No, we go to Jiffy Lube." "You don't repair your own car, you probably don't even mow your lawn. You pay people to do these things. Why aren't you paying people to do this for you?" They said, "Well, there are companies that do it, but I think they overcharge and they make me take all the risk. They just take a commission. They take 40 or 50% of every dollar, but I'm the one that whether it rents or not, I'm still stuck with the mortgage, with the taxes, with the insurance." I just didn't think that was fair. Not knowing any better, I said, "Okay, I get that. But these management companies you're talking about, they don't have a job without homes like yours. Why wouldn't homeowner's just make them all bid against each other to guarantee you how much they would give you? Then you know exactly what you're going to get, they're taking the risk, and you know, you're getting the best possible price because they're bidding against each other.” They looked at me like it was an idiot and said, "Well, yeah. If there's a way to do that, everybody would already be doing that." And so, everybody sounded like a pretty good market share. I started researching the space. So, I got back to the hotel after lunch, emailed the guy who became my co-founder, who was a friend from college and had worked in real estate. Just asked him, "Hey, do you think anything like this could work? Is there anything like this out there? It seems pretty obvious and simple." He said, "I don't know of anything like this. We kept looking at it and looking at it and our wives. His wife's a incredibly accomplished pediatric cardiologists, my wife's an incredibly accomplished attorney, said, "Guys, we love you to death. You're not that smart. The idea's super obvious. There are 20 companies out there already doing it. Stop wasting your time.” We said, "We totally agree. We're not that smart. But we can't find a single company doing this. And every single time we mentioned it, anybody with a property asks if they can work with us. So, we really think there's something here." Eventually, both wise and founded what has become rented.com.

Shantel: Wow. That's amazing. I've seen a few, I think maybe it's similar in this space as well. But for an individual home, someone who's selling their home, and I see these realtors that they're like, "We guarantee to sell your house, or we buy it." One, now kind of knowing a little bit about the background Rented, it sounds similar. But my question is, how do you and companies like that mitigate the risk if there are months that you don't rent the property when no one does buy the house? Where does that cash flow come from, or how did you figure that back end up?

Andrew: Yeah. I think you're probably referencing companies like Open Door or Knock that they really will guarantee to buy your house. You go list it online, and they just buy your house today, and they give you the money. That's a very, very capital intensive business, because they're having to give you 350, $400,000 to buy the house. And then, what they're betting on is they can do some touch ups and sell it quickly for high enough price, that they have a big enough market. Those are very risky, very, again, capital intensive businesses. How we got started was not with us taking that risk at all. We literally were just the marketplace. So, we would run auctions where we had 20 management companies in Hilton Head or 100 management companies in Orlando who would bid against each other. They were the ones taking that financial risk. What we found doing it for five or six years was way more owners wanted this, then managers were able or willing to offer this guarantee. And so, there was this big gap. We also from running the marketplace for a long time started, we've been tracking the data, and so we knew what the prices should be for these and what should be expected on the rental income. And so, we were able to underwrite to that and by having a broad enough footprint, we're in 85 countries, we have 1200 management companies, we have thousands and thousands of properties all over the world. It doesn't matter if one property one month doesn't rent, or one market has a bad month. We're diversified across. And when we underwrite, we do it at a very granular level. We do it at, okay, in July, in this market, we expect 73% occupancy with an average nightly rate of 237. And so, it's not that we will promise you what you're going to make in June, the exact same as what we think you're going to make in December. We spread that across. We say, "We'll pay you $5,000 every single month. Now we know doing that, that there're going to be some once we only get 2,000 back to us, and there are other months we may get 10,000 back to us, but we're okay taking that fluctuation. That's part of the value that we're able to deliver to the homeowner.

Shantel: Okay. Now that makes sense. Thanks for explaining that for the listeners. I'd love to switch gears. So, you studied law and then now you're an entrepreneur. Did you grow up around a family of entrepreneurs or anyone else that really inspired this journey of taking that leap of faith?

Andrew: My grandfather had his own company that had actually been his dad's company, and I respected that, that he had his own business and had his name on it. That to me was always pretty cool. My parents were both physicians, they still are both physicians. I remember being on a Christmas vacation once where my dad was telling me he's like, "There are other parents, other people they have a business," I think like his dad did and his dad's dad had, "That they can pass to their child or they're in an industry they can pass to their kids. But I don't have that. You're going to have to make your own way." I had kind of always assume that in the first place. I thought that was a weird thing the flag for me. But that was just always explicit my house. Seeing what physicians did, what my parents did, I very much respected that and respected them. But the idea of delivering impact at a personal level just seem limited to me, right? Whereas the individual teacher, you may have a huge impact on the 20 kids, 30 kids in your class each year that come through. But it's hard to go beyond that. As a physician, you may have a huge impact saving the lives on the people that you see and treat. But with starting a company, especially one if you're able to scale with code and other things, you can have an impact on ... It's what they talked about Google, right? Not that we're Google. But a person in Google impacts billions of people by some of the stuff that they're able to do. And just the sense of scale, the sense of impact you're able to deliver if you create something large enough, that, I think is what really inspired me to kind of strike out on my own.

Shantel: That's great. What have you loved most about being your own boss?

| SUPREME FLEXIBILITY |

Andrew: All of it. I don't know. It's absolutely amazing. I don't think I was ever a very good employee. I think I could do very good work, but I wasn't always easy for people to manage. And being the CEO for a while, I've had employees say, "Yeah, I can't imagine you not being a CEO. I don't know what that would look like." I work very, very hard. I work long hours, but I have supreme flexibility. I'll get up at five because I'm productive 5:00 to 7:00 a.m. I can get stuff done. I'm not productive around 2:00 or 3:00, so I go take an hour to go to the gym, go for a swim. If you're working for someone else, it's very rare that they give you that flexibility. Unless you're working for me, then I give everybody that flexibility. But most corporate jobs, most any job, you can't really do that. It's the same of, we were just talking before we started this about this was my 15th college reunion. I took off Thursday and Friday and had a great four-day weekend up there, but I just shifted and did some work on Monday, which it was a holiday, but I had some work I need to get done. That kind of flexibility where I know me, and I trust myself and I'm super self-motivated and will get things done no matter where I am, I like that I can control all that. And also, can build a team around me of just amazing people. I'm not dependent on someone else to not make hiring mistakes at this stage now that some point I'll have to release more the reigns, but right now I still do all the final round interviews before someone gets a full-time offer. So, able to really proactively create a culture, create a business, create a team of just amazing people I get to work with.

Shantel: I love that. Speaking of that supreme flexibility, do you feel a tendency to check in ... Okay, so you do log in at 5:00 a.m. Let's say the team doesn't see that, but they see you leaving every day at 2:00 to work out. Do you feel this complex a little bit of, okay they're working really hard and really late, but they don't see some of the behind the scenes things or stress that you're feeling? If that at all is a part of the equation, how do you manage them?

Andrew: Yeah, so there are two levels of that. I think that's entirely true about making more of the grind and the difficulty visible. Actually, I had a blog for the Sunday before I wrote on this about nurture versus nature and what you can accomplish, and how you develop that. That people that come later into it may see you as this totally polished somewhat finished product in a certain area. And they think, "Oh, that that's just natural for that person. I could never do that." What they didn't see was eight years ago when you were terrible at whatever that was, and you invested tons of time and effort in developing that and making it clear to them, "Look, I was actually worse than where you are today. If you want to invest the time and I will help mentor and coach you through it. You can be far better than where I am right now. I hope to be far better than where I am right now.” And so, making the effort and work in any area I think is transparent and clear to those around you isn't it just from setting the tone of how hard to work, but also setting the inspiration of what you can achieve if you work is important. On the tone. It is a concern I sometimes have. Because before I had a child, I'd get to the office by 7:00. I'd get up at 5:00 and I would be in the office. So, anybody that came in, no one ever got there before me. Everybody would always see me and be like, "Well, I guess he's been here for a while". It was totally fine to come home at 9:00. In fact, because my wife is an attorney, and she was working really long hours, it was the norm we started doing that and coming back later. We had to explicitly me being kind of I guess, put on my calendar, no, 7:30 to 9:00, I'm offline. I put it on my calendar, so I wouldn't keep booking things in that window and would go home and have dinner, and I would get back on after 9:00. But I would have that time blocked for Katie. Those just, both that morning window and that afternoon window, that evening window, have pushed, right? I need to be home by 6:30 now if I want to see my daughter before bed, and I do. So, I'm always home by 6:30. I take my daughter to school more days than not. So, I don't get to the office till closer to 8:30, which is an hour, hour and a half later than I used to. And so, what's visible in the office may be less clear to people. And a lot of what I do for a living isn't the tactical in the weeds business, it's a lot of stuff that's outside the company and part of the ecosystem that feeds. And so, it is less physical presence and visibility here. That was a concern I have. I don't have a great answer to it. I recently went through a 360 review, engaged a CEO coach. One of the kind of consistent feedbacks was, Andrew's the single hardest working person I've ever met. And so, it somehow is still coming across, I think, even if it's not always physically present here.

Shantel: Those are great examples and experience. Cheers. Thanks for diving into that a little bit. I'm interested in the CEO coach. What was your experience with them working with someone like that?

Andrew: Yeah. I'm very early into the process. What kind of flagged it for me was the growth of the business really started taking off. In 2017, we did about five times as much revenue as we did in 2016. And 2018 in the first quarter was more than all the revenue of 2017, right? January was more than we had in all of 2016. And so, it's just this hyper growth that to be the right person to lead that business, I felt I needed to get ahead and have some hyper personal growth to be right for the business, to be right for my employees, to make sure that I'm delivering the impact that everybody deserved and needed. And so, that's where I started proactively going out and looking for it. As I was interviewing different coaches, one who I ended up not going with, but this very accomplished great person said, "This is really interesting for me, because most of the people I talked to the situation, it's the houses on fire. They're sent by their board or they're sent because there's something really, really wrong. And you're coming in saying, "Look, everything's really, really great. I'm trying to get ahead of that and make sure that it stays that way. This is like a healthy visit to the doctor as opposed to, whoa, I have this severe pain I need to get addressed. And so, I'm going to have to approach this whole relationship differently, because I'm not used to working with people like that.” It does make it a little tougher of knowing exactly what to address. If there's no clear, glaring issue, you're saying, "Look. Honestly, I am super, super happy, everything's great. I want to make sure it stays that way. And if it can get even better, I want to do what I can to make it better." And so, it's this CEO coaching and learning to work with CEO coach and that whole process has just been a learning experience for me as well.

Shantel: Well, I definitely applaud you. I think being that self-aware, and it's certainly a common thread with all the entrepreneurs I speak to of just that continued growth and learning and bettering themselves that resonates with everyone. So, thanks for sharing a little bit about that. Speaking about self-aware, so for our listeners who are interested in starting a company or just launching a new venture, was there, or is there kind of like an, "Oh, shit" moment of, "Oh, I didn't know I had to do that," or "I really dislike this"? You kind of touched on hiring is still something that you're managing. Are there any tactical job pieces that you were like, "Oh, I didn't know that would be part of my role when I started the company," that reflecting on you could share?

Andrew: Yeah. Do you know the knowledge curse?

Shantel: I have not heard.

| THE KNOWLEDGE CURSE |

Andrew: Where once you know something, you have a really difficult time remembering what it's like not to know that thing? And so, you kind of take it for granted when you communicate with other people and they don't have the same context or the same knowledge base you do. And I think because it somewhat slowly happened of what the different responsibilities were, that it didn't feel like there were any big surprises or you had some really basic stuff earlier on about, "Okay, well, I need to go figure out and create email addresses and buy domains and set up the legal structure." And you have these very tactical things that just seemed, well, of course, who else is going to do it? I have to be the one that does this. That just continues. Of course, me being cheap, not having an office manager super early, like, "Well, I don't want these other people who have productive work to do to be the ones ordering paper towels or coffee. So, I'll do that." And so, people would ask me, "What's the most surprising thing about being a CEO?" Honestly, the low-level stuff you end up spending your time on, depending on your personality? I think there are other people that are much smarter economically in saying, "My time is way more valuable to the business than ordering coffee. This is a good time to have somebody else come do this, I think I was just slow to that party. But I-

Shantel: Go ahead.

Andrew: Yeah. I was going to say, I don't know if there were any surprises because I'm not the kind of person that feels I'm too good for somebody or somebody should have to do something that's not part of my role. As the founder, I feel like anything that needs to get done can be part of my role. That's kind of what the job is. Now, knowing that and enjoying that are two very different things. Back to the there's that matrix of things I love doing and I'm great at, things that I'm okay at doing and really enjoy, things I'm not good at and enjoy and things that I don't enjoy. Being able to work through that and move more of those things that you don't enjoy off your plate, especially when you're moving them to people who are better at doing them than you, that has definitely made it a far more enjoyable job. And so, being able to work much more on a strategic level to be able to stay higher up, because I am not super detail oriented. That's part of the reason I didn't want to be an attorney, is I didn't want to sit there reading detailed contracts. Because I had to legal degrees, I ended up having to be the contract person for a long time here. And being able to get other people that can stay closer to those things, getting that kind of stuff that I just don't like doing off my plate even if I was good at it has made the day-to-day just that much better for me, personally.

Shantel: Yeah, those are wonderful examples. I can certainly relate on the office manager role. We have a new teammate, she joined us in January, and it's been amazing. She can focus on some of these cultural pieces that is not a strength of mine of rallying the troops, because I'm usually pretty heads down and things like that. So, I'm glad that you shared that. What is next on the horizon for you and rented?

Andrew: Just keep growing. What we're trying to do is much, much bigger than what we're doing today. And so, we could grow 5 to 10X for 5 to 10 more years and still not really be where we want to be, in terms of the impact. We want to have. The goal was always to create this new asset class where you have oil futures, and you have corn futures, and you have pork belly futures. But the world's largest asset class, real estate, it's about an $8 trillion industry globally, still trades in a spot market. Meaning you go sign a lease today. You may sign a five-year lease today when you sign it, and there's not a futures-based contract for that. So, if I want to go create a new development, why, instead of taking a bunch of debt on and raising money for banks, could I not sell 20 years rental rates for part of the property or all the property in a liquid market that would be trading? That's really where we eventually want to get. Today, and maybe for the next 5, 10 years, we're entirely focused on the short-term rental space and being the market maker as well as the market. Because to create that market today requires us to be the ones providing the liquidity, because there are not enough people participating in the market on both sides. And so, what's next? It depends on the time horizon, what's next for the next month or 12 months or 24 months is continuing to expand our footprint and expand the properties we have under our contracts and managers who work with and geographies we're in within the short-term rental space. What's next in 12 to 25 years is expanding into different asset classes and creating that more liquid market that may or may not require us to be the market maker for it.

Shantel: I am excited to see where you and the company go. I so appreciate your time. I just have one question to wrap things up, Andrew, more of a fun one. But do you love to travel, and do you stay in some other rental properties you guys work when you do take some time off?

Andrew: I do love to travel. I think I've been to 83 or 84 countries of the stage. And my daughter's not, she's just two and she's been to 10 or something. So, we bring her a lot. But I have not yet physically even seen one of the properties we have. I'm hoping to change that in December. We're going to Portugal, and I think we have 30 units in Lisbon. And so, I'm going to see if there's some good ones for us when we go there, and finally break that streak.

Shantel: Nice.

Andrew: Get to one.

Shantel: Well, and how can people stay in touch with you or learn more about Rented, or your journey?

Andrew: Yeah. The best for rented.com is going to be rented.com. And then, for me, I am relatively active on Twitter @mamcconnell. My first name is Michael, my middle name is Andrew. So, MA McConnell. And for the company @rentedcom on Twitter and they're on LinkedIn, I think are probably the two best.

Shantel: Right. Well, Andrew, thanks again so much for joining us in this conversation.

Andrew: It was my pleasure. Thank you for having me.