At Rearden Commerce, Addiction is Job One ($100 Million Round Confirmed, Major Deal With JPMorgan Chase)
Erick Schonfeld
55 comments »
Patrick Grady has spent the past eight years of his life building the ultimate personal Web assistant in relative obscurity. But now his company, Rearden Commerce, is quietly emerging as major force among enterprise startups. He has confirmed that, as previously reported, Rearden has closed a $100 million round of funding from investors that include American Express, JPMorgan Chase, Oak Investment Partners, and Foundation Capital. American Express already invested in a previous round and is Rearden’s single largest customer—its corporate travel business resells Rearden’s all-in-one Web travel booking service to 1,300 corporate customers.
All in all, Rearden now offers its services to more than 1,700 corporations, up from 92 two years ago before signing AmEx as a partner. Pharmaceutical giant GlaxoSmithKline alone has about 60,000 employees on Rearden. Collectively, those corporate customers have about one million employees using Rearden to book flights, cars, hotels, dinner reservations, baseball games, theater tickets, conference calls, and even ground shipping. (See our review from last year).
To put that into perspective, that is about the same number of employees who use Salesforce.com. Of that million, about 15 percent are active in a given month, and all together they are well on their way towards spending $1 billion on travel-related services this year through Rearden. That is a tenfold increase in transactions over last year, and every step of the way Rearden takes 6 percent to 25 percent of every non-travel dollar spent. Updated: The fees on travel transactions like flight and hotel are low-margin commodities. It’s the extra stuff like dining, event tickets, conferencing, car services, airport parking, meetings and shipping where there are more margin and more savings to be had that Rearden makes its 6 to 25 percent cut. It also has other revenue streams, including third-party apps and advertising (see below).
The company has 316 employees, going to 400 this year. Most of those are engineers, since AmEx has hundreds of sales people pushing the service. And AmEx will soon expand the offering to its UK customers as well. So far, Grady has built his business by signing up big enterprise customers. But now he is ready to take his first step towards the consumer market.
That’s where Chase comes in. In addition to being an investor, Chase has also signed on as Rearden’s second giant customer. It plans on offering Rearden’s personal Web concierge service to its 90 million bank card holders. Anyone with a Chase bank account, whether business or personal, will be able to use the service. Eventually, Grady plans on opening up the service to all consumers, but AmEx and Chase are making it worth his while to give them exclusivity for at least another year.
In addition to the transaction fees, he also charges application developers 25 percent to 50 percent of their subscription fees to gain access to all the corporate customers on Rearden. And he also sees an opportunity on the upside for highly targeted advertising in the form of real-time offers from local restaurants and other businesses. He explains:
I am coming to New York. What does my Rearden Commerce personal assistant know about me? It knows I am a CEO of a Silicon Valley company, I will be staying downtown, I will be in midtown during the day, and it knows I like sushi.
Rearden has done the hard job of integrating different travel services together all through a single browser interface. Updated: The hard part is not only the technology—which is all about integrating an unruly mess of APIs and Web services—rather it is signing commercially binding service level agreements with 135,000 merchants across the world. . What’s more the system ties in your personal preferences with your company’s travel rules, restrictions, and negotiated rates to give you a customized view of what’s available to you. Think of it as Kayak, TripIt, StubHub, Zagats, OpenTable, and WebEx all rolled into one. Updated: But instead of having to go to ten different sites to find and book a flight or a restaurant for a business meeting, Rearden provides a mash-up of all the services. The two slides below, which are from a presentation Grady gives, illustrate the scope of what Rearden is trying to accomplish:
Rearden might be an enterprise play, but its software already has a consumer look an feel. Today, the difference between the two experiences is fast going away. Grady says:
If this isn’t addictive, if people don’t find this to be like an iPhone or Blackberry, then we have failed. It is only a productivity tool if you, the user, think it is better than Kayak, StubHub,or Kayak. Addiction is job one.
Grady has come along way from surviving the nuclear winter back in 2001. At the time, one investor, Jafco, tried to sell the company behind his back. Grady had to do a cram-down round and fire 45 employees to stare Jafco down and keep control of the company. Despite raising $200 million total so far, he says he has never taken a dime off the table. That’s hardcore.
Perhaps with the exception of facebook and digg, nothing is more addictive than TechCrunch
(speaking from experience)
Amazing Deal !!
Wow, interesting company and a great post. I loved the final comment: “That’s hardcore”.
Integration is good, but will Rearden be the next killer app? iit’s really hard to tell. some users are simply not used to the integration. they still prefer to go directly to the original site.
GO MD!
I’m still a little confused on what this service actually does - can anyone enlighten me?
Does it aggregate services into one platform?
Why would a business need to buy tickets to a Yankees game?
I am not a user, and have never heard of the company, but I have dealt with corporate travel agents before, and had to book my own travel on different occasions.
My guess is that this simplifies the whole booking process for business customers. Instead of going to a bunch of different sites to handle my arrangements, and have to deal with corporate rules about which flights I can take, and which I cannot, a one-stop-shop that is very easy to use for all my travel needs would be very nice. Especially if it integrated into the corporate systems.
So, the bottom line is that a company would like it because it provides uniformity in travel bookings, while the users would like it because its easy to use.
“Rearden has done the hard job of integrating different travel services together all through a single browser interface”
I really dont know what pot bloggers smoke but it some be some good s****. What is so killer app about this? what in God’s name is so unique about this? can’t orbitz, expedia, do these things? apart from the yankee tickets stuff, which I think is really lame.
Amex not having a stake in one of the major travel sites doesnt signify their offering is less compelling, and as per your one stop travel shop people would always want to check an alternative.
Lastly, this is why blogs suck, they have no journalistic integrity, no one knows who pays you to put such a biased and ill informed article up, such as this one, skewed to make people believe in something that is not. that is why I hardly read techcrunch, it is for dreamers who one day hope a replica they create would get funded …
Great promotional effort. Blog is a free flow of ideas and expressions. Anyone using a top blog is a surefire hit, at least for a moment.
Rearden is like a personal portal basically. It ties in various corporate services one would need, everything from travel arrangements, transportation requirements, planning, meeting scheduling, expense reports, intranet news/communication, so on so forth.
This is basically a hold-over from the first dot-com boom, back then it was every engineer’s wet dream to be able to build the gateway to access and manipulate information: hence AOL, Lycos, Excite, so on so forth. Info at your finger tips.
For consumers, it doesn’t work out all that well. Competing services benefited the end user. For corporate services, it saves time and effort when vendors can plug into Rearden and offer pre-approved services. FWIW, many top Fortune 100 tech companies have something like this built in house, my company does. It’s an all encompassing intranet system that coordinates every aspect of my corporate life. Other companies don’t have the expertise to build it nor want to so to them paying per seat can generate a lot of revenue.
For consumer stuff though… I have a google search bar, I don’t need no personal assistant.
Alaska - I think that Rearded is the PERFECT solution for a lot of consumers. Me, for example. Anyone who travels a lot, and maybe mixes personal and business travel, will want this. The new partnership also allows a lot of small businesses to get access to the service.
One more thing: labeling this a killer app is kind of funny. The web is now coming full circle, rehashing the dreams from the first bubble. Patrick Grady is a pretty cool guy though and it is pretty hardcore of him to have weathered the crash to build out the company. Like I said, info portals were the wet dreams of most engineers back in the day, but not many stuck around long enough to see it happen like this.
Alaska - this is a lot more than an info portal. They’ve built interfaces into the biggest travel services and have a ton of IP on top of that as well.
@Michael,
It is indeed a great product, most big companies use something similar but lack the deep integration or the amount of services. He’s going to do great targeting the mid-level corporations that don’t have in house developers and charging them per seat. But with that 100 million he definitely now has the muscle to hire engineering and sales teams to customize the software for much bigger corporation with more specific needs.
Will it be a good consumer product? Sure, just like how AOL is a great consumer product for getting you information you need. What I find funny is just how circular we’re getting as an industry as this was a pretty old dot-com idea that’s now taking root.
Next up: someone revive Kozmos so that I can get ice cream at home anytime I want.
“Despite raising $200 million total so far, he says he has never taken a dime off the table. That’s hardcore.”
This is clearly a puff piece for Rearden. Very few VC funded startup founders ever get to take cash off the table pre IPO/acquisition - … including companies that have been funded for way above $200M. The stories about founders cashing out pre-IPO/acquisition are few and far between (ie. Automattic).
I lost my train of thought and my point. I’ve used Rearden and think it’ll make a lot of money. It’s getting way too late for me to try to analyze tech news.
There is one killer app. It is a desktop app and it is called The Browser.
This article smells like a plug. In the ideal world, TC would tell us which articles were sponsored, but in this harsh world, we are left to guess. If i were to write a plug, i would 1) post it over night so people read it first thing tomorrow, 2) add a crap load of visuals that don’t really relate with the article but can sell it…. hm, kind of like this one.
About this company,
- the April 2007 TC article claimed that this company was going to be big because it was stepping out of the enterprise realm and into the lucrative world of public consumers…. it is May 2008, what happened? I, like most people, would take the time to browse because i’m paying for it, not my work. Price > Convenience.
- This company has “a million customers”, Why is it still looking for investors? Where’s the revenue/profit? How about an IPO? Something is wrong here, maybe one of its investors turned evil (my finger is at amex, i hate banks).
wow. that diagram reminds of the beefed up “magic diamond” from The New New Thing. This is Healtheon in the travel industry. Maybe when it goes consumer he can call it Travelscape
cream pie
http://creampie-new-site.net
But will it be better than Rearden Steel? I don’t know if that’s possible. I’m surprised nobody has commented on the name…
I worked with Rearden for a while in 2005 as a supplier - yes, the name of the company is after Hank Rearden. In fact, Patrick Grady asks all of his employees to read Atlas Shrugged. He reads it every year.
The app is very different from Orbitz, GetThere, RESX or any of the other booking engines developed for corporate travelers. It basically handles any business task that involves a third-party supplier - convenient for users but even better for the companies that offer it to their employees because they can monitor travel policy compliance and manage expense reporting with much more ease.
I’m still waiting for them to develop the technology so I can take a picture of my receipts with the phone on my camera and never have to think about it again.
incest
http://incest-new-site.net
I think such portal has greater scope though it is going to cut out the role of a middlemen. The corporate customers usually look for better travel package & travel arrangements, seems the portal will make everything easy.
Okay, I wrote this way too late last night. Obviously could have done a better job explaining what Rearden does. Tried to update the post to answer some of the questions/misconceptions here.
What Rearden has done is actually pretty hard. It is kind of what Microsoft wanted to do back in the Hailstorm days for its slice of the service/travel industry. Rearden has 135,000 local and global merchants on its system, all with service level agreements. And it can implement your company’s travel rules/negotiated rates, etc, and then export it all to whatever expense reporting system you use. That’s a huge pain point.
I’ve been following Rearden since the nuclear winter days. It is a difficult company to grasp, but it’s come a long way. You’ll be hearing a lot more about Rearden, especially as it opens up more to regular consumers. What’s been holding it back is that its corporate partners are paying major millions of dollars and acting as its distribution arm in return for exclusivity for a while. They see this as a competitive advantage to keep their own customers loyal.
Anyone who doesn’t think a $100 million round and strategic partnerships with AmEx and Chase is not a big deal is the one smoking something.
If this baby plugs directly into some kind of expense tracking & submission system then I am 100% sold. Anyone that works in client facing roles and travels extensively knows what a nightmare & total time suck expenses can be. I don’t see huge value for folks not traveling extensively for business, but their customer roster is pretty impressive.
If I could go to my intranet, review a ton of airlines, hotels, car rentals, have an overlay of my corporations expense policy (i.e., hotel not > 300 per night) and easily plug in corporate entertainment (dinner reso’s, yanks tix, concerts), and with the click of a button have it approved and submitted to my expense department that’s pretty freeking sweet.
I would think they would spend some of that $200MM to put a ‘Buy’ button somewhere. I just spent a couple of minutes trying to figure out how to buy the thing. Maybe its me but if all sales are very controlled then put up a big toll free number that says ‘call us to get our product’.
The closest thing they have is the contact us link and none of the listed info says ’sales’.
Besides my rant, I think this is disruptive to internal enterprise portal teams and disruptive innovation is always powerful.
Now if they offered a small business version that we could introduce to all our small business customers, they might like it.
Erick> “And it can implement your company’s travel rules/negotiated rates, etc, and then export it all to whatever expense reporting system you use.”
Are these rules only defined upfront or does it go through a workflow system for management approval?
Can you describe how HR manages the rules and approval?
How is expense reporting done? Around here I have to include all expenses for 1 trip in a single report — including things I would not get through Readen (say, laundry).
hahahah no body wants to work for this company. LOL
People this isn’t that difficult to get. Reardon is disrupting the travel industry and the corporate expense management industry in one swipe by answering two pain points. First, corporate users spend way too much time organizing complex itineraries and organizing sporadic large purchases. Trust me, I watch my colleagues screw this up all the time. Second, even when employees are able to purchase their own goods, they do it very inefficiently leading to significant purchasing waste. I think the trend Reardon is riding here is the incompetance of the average corporate worker to procure efficiently. It actually makes sense when you look at the fact that many corporate service providers actually incent the worker to make bad purchase decisions. Want to sponsor my conference at a very high price? I’ll comp you a few days at a destination resort where we’re holding it so that you can ‘evaluate’ it. Want to buy some research? I’ll give your group extra free access licenses if you can get a bunch of other BUs to sign up. You get the picture.
Basically this is Ariba 2.0. Apply the consumer orientation of Web 2.0 applications (ease of use, user centric design, web app architecture) and apply it to a big meaty corporate problem (our employees are idiots when it comes to procurement).
Next!
@18 you nailed it! TC busted!!
oh no - here we go again. i used to work for a company called CMGi. we had slides with nice logos and integrated merchants and banner clients and on and on.
what ever happened to circles? i could name literally 20 companies doing this in the 1.0 era.
cum
http://cum-new-site.net/
Rearden, well Shrug me off?
Present hardships in IT, sure seem like a book…
This article, while cool if real, forgive me if so, joke today, what is real or not?
Some might also remember listed name as well…
Looks interesting but how is this different from a Google Search? or any other website with a good search feature?
TechCrunch - you are busted!
I think Michael genuinely likes this company, and probably gave Erick the green light to do the plug. I like the vision too but as a reputable blog in the valley do your homework.
What are their clients saying about them? Why are the hemorrhaging exec staff? What is their revenue for 2007? Ask around and you’ll get all the answers. A friend of mine worked there and was shocked when he saw their numbers. Said they were <10M for 2007.
Patrick Grady and Rearden’s PR probably wrote most of the post themselves.
$200M investment for a simple booking service with a lot of bells and whistles.
Great reporting Michael and Erik!
Can you post large, viewable versions of those slides from the Rearden pitch?
We used the AMEX Axiom version of this site at my company (900+ employees worldwide). We recently dropped it. It is essentially a replacement for a travel agent with options for meals and entertainment.
Pro’s:
-Established flight options as in/out of policy (within 10% of the cost of the cheapest flight on a major carrier)
-Stored loyalty program information.
-Presented historical on-time data for flights
Cons:
-Just as expensive (or more expensive) than most other travel agents, changing a 5$ per trip per item (hotel, flight, rental car), 20$ int’l
-Wouldn’t return all the cheapest flights on major carriers at the best prices (Compared to Kayak)
-Wouldn’t return all flight options– it would often omit possible flights, especially internationally
-Clunky web interface
-Didn’t integrate into our iConcur expense report management system
The bottom line is that this service is a lazy way for HR departments to eliminate oversight on T&E expenses. Every company problem can be fixed by yelling or web software, right?
Reardon/Axiom did nothing to actually speed up the process of planning trips. There are many areas where they could improve this experience, but their all-in-one approach needs a few more updates IMHO.
@ Alaska, I loved kozmo’s. They brought a PS1 to my apartment and Rainbow Six.
I would love this service if it can take care of the expense report as well.
Lots of posts on the topic of expense reporting. One of the cool things about Rearden Commerce’s platform is that it lets any web-based expense reporting tool consume a web service containing the transaction details for anything booked through the site - beyond just the usual travel services. Expense reports can then be pre-populated with the data so users don’t have to type it all in themselves.
This is much better than the approach others like Concur are taking - who only give customers the option of integrating their own crappy travel booking engine with their proprietary expense app.
Freedom of choice is a beautiful thing.
Got to hand it to Grady for being tough.
But how do they handle being one more level removed from the actual service provider ? Increased error rates and decreased customer leverage are a significant problem with travel agents (Book through the airline and you have a prayer of fixing a busted itinerary. Book through Expedia, however, well… hope you like the DFW lounge a whole lot.).
Why does Rearden need more funding. If a company cannot be cash positive in 8 years when the hell will they. Wake up people, this is smoke and mirrors.
Why do they need funding after having acquired 92 customers (Did they really). Patrick has a history of giving hyper bole. Don’t drink that cool aid dude.
SM
McDaddy - Nice handle! Chase and AMEX are among the world’s savviest investors. Do you realy believe they are fools or would invest in this thing unless they believed that it would help them change their business and/or deliver at least a 10x return?
Puleeeze!
Lenny
Hey take it easy. Yeah I know about Chase and Bear Stearns and other savvy wall street types. Just warning folks on this blogbefore they get carried away. Put your money where your mouth is.
No if they could only figure out a way to get rid of the TSA lines.
Next killer app ? hmm too hard to say for now.
http://vidsonly.blogspot.com/
Nice user interfaces, great sales and support team, and herds of 3-party products, Rearden had played the portal game quite well.
So the VCs expected Google may acquire Rearden after acquiring GrandCentral.
GrandCentral is a portal of electronic communication, and Rearden is a portal of commercial services.
Hard to imagine this could be anything but a collection of worst-in-class components.
“If I could go to my intranet, review a ton of airlines, hotels, car rentals, have an overlay of my corporations expense policy (i.e., hotel not > 300 per night) and easily plug in corporate entertainment (dinner reso’s, yanks tix, concerts), and with the click of a button have it approved and submitted to my expense department that’s pretty freeking sweet.”
Joe, You just described a service called Concur Travel & Expense.
worked there. it is smoke & mirrors and kayak is vastly superior for consumers.
amex and chase have no choice but to let rearden custom build internal IT app or portals they can’t build themselves.
million users? million employees that “might” use it someday.