misterb&b (misterbandb.com) has grown from being a niche vacation rental website to being the world’s largest booking platform dedicated to the LGBTQ community and its allies, with more than 1 million listings. Four years ago, when we first talked with the company’s CEO, Matthieu Jost, the site had only 45,000 gay rentals and homestays. misterb&b has just launched its second equity crowdfunding campaign, where investors put money into a convertible note with a valuation cap of $40 million.

In this exclusive interview, Matthieu Jost shares with us:

– the benefits for property managers and owners to list with his site,
– how he has invested the money from hist first equity crowdfunding campaign and what he will be doing with the proceeds of the second,
– how a $40 million convertible note works,
– why misterb&b is now also offering hotel rooms,
– how the COVID crisis has affected his company’s business,
– the technological challenges that his team has solved,
– and how misterb&b‘s short-term emergency housing program is growing.

Rental Scale-Up: To rely less on the big OTAs, vacation rental managers are looking to diversity their booking sources. misterb&b is a niche travel website dedicated to the LGBTQ community. Like Airbnb, misterb&b started out mostly with private rooms and now offers a large selection of property types, among which short-term rentals. Channel managers such as BookingSync, Guesty, and Rentals United endorse misterb&b and offer connections to your platform. Why should our readers, property managers, and owners alike, start working with you?

Matthieu Jost (misterb&b) With 1 million unique visitors per month, already over 1 million listings in 200 countries, and growing demand for accommodations, misterb&b is the world’s largest booking platform dedicated to the LGBTQ community and its allies.

Primarily targeting a gay audience, misterb&b is open to everyone. In other words, you don’t need to be gay to connect with us. The most important thing is that you affirm a welcoming attitude and acceptance of our community.

– We are easy to use & responsive. Connecting and getting live is quick! We offer a 24/7 customer service.
– We are cheaper than OTAs, we take between 5.5% and 7.5% commission per night.
– We bring more business off-seasons. Mostly without kids, the LGBTQ community is more flexible with their vacation dates.
– We pay fast: we charge the guest upon booking, secure your money, and pay you 48h after guest arrival.
– Trust & safety: You can request a deposit; All travelers are verified (email, phone) and you can also request a government-issued ID; Host and guest reviews are published after checkout.

Rental Scale-Up: After a successful round in 2019, this is your second time using WeFunder, a crowd-funding platform, to raise money for misterb&b. (https://wefunder.com/misterbandb) You are not the only company related to the short-term rental industry to have done so, in the middle of the COVID-19 crisis. For instance, LuggageHero, a luggage-storage network, successfully closed on May 15 a Seedrs campaign at €408K, overfunded by 24%. Why do companies like yours use this kind of platform to raise money?

Matthieu Jost (misterb&b): This is our second equity crowdfunding campaign on Wefunder, the largest funding portal by investment volume and investor returns.: a sharing economy company, we choose equity crowdfunding again as an opportunity to motivate active participation of our community and extend the investment opportunity to the LGBTQ community and their allies who are not familiar with investments but may still be interested in the “triple bottom line” – people, purpose, profits.

We are reaching out to the most passionate people in the community: our hosts and our guests as well as LGBTQ allies. We want to give them this unique opportunity to own a piece of what we have built and to financially benefit – thus helping give back to our incredible community.

Rental Scale-Up: Your goal is to raise between $50,000 and $535,000, for a company valuation of $40M. The investment vehicle is a convertible note, i.e. a loan that eventually converts into equity. The interest rate is 3% and the discount on the possible stock value is 20%. For people who would like to invest in your company and are not familiar with convertible notes, could you explain what they should be expecting?

Matthieu Jost (misterb&b): For now, you invest on a convertible note. This is like a loan that will convert into shares if the company has an equity financing round (series B for example) or if there’s a change of control (sale of the company for example) and in any case in the next 36 months max. The number of shares you will get when the conversion occurs will be determined by using the Valuation Cap ($40 million), Discount Rate (20%), and Interest Rate (3% annually). By investing in this convertible note, you will receive the stock at a discounted rate as opposed to the next round of funding, in 36 months max.

Rental Scale-Up: You have used part of the money raised during your first WeFunder campaign to add hotel rooms to your supply. This strategic move can be compared with that of Airbnb when it started adding boutique hotels to its mix. Your 1 million LGBTQ-friendly accommodations in 200 countries now boast several categories, such as private rooms, LGBTQ hotels, clothing-optional, apartments, and LGBTQ resorts. How have your travelers reacted to the addition of hotels? How are you vetting this new supply for gay-friendliness?

Matthieu Jost (misterb&b): After closing our Wefunder round, everything accelerated. We hired developers to work on implementing our LGBQ-friendly hotel offering. This was a big challenge due to the complexity of it (API for live calls on availability and pricing, A/B testing, algorithm tweaks, etc.). We also added a social layer on the LGBTQ friendly hotel service allowing our guests and hosts to connect and discover who will be staying in the same hotel/city to explore the city together. It was a 6-month technical project. Then we kicked off marketing. By the end of Q1, we were growing bookings 20% month over month, until the global pandemic hit. We delivered our promise to our Wefunder investors.

Before COVID-19 hit, misterb&b was recording a 20% month-over-month growth. Your transaction volume was $15M in 2019. In 2020, you were expecting $30M, thanks to your new hotel offering. How has the crisis affected your business and how have you adapted? What trends do you see for Summer 2020

Matthieu Jost (misterb&b): We have been able to scale down our expenses (4X less) and are ready to scale up as travel bounces back. This new round is to develop a Safety protocol and technical solution to help our guests and hosts navigate through this unexpected event. It will also help to re-kick off our growth efforts.

We see a real increase in our bookings since mid-May. Our recent LGBTQ travel survey shows that 67% of our travelers are ready to travel again before the end of summer.

The desire to travel and connect is a basic need, exploring and discovering is part of who we are as humans. Traveling might be different after the coronavirus pandemic but our fundamentals put us in a very strong position to thrive once the world fully recovers.

Let’s talk about technology investment. misterb&b has a successful app. This is the first LGBTQ app to have been selected twice by Apple as “App of the day”, in 2018 and 2019. How will you be using this new investment round to improve your systems?

Matthieu Jost (misterb&b): 10% of the funds will be used to adapt to Covid-19 by offering new tools for hosts and guests to travel with peace of mind (project management, design, protocols writing, API, desktop and app integration).

50% in marketing to fuel the recovering growth after countries start to reopen and travel bans are being lifted; also for strategic partnerships with other LGBTQ players.

Finally, 10% will be used to build on scale our short-term emergency housing program for those in our community most in need. We’ll revisit our mister for good program completely and implement the possibility to donate to LGBTQ charities when paying for a misterb&b booking. 26% will be set aside and used as a financial security in case Covid-19 hits back. 4% towards Wefunder intermediary fee

Your company is also very active in supporting LGBTQ organizations and NGOs. Could you tell us more about your “Mister For Good » program?

Matthieu Jost (misterb&b): At misterb&b we believe in people, purpose and profit. We supported Le Refuge, a French non-profit helping find short term housing for LGBTQ young adults in crisis, through our Mister for Good program, long before Covid-19. So it was only natural that we would assist during the Covid-19 crisis. For some young members of the community, being forced to stay home 24/7 with their homophobic families turned out to be very toxic, sometimes violent, and finding a safe place for them was essential.

After we reached out to our community, many misterb&b hosts answered our call for help, and offered their accommodations to LGBTQ teens in crisis for free. Thanks to their solidarity, we have been able to provide emergency housing for almost a dozen young people.

“Without this help, I don’t know where I would be today”, says Dimitri, 20 yo, grateful for this partnership with misterb&b

Our Mister for Good program has also supported dozens of LGBTQ non-profits throughout the world.