In his debut speaking engagement in travel, Kris Naudts, the founder of one of the most talked-about start-ups in the sector told his story at the Travolution Start-up Summit hosted by IBM
How does a firm go from a cramped office in London’s Elephant and Castle with just eight employees to one that employs 200 in central London having just raised $80 million series B funding?
The answer is with plenty of endeavour and some difficulty in the face of a UK investor and banking sector that oscillated between being oblivious to the opportunity and ignorant about the needs of a digital start-up.
Over the last decade Naudts, a former psychiatrist, has tirelessly taken what began as a pet interest in books and travelling to the places where they are set to creating a budding OTA that has set tongues wagging.
He told the Travolution Start-Up Summit, hosted at IBM’s offices in London, about the painful years when Culture Trip was constantly on the verge of running out of money.
Things had got so bad that it stopped being able to afford its tiny office in Elephant and Castle and resorted to operating out of hotel lobbies, free riding on their complementary wifi.
But when its unofficial hosts realised the same eight people kept turning up and sitting in the lobby all day but couldn’t even afford to buy coffee, they were kicked out.
“Those were painful years”, Naudts said. “I remember them being like one long stomach cramp.”
However, Naudts, who left a successful career as a psychiatrist to start Culture Trip, said operating with no money forced him to think “outside of the box” and led to where the company is today.
“If we had had a million dollars from the beginning what I would have ended up doing is building a big book store which, by now, would probably have been sold.
“Not having that money forced me to dig really, really deep. Every two or three months we were running out of money.
“When you have kids and you have to provide for them, this was difficult. But the good news was every four or five months the audience doubled.”
Culture Trip, with six young content producers Naudts had persuaded to write for the site, started to branch out and began creating articles about art, then design and architecture.
But it was when they started writing about food that the site really started to take off. “The big unblocking element for traffic growth was food. Once we went into food we were off,” he said.
However, money was still incredibly tight and with Naudts “staring into the abys” once again, he got a lifeline from an investor in Los Angeles who had previously backed the likes of Twitter.
After using the last of the firm’s cash to travel to the US to pitch and then borrow money to return to seal the deal after the investor and some of his contacts showed an interest, he secured $2 million.
“I won’t say the dark days were over but everything changed. They came in and then everyone wanted to join in.
“To me this felt like we had won the lottery. Having nine months of cash was amazing. Obviously, six months later we had to hit the road again.”
This time Naudts, a self-confessed risk-taker, decided to aim high. Although he faced opposition internally he set about raising $20 million and finding investors prepared to buy into his vision.
Again, the UK did not offer itself as “a great landscape to operate in” as a founder needing investment and Naudts turned to Silicon Valley, Israel and Switzerland.
“We had a lot of arguments internally. I wanted to raise $20 million and everyone thought that was insane. Normally after £2 million round you go after $5 or $6 million, but I do like to take risks.
“I felt it would weed out those with small amounts of money and only those who were serious would talk to us. I was the only one on the team who felt like that.”
Naudts said he found good appetite for investment but only for “small” amounts of about $10 million, then “out of nowhere” came a fund based in Holland called PPF.
That Series A funding in 2016 spurred a major growth spurt and Culture Trip went from 12 employees to 200.
“It was great in many ways but painful in others because we weren’t equipped to deal with that level of headcount,” said Naudts.
“So again, the big wake call was money is not the solution to everything. It’s just a new set of challenges, but it has been great.”
Before long Naudts was back looking for more funding, this time $80 million and once again he was facing a critical moment in the company’s short life, but now with 200 employees reliant on him.
“The negotiations were even more protracted. It took and awful lot of time. It became the hardest week in my Culture Trip life.
“It looked like we would reach a deal in July  but the whole negotiation fell apart. Now we had to re-engage and it took another eight months.
“Suddenly I had 200 people all around me and the situation of having no cash left. I had to close deal. It focuses the mind.”
PPF led the Series B funding round which closed in April and was confirmed shortly after Culture Trip announced its intention to establish an OTA, exploiting the clear intent its users show for travel.
“It’s a loose definition of OTA,” said Naudts. “If you are reading twenty articles about Paris and doing that in London then the chances are you might be thinking about going to Paris.
“We produce articles where we know that there is actual intent to book something. Listicles, for example, for of the best 10 Airbnb properties in Paris. One in two readers click to Airbnb.
“The name Culture Trip itself suggests travel. There is clear intent in our user so we want more of that pie.
“We want to build these funnels going from inspiration, which is what people know us for today, to conversion, whether that’s hotels, apartments or restaurants.
“The tip of the funnel is very crowded but at the top it’s crowded in terms of people creating content but no one has been able to do a form of aggregated content on a platform like ours.
“It’s now quite difficult to not see us if you do a Google search on a particular topic. We’re a tech company operating in media with a very strong travel use case.”
Having recently moved into new offices close to Bond Street – Naudts is slightly embarrassed at the association with one of London’s more establishment addresses – a bright future awaits.
Naudts isn’t one of those entrepreneurs who believes his experience has given him all the answers, but what lessons of those years of struggle does he suggest today’s start-ups should take heed of?
“I felt I’ve done a second Phd in this kind of stuff. I had time, no money, but I had time. So I read everything.
“If you want money you have to realise you have no right to raise money. You have to deserve it, add value and try to find the right investor.
“Every round you do you need a bigger and better investor than the previous round because it validates your earlier ones and it keeps upping your game.
“That, with hindsight, is the journey I took. We went from unknown angels to more high profile investors. For them it was peanuts, but for us it was a life line.
“You may have to make a trade off if it’s about the survival of your company but the better your investor is the easier life will be.
“As a founder you do pay a price, it’s a lonely journey. I don’t do co-founders. It’s a lonely thing and you need to brace yourself for that, but it’s very rewarding.”
Naudts said he very much concurs with Ben Horowitz, author of The Hard Thing About Hard Things, that in a technology start-up there’s only two emotions euphoria and terror.
He believes the investor landscape in the UK has improved since he battled to convince angels who just wanted to talk tax relief.
“When will there be the first $100 billion UK company?” he said. “I think it’s only a matter of time. It will just happen.
“On the investment side I think people are more optimistic given the changes we have seen in the past five or six years.
“On the founders side, yes, there is more appetite, yes, there is more capital, but still you get questions that you feel are the wrong questions for your business.
“There is an ecosystem of investment, true, and a bigger ecosystem of founders, for sure.”
However one critical area Naudts feels hasn’t changed is in the attitude of the banks. He recalls trying to raise money by getting a loan from a high street lender in the early days.
The person he dealt with questioned why he hadn’t any collateral, she said you “ain’t got any machinery, not even a coffee machine”, he recalled.
“The banks do not know what you are talking about. And that, to my mind, hasn’t much changed. I still feel there’s a lack of recognition in the early days for us as founders.”