The Underlying Opportunities in Hospitality and PropTech

Hotels are one of the most common places where bed bugs will be found. Bed bugs can cause serious damage and contamination, and they're notoriously difficult to get rid of. Watch this video to learn how you can protect yourself from bed bug infestations while staying safe in hotels.

Pests can cause several problems in the workplace, from distracting employees to contaminating food products with bacteria. Learn more about how pest control protects your business and what you should be looking for when selecting an exterminator.

Valpas has created what appears to be the world's first connected bed bug prevention system that both improves the bottom line and the guest experience. And while technology is at the core of the product, the startup matches biological science with the IoT to build an affordable and reliable system to eliminate an expensive and stressful headache for hoteliers: bed bug infestations.

Valpas also has an interesting origin story. It developed as an off-shoot of an existing bed bug eradication service. The founders found the need for a hotel-specific system that not only eliminates the ghastly cost of eliminating bed bugs but also guarantees guests a bed-bug-free stay.

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The Underlying Opportunities In Hospitality And PropTech

This is a fascinating case study for a few reasons. Firstly, many people have roles in PropTech, and they're in an industry and in a business. There you are, you run a pest control company, and now you're running a whole platform really as I call it. If you dive into that as a case study, what you see is you don't just have a hardware product. You've got a hardware product sold and positioned for these hospitality owners.

There's a recurring revenue component. There's a reporting for owners and real-time reporting to where people can log on and see things. You've got this whole consumer-facing application. This is a platform. You don't go and build that because you suddenly had that idea. You built that because you talked to people, you've tried to get to the bottom of what is the pain point we're solving.

Back to the difference between product and technology, and what I would say is product marketing, how did you avoid your biases? You're going to have a bias. You run a successful pest control company, and you had an exit, and you sold it. It's very easy to dismiss feedback from people and to look at the world the way you want to look at it. Did you encounter that problem of bias?

Yeah. I think everyone is subject to bias, myself and our team included. However, it’s not for the reason that you mentioned because we were complete outsiders to the pest control industry. As I mentioned, I had a bad experience in my travels and wanted to fix it in a better way. It's actually funny because we were just starting our Master’s studies at Aalto University in Helsinki and LSC in London. I'm a Finance major, so I used to work in a bank as an Investment Analyst and Manager. When I started the extermination company, my friends and finance buddies were like, “What's wrong? What's this thing with bed bugs? Are you okay, dude? What's happening?”

To jump on that point, you hear stories of burned-out people in banking, consulting, law, and they'll go and start a bakery shop. They would go and start a flower shop or whatever, and then there you are, going down the other extreme, starting a pest control company.

There was no bias coming from pest control. The reason why we started the heat treatment company too was that we saw, since day one, bed bugs as a problem of travel because it spreads among people, especially when you travel. Hospitality providers are at the center of the spreading problem, and also at the same time, they’ll be the solution because of the high turnover of people.

The rationale was that if hotels and hospitality providers or temporary living providers would be safe, if they would stop problems from spreading, households wouldn't have a problem either. This was the idea there. We do have a biases but not from that pest control side because we came from the outside, and we wanted to completely rethink it.

I think, in general, the first step is just understanding that you have some bias in accepting it. The next step is understanding why you think a certain way and why you feel a certain way in certain kinds of situations. That comes from self-awareness and understanding where you're coming from and why you are thinking it this way.

The third step, once you're there, is poking the other holes. Understanding that you have a blank paper, your point of view or idea is maybe a small chunk of it, then going through, “What are the other angles to this particular topic, insight or feedback?” and then going all over it until you feel that it's been as unbiased as we possibly can, and the situation justifies for it.

Can you expand on that? Maybe give us an example so I can understand the third step. Could you repeat the three steps for the benefit of everyone and then give us a concrete example of that last step?

Step number one is understanding that we all have our biases. We all have our unique points of view through which we look at things. The second one is through self-awareness, understanding why you would, in a particular situation, think first like this. The third one is understanding and going through the other angles that could be there that you don't automatically switch to because you have your own biases, but that could be there. I can't think of a concrete example right now.

It's a good framework, and I’ll give you an example of me using that framework. I grew up as a teenager, making money in building websites, and making money from ads on these websites. In some ways, I tasted the advertising industry. I saw the web industry grow, and I saw how desktop ads work. When the mobile revolution was happening, I did come with a bit of a bias. I thought ads should be a certain way. Even more so, I found that anyone I asked for feedback, who was in the traditional game of desktop advertising, was full of biases, “This will never work. Mobile will never work. This is how things need to be done.”

When the mobile revolution was taking off, people tried to took what they knew about desktop. The cookie-based world where you've got a big screen and you scroll down, you take that mindset and you just said that and you bring it to mobile. It doesn't look like that. A mobile phone is dynamic. You don't really do as much scrolling. There's this new thing called an application. The screen size is so small. In those days, people were plugged in hardwired internet connection here. On a mobile phone way, connection can be a problem, especially as the mobile industry was taking off.

I came in with my biases, but I spoke to customers. Like you, I realized, don't talk to the people in the advertising industry because they're full of bias. I wasn't getting anything from my customer validation. I talked to ad agencies, I talked to advertisers. I decided, “Let me talk to the actual consumers. Let me talk to people who are using mobile phones and know what they don't like about ads.” “These ads are intrusive. They show up on your screen and you accidentally click on it.”

Product is equal to technology plus positioning.

Then you talk to the developers, the people that are putting the ads, and they're struggling. They don't have a solution. It was then I realized, “That's the problem. I come from the desktop advertising industry. I’m now self-aware. I understand there are biases. What are the other things I need to plug in? What are the other perspectives?” By talking to different stakeholders, I realized, “There's this whole opportunity.” That's why I built a startup called Vungle, which eventually did very well and got hundreds of dollars in revenue. It came from that process. That's why I was fascinated with the framework you outlined there.

It's a framework that can be used especially if you have a bias because if you have a bias, you can miss an opportunity. I'm sure the audience will know this, especially people that like to trade. It seems like everyone likes to trade these days. One of these books, I don't know if it was called A Random Walk Down Wall Street or whether it was like Peter Lynch’s. One of these books talked about sometimes, the best people that are really well in an industry and invest in companies are ones that don't come from that industry. The outsiders make good stock picks. The insiders are biased, and they tend to underperform as industry experts in finding stocks to pick on. You're nodding, does this resonate with you?

Yeah, absolutely. I think it's the outside-of-the-box thinking. You're not restricted by the ideas and the omnipresent traditional way of doing things. You come there with a different skillset, different experiences, different way of looking at things, and then normally something new happens. To give them an example now, I think your example was really good, and it put my brain to work again. An example is when we started the first heat treatment company, we were 22 or 23. We didn't have any experience in B2B. All the brands that we knew were consumer brands.

Our first impulse or our first bias was just to do customer acquisition by online marketing, “Do a great website, SEO, Google ads, let's get the orders in.” We were good at it at first, but then there was a threshold, after which we could not grow more. We have exhausted the initial approach that our bias led to. It was only later that we understood that we also actually need to add the B2B side and the B2B sales to this, which was something we were completely oblivious to because we didn't come from that side. We didn't understand it at all.

Eventually, we actually started also doing B2B sales to these real estate maintenance companies that actually order bed bug heat treatments and exterminations into flats and multifamily housing, or the equivalent of it here in Finland. Then only after that, we made the next growth leap in that first company. This is something that when you say it out loud, it's like, “Obviously,” but even something like this can be subject to those initial biases. It's only after looking back that it feels like, “This is obvious. How didn’t we get there sooner?”

In the spirit of talking in threes, I'll define three paths here. Your first path, and although this is fraught with a lot of high risks, some of the greatest returns come from this area. Still, you've got people that are outside of the industry that are naive, and they go and create a company, and that company is so different than what the industry is used to, that it's disruptive. The fact that Facebook and Tesla came along, they are different from what exists in the industry. That's one path.

The other path I see are experienced people who understand the problem firsthand, they build an underwhelming solution, they fill a bias, and they don't do anything disruptive. Worse, they build something that is so small that it doesn't take off. That's it. The third path is a combination here where you can get the best of both worlds.

If you have that experience, if you understand the industry, or you can come in as a newborn baby does, full of receptivity, full of trying to learn and coming in, removing your biases, understanding what your biases are. Once you find that problem, bring on the cavalry, your connections, your experience. You will grow much faster than the previous two examples of entrepreneurs on that path. That's the playbook. The framework you outlined was great.

To add on to this, I think it's super important still to have that expertise. If you don't have it, that subject matter expertise of the problem that you're solving, you might not have it as a legacy. You might actually experience a problem, and then start developing that subject matter expertise, but you need to have it. That's for sure.

This is the part that I feel that some individuals or companies that come from a very singular track record or being in just one industry for their whole lifetime and then doing something is that they become the expert in the subject matter. Then the actual user, who you are developing that solution, gets lost or is neglected.

Coming back to that earlier equation, that product equals technology plus positioning, another equation or way of thinking is that in order to create this revolutionary, highly mass-adopted product, you need to have the subject matter, and then you also need to have an understanding of your users. I think that's equally important as the subject matter, sometimes even greater, because just the experience of using a product can actually lead people to prefer the product, even if some other product might be a bit more effective or efficient. It's super important.

Get your MVP, get your prototype, get some functional version in the hands of a consumer or a customer, and go from there, build around that feedback.

Even after you've shipped, you need to spend time constantly, or some of your founding team needs to spend time in discovery. By discovery, I mean customer discovery, so that you keep developing that product towards that product vision that you have, and

always keep finding those problems that the customers are facing and ways of better helping them with them.

Create a product that's so superior to everybody else that it creates its own category and grows from there.

This has been a fun conversation. To round up, concluding thoughts, what does the industry's future looks like? I know at one point you used an analogy of a vaccine. A vaccine cannot physically work because if someone is vaccinated against these bed bugs, that means that they will constantly bite it, and they won't know. As you said, 10% to 15% of consumers are immune to bed bugs.

What I mean by that is you don't spread the problem after that. We're basically vaccinating real estate for bed bugs so that once they get into the real estate, they don't spread. They don't become a problem for anyone.

That's the danger with using a human analogy. Real estate could be vaccinated, you're right, through products and services.

It’s out-of-the-box thinking.

That's positioning right there. I think this is it, really. This is a big asset class, and there are many unsolved problems. The last thing you think about is something like biological issues like pest. Everyone is now jumping on the green climate trend and decolonization of things. Especially in the US, at least President Biden's $2 trillion infrastructure plan, and countries around the EU and everywhere are mandated to cut things down. Problems like this can go unserved and unnoticed. It might sound like a niche, but if you're solving a niche no one wants to be in, that's great. There's less competition, and you can innovate that.

I absolutely agree with Peter Thiel's comment that competition is for losers. Just try to create a product that is superior to everybody else that it creates its own category and grows there. With that said, Valpas does have a considerable environmental impact too because remember those tangible losses, the refurbishing of rooms, every single prevented bed bug incident basically prevents, on average, one ton of carbon equivalent. That's the same as one person switching to a vegan diet for a full year. Plus, we avoid the use of pesticides that are harmful not just for our health but also to the environment. There is a slight carbon impact there too.

Martim, how can people reach you?

Martim@Valpas.io or just hit me up on LinkedIn. Valpas is actually Finish, which means thoughtful, which is our mission, “Advancing thoughtful travel.” You can hit me up on LinkedIn. Please follow Valpas on LinkedIn or Instagram to get to know the safe new hotels we enlist later this year.

Martim, thank you so much for being on the show.

Thank you. It was a pleasure, Zain.

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About Zain Jaffer

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.

His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as “Forbes 30 Under 30”, “Inc. Magazine’s 35 Under 35” and the “SF Business Times Tech & Innovation Award”. He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.