RedDoorz: From sleepless in Singapore to US$70m for cut-rate hotels

[SINGAPORE] Amit Saberwal went through many a sleepless night when he first began pitching the idea that became Southeast Asia's top online budget-hotels service, RedDoorz.

Few financiers paid attention back then to a middle-aged former hotel sales executive. His vision of quality US$20-a-night rooms seemed impractical for a largely neglected market. And rival outfits run by younger founders, like Rocket Internet-backed Zen Rooms, hogged the spotlight. It took about six months before he finally scored a modest US$540,000 from his first backer, Singapore-based Jungle Ventures Pte.

Four years on, many of his competitors are gone and the erstwhile insomniac likes to talk about how RedDoorz helps customers get a good night's sleep in 1,400 hotels across 80 cities in Indonesia, Singapore, Philippines and Vietnam. Fundraising has gotten easier: on Monday, the company disclosed a US$70 million cash infusion from Asia Partners, co-founded by Oliver Rippel, a former CEO of Naspers; Rakuten Capital and Mirae Asset-Naver Asia Growth Fund.

Mr Saberwal, now 49, finally convinced backers with a prudent business plan that eschewed the heavy spending others favoured, said Anurag Srivastava, managing partner of Jungle Ventures, which has either led or joined each of RedDoorz's funding rounds since. "Amit wasn't a 24-year-old kid with a lot of execution risks," he said. "We had faith and trust in him that he'd hustle through eventually. He's built the company prudently, without craziness, without crazy cash burn."

Four-year-old RedDoorz has now raised about US$140 million since its inception from investors including 500 Startups, SIG and Qiming Venture Partners.

The latest funds will help Mr Saberwal fend off SoftBank-backed Indian lodging startup Oyo Hotels and Homes, which plans to pour US$100 million into Indonesia - the largest market for RedDoorz - as part of a global foray that encompasses the US. Unlike Oyo, Mr Saberwal said he prefers to focus on Southeast Asia. He's gearing up to enter Malaysia and Thailand this year before expanding to other nations like Cambodia.

"The whole journey has shown us that the opportunity is humongous," Mr Saberwal said in an interview. "It's a virgin field."

Similar to Oyo, RedDoorz signs on budget hotel owners, provides them with software and standardised supplies, and trains their staff. They split the revenue.

Both startups are riding a surge in independent travel as younger Asians grow more affluent and develop a taste for going it on their own. By 2022, Southeast Asia should host a middle class of 350 million, according to Bain & Co. There are 125,000 budget hotels in the three-star or below segment and RedDoorz aims to grab 2,000 of those by the end of this year.

Mr Saberwal wants to build a company with a valuation of US$1 billion by next year, possibly US$5 billion in two to three years, by which time he hopes to take RedDoorz public.

"It is an entrepreneur's dream to take his or her company to a logical conclusion. And I think the most logical way for us to do is an IPO," he said.

The founder witnessed what an initial public offering can mean to employees of a young startup when he was chief business officer at MakeMyTrip.com (where he spent nine years after leaving his hotel sales and marketing job). The company listed on the Nasdaq in 2010, surging 89 per cent on the first day of trading.

"It's a great feeling ringing the bell," said Mr Saberwal, who grudgingly put on a suit during its listing ceremony in New York. "I stopped wearing a tie after I left the hotel because I got so sick of it. Maybe when we do our IPO, I will wear a tie again."

BLOOMBERG