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Interview with Eric Hovanec and Steve Reich, LeisureLink

Yesterday, Pasadena-based LeisureLink (www.leisurelink.com) announced a $6.2M funding round for the firm's travel booking service. We caught up with Eric Hovanec, the firm's CEO, and Steve Reich, the firm's SVP of Sales, to hear more about the funding.

For those who haven't seen LeisureLink before, explain how your service works?

Eric Hovanec: We're a distribution and revenue platform for specialty lodging providers, including vacation rentals, condominium hotels--anything that isn't a hotel. All of those need to play into the electronic transaction world. We help them distribute their product, and put it on the shelf, anywhere a customer might buy--whether that's with a tour operator, travel agency, or a travel website. Our platform enables them to very easily get content into our system, and syndicate that content--which in this case, is the inventory, the rooms they have available for sale--to all the places where a consumer might purchase travel. We process the transactions for them, and make it very easy for those suppliers to run their business. We handle all of the online distribution, marketing, and lots of seemingly small, but very important things that have to be done. It's really hard for the small, subscale partners to do that on their own. They have to manage promotions, manage their inventory in real time--which is very important so they don't overbook--and there is a lot of complexity in actually executing the business. We've got a software-as-a-service platform that handles all of that for them--all they have to do is hand the guest the key.

Let's talk about the new round. How long has this been in the works?

Eric Hovanec: Probably since around Thanksgiving. As you know, you get delayed around the holidays, and we never though we'd get a whole lot done. We started in November, and things really picked up at the beginning of January. We closed in the middle of March.

What will the funding be used for?

Eric Hovanec: We've got some operational growth opportunities. Our business is growing so fast, there's a lot of pressure on our operational team. There's content loading, customer service, and account management--the basic guts of the operation. We're investing pretty heavily in people and upgrading systems and tools those folks use to do their job. Right now, there's a considerable backlog of properties who have come to us, and we've been short of manpower. They'd like to be live and generating revenue. There are properties screaming for it, and want to be on our platform generating revenue--it's a high degree of urgency. So, we're happy to make those investments in our operations.

Why the high level of interest of your service, even given the economy right now?

Eric Hovanec: There are two things going on. The first, is our platform helps them generate revenue. Lots of people might have done this themselves in the past, because business was good during the bubble. But now, they need to be an aggressive online marketer because of the crisis. Our platform allows that. People have recognized that, and the word has gotten out in the industry that you can fill up your property using LeisureLink. We've sold this to resorts -- dozens and dozens of them -- and sold them out. By effectively using our service, they are generating enough income that they are fine. On the other hand, there are others who are running at very low occupancy, who are starting to be desperate.

Factor number two, is that we're seeing people still traveling. Our hypothesis is that travel is certainly down--but that doesn't mean people are not taking vacations. What is happening, is they're trading down. Instead of a week-long luxury trip to Italy, they're taking four nights at a vacation rental on the beach. Or, maybe they're spending three nights in Orlando and taking the kids to Disney World. People are still going, but instead of spending big bucks, they're taking a value oriented approach. Our inventory represents specialty lodging, with multiple bedrooms in a unit, with kitchens and living rooms--all in the value oriented category within the leisure market, as opposed to a five star luxury hotel.

Talk a bit about your background and how you guys ended up at LeisureLink?

Eric Hovanec: Both Steve and I are angel investors. I became an angel investor after Overture was acquired by Yahoo. I left, and one thing I started doing was angel investing. I invested along with some other people in LeisureLink, and I was sitting on the board, as was Steve. We saw that the company was starting to have some potential to take venture capital, and got a little more involved, recognizing the need to step up management. The board asked me to jump in, and I did, working with Ted Alexander and Jim Armstrong, of Mission Ventures and Clearstone Ventures, respectively. That was about three years ago. It's a pretty interesting story about angel investors getting involved. Lots of angels are passive, but we were in a position where as angels we knew the company didn't have the management, but had a wonderful idea and promise, that we had some leading SoCal VCs interested, and what we concluded collectively was that the company needed to add management capability. Steve has done this several times, and I have been fortune several times--as the VCs say--have "seen the movie before." So we jumped. in, and we are happy to report that we're seeing some good growth, and that our investors are happy. We're just trying to grow as quickly as we can and help our customers.

How difficult was it to raise this round?

Eric Hovanec: It's always difficult until it's closed. You're dealing with complexity. We're blessed to have really supportive investors, and our investors are happy with their investment, where the company is, and that makes it easy.

Steve: It's really working out the details where it's tough. The initial decision is pretty straightforward, we have revenue ramp, despite the miserable economic environment. It's working through the T & C's which isn't fun.

Speaking of revenues, what's the business model here?

Eric Hovanec: We take 30 percent off the top, which we use to pay commissions to our distribution channel and partners.

What's next on the table for you guys?

Eric Hovanec: Execution, execution, and execution. There are a ton of growth opportunities in our core segments, which are timeshares, vacation rentals, and condo hotels here in North America. We're expanding our distribution network, adding tools and services for our suppliers, and beefing up operations.

Finally, since it seems to be on the mind of lots of people--you mention you're hiring--what kind of people are you looking for?

Eric Hovanec: Web developers, operations folks, and we have openings in sales and account management. We're looking across a number of positions.