Deal Memo - Cabana - The Flight Log by Ground Control

Today we’re backing Cabana, a company revolutionizing the RV space by redefining the campervan. INVEST HERE >>>>>>

When I first heard about Cabana I was doubtful – how big could a campervan company actually be? Wasn’t this kind of like van-life, the nomadic, niche, lifestyle that got a lot of play in Silicon Valley but was really more for the 1% of the 1% who could enjoy an incredibly flexible lifestyle? How big of a market could that really be?

But as I spoke to Scott and researched more I realized how big the RV market already was, how big it could grow, and how Cabana could unleash that growth by fundamentally changing what you expected from RV vacation.

If you want to skip ahead to the investing part, go here: https://angel.co/i/onaCN

And read about our deal from last week, Landline, that is still open for investment, here.

Read on for a more in-depth analysis about Cabana.

Cabana bills itself as a mobile hotel company, a new type of mobile lodging platform. They’re disrupting the RV market, reinventing the fundamental unit from something resembling Cruise America to a more modular and elegantly designed campervan that can expand the market to a different type of traveler, franchising through local regional partners, and layering on a software layer that gets rid of the most obnoxious parts of the RV booking & itinerary planning experience.

Currently, Cabana is live in Seattle and Los Angeles and will be expanding shortly to San Francisco, Denver, and San Diego.

CEO Scott Kubly Was previously the Chief Programs Officer at Lime, the electric scooter company and this round is a $6M Series Seed-2 on a $20M pre-money valuation led by Craft Ventures and Goldcrest Capital.

One of the most interesting notes I took in our conversation was about how for RV Lifestylers,  much of the culture was primarily about celebrating the hardships that come with owning and operating RVs. It was a point of pride to make these clunkers work and to live this lifestyle.

And with a culture, and a core customer base, primarily built around people who reveled in that hardship, the core product often left much to be desired.

RVs often had a ton of wear and tear. There were listacles galore on the internet detailing everything you needed to know about how to operate an RV, what to do when they inevitably broke down and more.

Basic things like “where can I park overnight” can take hours to research.

In short, there was a learning curve, and that learning curve meant that there were only .5% of U.S. travelers that had taken an RV trip in America.

Cabana is launching their own upscale, custom designed RV, built to solve all the issues most common in the RV experience and pairing it with a software planning suite to help solve all the tough planning and logistical issues.

As I delved more into what Cabana was building I was impressed with how they had thought through everything that RV users complained about. They made the kitchen modular and removable so they can take it out and clean it and put in a new kitchen. They built in space for luggage storage, a common problem in RVs. They spent real space in the RV on the bathroom, one of the common criticisms of RVs, choosing to have the kitchen experience partially outside. They are sticking to ONE form factor for now to minimize the learning curve and the complexity when it comes to repairs and overall moving parts.

And then on top of that they are building an itinerary and planning software suite so that the hard part of finding where to park the vehicle overnight is taken care of seamlessly.

And they’ve modeled out an economic model that works with this new and improved form factor  – over the last year+ of operation with 25 vehicles they’ve seen enough evidence to reputably model out 75% occupancy, 3% refunds, and approximately 72% gross margins and 28% net margins. 

The past year has been tough for travel companies but there was a huge spike in demand once California lifted it’s travel restrictions, accounting for a big spike in revenue around December 2020.

The expansion plan is to expand via franchise and in this latest funding round there are already multiple franchise partners that will cover Denver and Austin.

Some of our group’s original concerns were around the wear and tear and how long a van can last, what is the resale value and how much could you get at the end of a lifecycle by selling the van to recoup costs.

The current estimate is that each van can last 5 years, but the real answer seems to be “TBD” as, well, there haven’t been any out for 5 years, but to test the resell value they have already sold a few vans at $80-92k after one year of operation.

Their first vehicle cost 105k, the next 25 cost 85k, and now it costs 79k and Cabana believes they can get the cost down to 60k at scale.

So there is a fair amount of wiggle room that even “used” Cabanas can recoup a fair amount of their costs, especially as costs go down.

The most interesting question to me was “is this the correct play in the RV market.”

Because if there is one part of the travel industry that has gotten a lot of attention during the pandemic it was outdoor activities, and there are a lot of players in the market.

Texino is a competitor that assembles their own vans ground up and seems to be more boutique and … artisan.

Boho Campervans is cut from the same cloth – beautiful wooden interiors:

Outdoorsy & RVShare are marketplaces that don’t touch the actual product and end up with a wild variation in quality, different types of vans, and again, a big learning curve, but have the obvious benefit of not having to construct their own vehicles and simply use existing supply and tap into an existing community.

There are varying degrees of involvement from marketplace to producer of the actual RV and I was left asking –  what is the right balance? Is getting THIS involved the right play?

RVs can be unreliable, wear and tear quickly, and Cabana’s fundamental belief is that you can drastically expand the market from the .5% of the U.S. population that has taken an RV trip to much much more, but only if you redefine the fundamental experience from the ground up.

RVs have a reputation of being primarily for old folks, the scene of unfortunate semi-permanent living situations, or again, for gurus who obsess over the various quirks and lifestyle issues that come with the “RV Lifestyle.”

The bet is that in the same way Uber brought way more people into the “taxi” market by redefining core fundamentals, Cabana will drastically expand the market of RV users to younger millennials and GenZers, weekenders and more.

This rings true for me – I don’t think I would ever rent an RV but I could see me and my gf renting a Cabana to go to a national park or a weekend trip to Vermont.

Being able to put out a differentiated product that potentially drastically expands the market is important …

Redefining the RV aside, it’s also important that they can scale quickly, which is where the difference with Texino and Boho CamperVans comes in – Texino and Boho assemble all their own vans, while Cabana relies on third party manufacturers and only controls the design.

As Cabana refines the design they have a quicker path to market to expand to scale by using existing manufacturers.

Cabana’s bet is the sweet spot is somewhere in-between Outdoorsy/RVShare and custom bespoke vans.

And here again, I’m reminded of Uber – the “easy” way out to add a lot of supply as an early rideshare or taxi app was to plug into the existing supply – taxis. Overnight you could go from zero to 2,000 drivers in a city. 

But it neglected the fact that the experience was fundamentally a bad one – 2,000 drivers who won’t pick you up is useless.

At the same time, it wouldn’t have been smart for Uber to go and buy all their own vehicles (though for the longest time that was apparently Travis Kalanick’s idea) – this is essentially the strategy of Carey Limousine, Addison Lee and other traditional players that would buy thousands of vehicles off of Ford and GM every year.

The right balance was something in between – something that changed what was fundamentally wrong with the taxi experience while maintaining as much flexibility as possible.

I see a lot of the same similarities. While Boho Vans and Texino are busy building wood paneling into the walls, and Outdoorsy and RVShare are plugging into existing supply, Cabana is figuring out how to exert more quality control while maintaining as much scalability as possible.

While I think there is a high likelihood that a rising tide lifts all boats when it comes to outdoor travel players, aggregators like Outdoorsy and RVShare included, I’m particularly intrigued by a concept that can change how a population thinks about a category and redefine our assumptions about the market size while maintaining as much scalability as possible.

I think Cabana has a chance to carve out a really interesting business and I hope you join us.

Invest here: https://angel.co/i/onaCN

David Litwak, @dlitwak