CFOs React: TravelMuse’s Russ Lemelin

It's a dicey time to be a start-up dependent on venture funding. On the other hand, owning a tiny sliver of your market's pie has its advantages.

For a small start-up company, one measure of success will come on that future day when the numbers in your books start representing thousands of dollars, rather than raw totals. Later on, with luck, you’ll cross over into the black. And just maybe, one day someone will plunk down a load of cash to buy you out.

Russ Lemelin went through all those stages as the CFO and later interim CEO of, a travel metasearch engine that he joined in its infancy in 2000 — right before the Internet bubble popped. Then came the terrorist attacks, and people stopped traveling for a while. But ultimately, booking travel online gathered into a force that nothing could stop. SideStep grew to serve more than 5 million unique users per month. Last December a competitor,, paid $200 million in cash for the company.

Lemelin has been experiencing something of a deja vu since October, when he became the first CFO of, a leisure travel planning and booking site that went live in September 2007. But now, in addition to the travel market being once again under a huge assault, Lemelin must cope with the reality that in today’s economic climate raising further funding will be a challenge, to say the least.

The good news is that TravelMuse already had locked in $4 million in venture-capital financing and a $1 million bank loan before the credit markets shut off the spigot. That should last until the first half of 2009, when the company will try to line up more equity funding to see it through to the point of profitability, hopefully within two years. Whether the credit and travel markets will cooperate is the big question, but to Lemelin the only answer for now is to focus on the things he can control.

How concerned are you about consumer spending in this economy, especially spending on a luxury item like travel?

I’ve been thinking a lot about that, obviously. The thing about travel is that it’s such a huge market. Last year about $90 billion was booked online. It’s probably the best category for a start-up in terms of online advertising.

When you’re a a start-up, you can be impacted by macroeconomic things, and I do think the overall travel market is going to get hit. But if you do a pie chart and look at your share and you’re just a tiny sliver, you’re more impacted by things you can control than by the market. As a start-up, you don’t really go after market share.

What can you control?

Having the best product we can possibly have. Picking the right ideas and improvements. It’s nothing to fear — it’s just execution. Execution is the No. 1 risk, before the market or anything else.

What can you control from a finance standpoint?

In this difficult climate it’s important to have a respect for capital. Everyone remembers hearing stories about Internet companies back in the bubble buying the crazy-expensive Super Bowl ads and having the nicest offices and all kinds of perks. Respect for capital means you shouldn’t be totally comfortable when you write that check.


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